Wed 1 March 2006
HARARE - The state-owned Zimbabwe Electricity Supply Authority (ZESA)
will hike power tariffs by a massive 770 percent spread over a period of
nine months beginning this month, ZimOnline has established.
Long-suffering Zimbabweans, who this week saw the price of bread and
public transport fares shooting up by between 50 and 100 percent, must brace
up for a whopping 560 percent increase in the cost of power this month
alone, according to a confidential memo from the Energy Ministry authorising
ZESA to hike tariffs.
The power company will increase tariffs again in June by 185 percent,
15 percent in September and 10 percent in November as the cash-strapped
power utility resorts to the overburdened consumers to raise cash to meet
operational costs and to finance its stop-start power generation expansion
The memo from the Ministry of Energy to ZESA, reads: "Please be
advised that in terms of sub-section 1 of section 53 of the Electricity Act
Chapter 13:19 the minister has concurred with your proposal to stagger
electricity tariff increases as follows, by 560% in March, 185% in June, 15%
in September and 10% in November. You may therefore proceed with
implementation of the approved tariff."
The memo dated 27 February, 2006 and a copy of which was shown to
ZimOnline was signed by permanent secretary in the Ministry of Energy,
New black farmers resettled on land seized from whites will be
exempted from the new power tariff increases and will continue paying only
55 percent of the cost of supply with the rest being met by the government
An overwhelming majority of the new black farmers are either senior
officials or supporters of the government and ruling ZANU PF party. The new
farmers already enjoy a host of other benefits from the government including
cheaper priced fuel, when garages across the country are almost always dry.
Economists warned on Tuesday that the planned tariff increases will
trigger a wave of price increases across the board and push inflation
through the roof. Inflation, which President Robert Mugabe says is
Zimbabwe's number one enemy, surged to 613.2 percent in January from 585.5
percent the previous month.
An economist with a local finance house, James Jowa, said the proposed
increases in electricity tariffs spelt doom for Zimbabwe's businesses,
already facing serious viability problems because of a shortage of foreign
currency to import raw materials and machine spares.
Jowa said: "This means more suffering for industry which is already
reeling under very high input costs .. industry has operated at very low
capacity over the past six years and this means that they will continue to
reduce capacity and ultimately production. More companies will close down
under heavy costs because electricity is key to industry."
The government last year said it would allow ZESA to increase tariffs
only once per year but appears to have backtracked in order to save the
ailing parastatal from total collapse, which would plunge Zimbabwe further
The state power company has since last month rationed power, switching
off entire cities for several hours on end, because of a shortage of
electricity that officials say is because of equipment breakdown and also
because South Africa is unable to maintain exports to its neighbour.
Zimbabwe imports 40 percent of its power requirements and apart from
South Africa also buys electricity from Mozambique and the Democratic
Republic of the Congo (DRC).
But electricity is only one item on a long list of key commodities in
critical short supply in Zimbabwe as the country grapples its worst ever
economic crisis, described by the World Bank as unprecedented in a country
not at war.
Food, fuel, essential medical drugs, chemicals to treat drinking water
for urban residents and nearly all other basic survival commodities are in
short supply because there is no hard cash to pay foreign suppliers. -
Wed 1 March 2006
BULAWAYO - A special committee of Parliament will next Monday summon
the Broadcasting Authority of Zimbabwe (BAZ) to explain why it has failed to
permit other players into the industry, as the government continues to give
conflicting signals on whether it plans to reform its tough Press laws.
The chairman of the parliamentary portfolio committee on
communication, Leo Mugabe, said his committee wanted BAZ to explain why the
authority has since its formation four years ago failed to licence not even
one person or company to operate radio or television services to compete
with the state-owned Zimbabwe Broadcasting Holding (ZBH)s' television and
ZBH, formerly known as the Zimbabwe Broadcasting Corporation, operates
the country's only radio and television service and is often blamed by
critics of churning out state propaganda while blacking out the government's
Mugabe, who is also a nephew of President Robert Mugabe, said: "The
BAZ will appear before my committee and we will hear their side of the story
on why there has been no one licensed to operate in this country but we will
also want to deal with issues to amend the Broadcasting Services Act and
ensure that it opens the airwaves for community broadcasting."
The broadcasting Act imposes stringent conditions that media experts
say are a virtual barrier to any potential investor. For example, under the
Act broadcasting firms must obtain renewable two-year licences from the BAZ.
But the authority can withdraw licences from broadcasters deemed to be not
toeing the line.
The Harare government earlier this year told the African Commission on
Human and People's Rights that it was considering reforming the broadcasting
Act and the Access to Information and Protection of Privacy Act that imposes
severe restrictions on newspapers and their journalists.
But little has changed on the ground. The government has instead in
recent months stepped up an onslaught against independent journalists in the
country. Police for example, late last year raided the offices of the
private Voice of the People (VOP) broadcasting firm, confiscated documents
and arrested three of the firm's journalists.
The journalist were later released without charge but the police
proceeded to arrest and charge VOP's trustees, David Masunda, Lawrence
Chibwe, Nhlanhla Ngwenya, Millicent Phiri, Arnold Tsunga and John Masuka for
allegedly broadcasting without a licence.
Under the broadcasting Act, Zimbabweans face up to two years in jail
for owning broadcasting equipment or operating a radio or television service
without a licence from the BAZ.
The VOP however does not broadcast from Zimbabwe but from Madagascar
through a transmitter owned by Radio Netherlands.
The VOP trustees, who are out of police custody on bail, will appear
in court today after Harare magistrate Rebecca Takavadi postponed
proceedings yesterday. - ZimOnline
Wed 1 March 2006
JOHANNESBURG - More than 100 activists yesterday demonstrated at the
Zimbabwe Consulate in Johannesburg against Harare's tough media laws and the
continued harassment of the trustees of the privately-owned Voice of the
People (VOP) broadcasting firm.
The protests were organised by the Zimbabwe Solidarity Forum a network
of several South African civic society groups pushing for democracy in their
"We want the Zimbabwean government to give people freedom of
expression .. we cannot ignore when our neighbours are being victimised,"
said Solidarity co-ordinator Pamela Masiko, adding that her group would also
lobby the South African government to pressure their counterparts in Harare
to embrace Press freedom.
It was not possible to get any comment from officials at the consul.
The trustees of VOP, which is one of the few independent firms
broadcasting into Zimbabwe, are facing charges of breaching Zimbabwe's tough
Broadcasting Services Act and were set to appear in court yesterday but had
their matter postponed to today.
The trustees are Arnold Tsunga, Mille Phiri, Isabella Matambanadzo,
David Masunda and Nhlanhla Ngwenya. They face up to two years in jail if
found guilty of broadcasting from Zimbabwe without a licence from the
Broadcasting Authority of Zimbabwe.
Top Harare human rights lawyer Beatrice Mutetwa, who is representing
them, has however said she will ask the court to remove them from remand
because the state has failed to disclose the specific offence her clients
are alleged to have committed.
Although VOP employs journalists in Zimbabwe it does not broadcast
from the country but from the Indian Ocean island of Madagascar using a
Radio Netherlands-owned transmitter. - ZimOnline
Tuesday 28 February 2006
New energy pact to boost SADC supply
2/28/2006 5:18:37 PM (GMT +2)
Southern African countries have taken a decisive step to avert a
looming energy shortfall by signing a revised agreement that brings in new
players and takes into account present realities in the sector.
The agreement was signed on February 23 by the Southern African
Development Community (SADC) Council of Ministers in Gaborone. Bringing in
new players such as the private sector, the agreement is a revision of the
1995 Inter-Governmental Memorandum of Understanding establishing the
Southern African Power Pool (SAPP). The revised MOU is an "integral part of
SADC's efforts to create an appropriate enabling environment for the
development of the private sector and foreign direct investment into the
region," said Baledzi Gaolathe, Botswana's Minister of Finance who chaired
the Council. Gaolathe said the reconstituted power pool takes on board
private investors to widen supply and meet demand that is rising with
industrial growth amid lack of corresponding investment. The move is also
meant to recognise other new developments like the restructuring of SADC and
its institutions, particularly the dissolution of the electricity
sub-committee. SAPP membership has been increased from 10 to 12 countries,
thus covering all mainland SADC countries. The two Indian Ocean islands of
Madagascar and Mauritius are not part of the pact. The landmark agreement
puts in motion a joint effort by electricity utilities and their governments
to combine resources in the supply of power in a region that is threatened
with power shortfalls by next year. It is estimated that the region has a
combined total installed generation capacity of 52,743 megawatts (MW) while
net generation output is about 45,000MW. A generation reserve capacity of
10.2 percent must be maintained but it is feared this may be exhausted as
early as 2007 at current demand growth levels. During the 10 years of its
existence, SAPP has initiated a number of joint initiatives. In October
1995, the Matimba-Phokoje Unsikamini 400 kV inter-connector was completed,
linking Eskom of South Africa and the Zimbabwe Electricity Supply Authority
via the Botswana Power Corporation. The inter-connector between Songo in
Mozambique and Bindura in Zimbabwe was completed in 1997 while the 400 kV
line between Aggeneis in South Africa and Koberboom in Namibia was also
commissioned. "These inter-connectors have increased the reliability of
supply in the region and assisted in meeting the demand growth, which is
driven by population numbers and by the increase in the effective demand,"
said Namibia's Minister of Energy, Erkki Nghimtina, after the signing of the
agreement. "SAPP is indeed a shining example of successful regional
integration and cooperation. It is the desire of SADC that all SADC
institutions produce results, like SAPP has done," said Nghimtina. SAPP is
now undertaking efforts to implement the priority generation and
transmission projects as spelt out in its 2005-2010 strategic plan. The
targeted projects are those that are intended to address the impending
deficit in generation capacity. Priority is also on connecting the SADC
member states that are not yet linked to SAPP. They include Angola, Malawi
and Tanzania. Efforts are underway to connect the affected countries to the
regional grid. Another ambitious new project, the Western Corridor Project,
aims to initially interconnect power utilities of Angola, Botswana,
Democratic Republic of Congo, Namibia and South Africa. Plans are afoot to
extend the initiative to the rest of the region. (SARDC)
Institute for War and Peace Reporting
IMF ratchets up pressure on Zimbabwe to change policies and repay entire
debt to the fund.
By Progress Dodo in Harare (AR No.55, 28-Feb-06)
The executive board of the International Monetary Fund will meet in
mid-March in Washington for the second time in six months to decide formally
the fate of Zimbabwe's membership of the fund.
In a tribute to hyper-inflation, Zimbabwe's Central Bank last month printed
a staggering 21 trillion Zimbabwe dollars in order to buy nine million US
dollars to pay the IMF and thus avoid becoming the first country since
Czechoslovakia 52 years to be expelled from the world's most important
Although Zimbabwe still owes another 120 million US dollars in payment
arrears, it is likely to be given until November to find the money.
The nine million US dollar payment averted immediate expulsion, but none of
the IMF's previous concerns and policy recommendations have been met by the
Zimbabwe government in Harare. For the time being, the IMF executive board
will shelve its frustrations and avoid recommending Zimbabwe's expulsion for
a cat's cradle of political and economic reasons.
To achieve an IMF membership cancellation, the board needs an 85 per cent
vote majority - a figure almost unachievable for a group containing many
Third World countries that would be reluctant to support such drastic action
against a state whose president, Robert Mugabe, has been a Third World hero
for his struggle against colonial rule.
The fund, anyway, does not have a history of expelling its members - the
only exception being the cancellation of Czechoslovakia's membership in
However, a cat and mouse game between Washington and Harare is sure to
continue, with the IMF ratcheting up pressure on Zimbabwe to change its
policies and repay its entire debt to the fund. The constant threat of
expulsion is the only diplomatic avenue open to achieve policy changes in
the country with the fastest declining economy in the world and where
inflation is forecast to top 1,000 per cent before the end of the year.
Zimbabwe's Central Bank says the country's inflation rate officially stands
at 613 per cent. But the IMF in its latest report on Zimbabwe says the real
inflation rate already exceeds 900 per cent. The IMF report adds, "In the
absence of a comprehensive and immediate [IMF-recommended reform] policy
package, Zimbabwe's economic prospects would be bleak."
Following Zimbabwe's expulsion from the [British] Commonwealth in 2001 on a
charge of rigging elections, the IMF is the only western-orientated
organisation that still has leverage on Zimbabwe. The relationship will
continue, with the IMF insisting that Zimbabwe puts in place measures to
curb impending total collapse.
The love-hate relationship between Zimbabwe and the fund began in 1997 when
President Mugabe made one-off payments of 2,500 US dollars to each of 50,000
members of the rebellious War Veterans Association who had fought a
liberation war against white minority rule in the 1970s. To widespread
astonishment, in a country where the average working wage was only 30 US
dollars a month, Mugabe also granted the war veterans monthly pensions of
100 US dollars. As a result, the Zimbabwe dollar crashed, driving up
inflation and pushing the economy into a downward spiral from which it has
After failing to get economic policy changes, the IMF stopped giving
Zimbabwe fresh funds after 1997, thus shutting down one of its remaining
sources of balance of payment support. It also suspended Zimbabwe's IMF
Mugabe accused the fund of pandering to the whims of his "western enemies"
and immediately stopped servicing the country's mounting interest payments
to the IMF. In 2002, he told the fund to "go and hang", insisting that
Zimbabwe would go it alone, arguing that the institution's managers had
tricked him into adopting unworkable and damaging economic reform programmes
in the early 1990s.
But in private Mugabe has always recognised the need for urgent balance of
payment support from the same institution.
Instead of expelling Zimbabwe, the IMF has repeatedly adopted a diplomatic
stance, preferring to threaten expulsion rather than actually to wield the
Although Mugabe continues to rubbish the fund publicly at political rallies,
his key economic man, Gideon Gono, governor of Zimbabwe's Central Bank, has
said repeatedly that Zimbabwe is committed to healing its troubled
relationship with the IMF.
And IMF pressure clearly worked because, after a seven-year gap, Zimbabwe
began resuming payments of its debts in 2004.
It is the hope, however forlorn, of economic change that continues to
dissuade the fund from going the expulsion route.
Alex Magaisa, a Harare-based economics lawyer, said this is wise because, in
current circumstances, the threat to expel can achieve more than actual
expulsion, which would deprive the West of opportunities to influence
economic and, more importantly, key political decisions.
And apart from the complex matter of leverage, there is also the issue of
the cumbersome process that is required before a country can be kicked out
of the fund.
However, the standoff will remain because, although Zimbabwe continues
narrowly to avoid expulsion, there will be no resumption of new IMF loans
unless there are drastic policy changes.
The IMF will still demand that Mugabe cuts state expenditure, open the
market and halt further invasions of commercial farmland. The IMF board will
also demand, as it has always done in the past, that government reduces
money supply and the civil service wage bill, which eats more than 20 per
cent of the national budget.
It is equally unlikely that the Zimbabwe government will implement any of
these recommendations soon. "The economic situation is desperate and,
although some reforms might come, they will be slow," said Eldred
Masunungure, chairman of the political science department at the University
of Zimbabwe in Harare. "Mugabe has staked his pride on the land issue, and
he will want to handle that in a manner in which he thinks he is not losing
But John Robertson, the country's leading economic commentator, warned that
Mugabe will damage Zimbabwe's rapidly declining economy still further by not
responding quickly to the IMF's call for reform. "Zimbabwe has suffered from
political grandstanding and there is nothing at the moment to suggest we are
not going to see more of that," he said. "Sadly there is no end in sight at
this stage. All indicators point to tougher times ahead for the majority
while the government looks short on ideas."
As if to confirm the economists' worst fears, Mugabe immediately went on
television after the narrow escape from expulsion to liken the IMF to "the
Devil" and to assert, "The IMF and Britain are squeezing us economically so
that politically we would do what they would want us to do. No other country
has been treated this way.
"The British [Zimbabwe's former colonial masters] and the Americans want to
use the fact of our owing the IMF to bring about the change of regime here."
Mugabe thus ensured that the war of nerves between his government and IMF
headquarters in Washington will continue for some time yet.
Progress Dodo is the pseudonym of an IWPR contributor in Zimbabwe.
Institute for War and Peace Reporting
Some believe Arthur Mutambara has the right qualities to bring salvation to
a country crippled by a worsening series of political and economic crises.
By Hativagone Mushonga in Harare (AR No.55, 28-Feb-06)
Seventeen years ago a militant University of Zimbabwe student leader, Arthur
Mutambara, and the radical national trades union leader Morgan Tsvangirai
openly criticised the way the country was being governed by President Robert
Mugabe and his ZANU PF government.
The two were among the first Zimbabweans to experience the wrath of Mugabe
against his critics as popular discontent began to stir. They were arrested
in October 1989 following a series of anti-corruption demonstrations which
to the first-ever closure of the Harare-based University of Zimbabwe.
Tsvangirai was detained for supporting the striking
students and condemning the shut-down of the university.
The pair were held under emergency powers retained by Mugabe from the era of
white minority government. Mutambara and a fellow student, Enoch Chikweshe,
were charged under the draconian pre-independence Law and Order
(Maintenance) Act with publishing a subversive document that branded
Mugabe's administration as worse than the white minority apartheid
government in South Africa. Tsvangirai was, among other things, accused of
attempting to bring the downfall of the
government through unconstitutional means. The two shared a cell.
Today Mutambara, 39, and Tsvangirai, 53, are radical opponents, each leading
rival factions of the badly split opposition Movement for Democratic Change,
MDC, which for years was Zimbabweans' main hope of political change in their
country. Whichever faction eventually triumphs will decide which man gets
the chance to topple the ZANU PF government and become only Zimbabwe's
second state president since independence in 1980.
The MDC imploded in November in 2005, splitting between a faction eager to
contest elections in January this year to a new upper house of parliament,
or Senate, and a faction loyal to Tsvangirai which dismissed the Senate as a
useless institution, a kind of retirement home for failed politicians loyal
to President Mugabe. Tsvangirai also said it was useless contesting the
election because Mugabe would again rig it as he had earlier presidential
and lower house elections.
No one has yet satisfactorily explained why Zimbabwe needs a Senate nor what
its limited powers are. "For most people, the senators will do more dozing
than debating," commented veteran Zimbabwean journalist Bill Saidi.
Mutambara, who has not worked or lived in Zimbabwe for the past fifteen
years, has emerged as leader of the pro-Senate splinter group of the MDC
after being elected its president by faction supporters on February 25.
Tsvangirai, the MDC's president since its formation six-and-a-half years
ago, will remain leader of the anti-Senate MDC after the faction holds an
electoral congress in mid-March.
Tsvangirai and Mutambara will first lock horns publicly for the use of the
name MDC, as well as for the party's finances, property and symbols, before
tackling Mugabe head on.
Some analysts are beginning to argue that Mutambara has the right qualities
to bring salvation to a country crippled by a worsening series of political
and economic crises.
"He is the man that Zimbabwe and Africa have been waiting for," one analyst
told IWPR. "He is a genius of international reputation, a man of versatile
talent. Tsvangirai is now history. Students of history will read that once
there was a man called Tsvangirai."
Another analyst said the heavily criticised pro-Senate faction, initially
led by Tsvangirai's former right-hand man Welshman Ncube, knew from early on
that the breakaway party's success would depend on electing the right
leader. He said he believed the faction had finally found a person in
Mutambara who could successfully challenge Mugabe and eclipse Tsvangirai.
However, in an illustration of the depth and complexity of Zimbabwe's
divisions, a top anti-Senate official said Tsvangirai would emerge as a
clear winner. "Morgan is hero-worshipped in the opposition movement," said
the official. "He is the true face of the MDC. These issues of the
constitution are unnecessary niceties as far as the broad masses are
"However, it is also true that the split is a setback to opposition
politics, a kind of suicide attempt for both sides. The MDC will never be
the same again."
Unlike many African leaders who blame western colonisation and civilisation
for plunging Africa into decades of crisis and racism since independence,
Mutambara is seen as one of a wave of "new thinkers" who argue that Africans
should assume responsibility for their own mistakes and seek salvation
"Technologically, Africans are behind," he has argued. "We are not
competitive. We are lagging behind and we have wrong priorities. The calibre
of our leaders leaves a lot to be desired. And culturally we are not
defining ourselves and not doing enough to advance our own history."
Mutambara graduated in engineering from the University of Zimbabwe. He
became one of Zimbabwe's first two Rhodes Scholars at Britain's Oxford
University, taking an MSc in computer engineering before obtaining a PhD in
robotics and mechatronics while working with the Oxford Robotics Research
In 1996 he was a visiting research fellow at California's University of
Technology and at the US National Aeronautics and Space Administration's Jet
Propulsion Laboratory in Pasadena.
Before returning recently to Zimbabwe, he had been working in South Africa
for the Standard Bank and running scientific and engineering consultancies.
However, the big question is whether his intellectual and academic
achievements qualify him to lead a political party?
One political analyst, who declined to be named, told IWPR it might be
difficult to sell Mutambara to the electorate, because ordinary Zimbabweans
do not know him. It is also an indictment of the pro-Senate faction that
they have been unable to find a leader from among themselves and have had to
"He [Mutambara] is highly educated, he has taught worldwide, is undoubtedly
very intelligent," said the analyst. "But what are his credentials as a
politician? People remember him as a student organiser whose leadership was
responsible for the first closure of the University of Zimbabwe. At that
time no one had ever challenged Mugabe openly. But does he know how to work
with the ordinary people? Some say a leader of the opposition in Zimbabwe
requires courage more than intellect."
A quick, unscientific survey in Harare's city centre revealed that some
people remember him vaguely from his student days.
"Who is Mutambara?" asked Linda Savanhu. "You mean that guy from the
University of Zimbabwe? Okay, I remember him from those demonstrations then.
Where is he now?"
John Chitima said, "For president? I don't know. I know he is a genius. He
might be what we have been waiting for. For me Tsvangirai has failed and he
has shown that he is no different from Mugabe. I always thought that whoever
will lead the country next would come from a third party. Maybe this is it."
A top anti-Senate official told IWPR the debate over the new upper house was
just a smokescreen and a camouflage for the deep-rooted division already
within the MDC when it was formed in 1999. He said the party was an
association of people from different class backgrounds with different
ideologies. Its trade unionists had advocated radical modes of confrontation
such as mass actions, violent demonstrations, sanctions and isolation of the
regime as a way to force the Mugabe
government out of power, while neo-liberals and professional people in the
MDC, as represented by the pro-Senate faction,
wanted a conciliatory approach of constructive engagement.
The other source of division, he said, was as a result of personality
clashes between intellectuals who felt Tsvangirai was not educated enough,
and lacked sophisticated leadership skills, and others who argued a man
cannot be defined purely by the amount of schooling he has been privileged
to receive. Tsvangirai, one of nine children of a bricklayer, left school
early to become a miner. He later worked as an official in the Zimbabwe
Congress of Trade Unions and was appointed its president, before emerging as
a political force in 1999 when he helped form the MDC and was elected its
"The Senate was a powder keg issue," said the anti-Senate official. "The
rift has since widened as accusations and counter-accusations have been
traded. The pro-Senate people accused Tsvangirai of being dictatorial,
working in violation of the party constitution and suspending party
decisions in favour of his kitchen cabinet decisions.
"And Tsvangirai accused the pro-Senate faction of being sell-outs and
working in cahoots with the CIO [Mugabe's much-feared Central Intelligence
Organisation] and ZANU PF and South African president Thabo Mbeki.
"It would appear that the break is now permanent and that all attempts at
mediation to resolve the differences have not borne any fruit."
Asked if the split means the end of a formidable opposition party in
Zimbabwe, the official said, "No. ZANU PF is beyond political redemption".
And if that is the case, he said, then whichever person comes out top in the
struggle between the two MDC factions will be the person who eventually
leads Zimbabwe into a new era.
Hativagone Mushonga is the pseudonym of an IWPR contributor in Zimbabwe.
The Herald (Harare)
February 27, 2006
Posted to the web February 28, 2006
ZIMBABWE'S weak currency could exert additional pressure on new minimum
capital requirements for commercial banks as the September deadline
The Reserve Bank wants commercial banks to beef up their capital to a
minimum of $100 billion (or US$10 million) by September.
But after September, banks would be asked to link the US$10 million (about
Z$1 trillion) to the ruling exchange rate, as their minimum liquid capital.
Analysts say although some banks may already be compliant with the new
capital requirements, raising Z$1 trillion in capital reserves could be a
nightmare for others. The dollar is currently pegged at $99 202 against the
US$ at the interbank rate.
"The central bank's new laws on commercial banks' minimum capital
requirements have certainly sent waves of shock within the industry," said
an economist with a Harare bank.
"Although the initiative is meant to guard against bank failure, this could
mark an incisive turning point in the history of the sector. As an urgent
matter the only way banks could survive is by adopting stricter policies
that minimise costs while simultaneously bolstering revenue.
"This could manifest in the form of mergers, consolidation and or
acquisitions, transactions largely expected to take centre stage in the
industry this year."
The revised capital adequacy amounts (at least according to the exchange
rate) for various financial institutions are as follows: $750 billion for
merchant banks, finance houses and building societies up from the July 2005
figure of $75 billion.
Discount houses will be required to have $500 billion in reserves, while for
asset management companies the new figure is $100 billion, up from $50 and
$10 billion respectively.
A tightening of the regulatory environment in 2004 triggered a wave of bank
failures while some finance houses went belly up.
A recent Kingdom Stockbrokers economic report noted: "An issue that may
bring hard times to the financial sector is that of minimum capital
"In coming up with the figures the (central) bank considered the bare
minimum outlays required to start up these types of institutions, as well as
the need to maintain the public's confidence in the banking sector.
"Although a couple of banks had complied with the $100 billion limit by
December 2005, having US$10 million at the ruling exchange rate in the
post-September period would be a very difficult task for a lot of banks, a
development that should see another round of banking crisis."
Although last year, the Reserve Bank declared the financial segment
"financially sound and stable", several commercial banks are battling to
meet the new statutory requirements.
Not surprisingly, banks have since embarked on a deliberate policy to
increase their market share, in a bid to boost their capital reserves.
Despite the jitters they have caused in banking circles, Zimbabwe's capital
requirements are by no means the most stringent on the continent. Nigeria
recently liquidated about 15 commercial banks after they failed to meet the
new minimum capital of US$100 million.
By Violet Gonda
28 February, 2006
South African based businessman Mutumwa Mawere continues his campaign
to expose how his business empire has been systematically destroyed and sold
off by the Zimbabwean government. He was in the USA last week where he told
representatives from the International Monetary Fund that the government
raided his companies to pay off the IMF loan. Zimbabwe recently surprised
analysts by paying off the outstanding IMF debt.
Mawere said they were using money stolen from his businesses and
claimed he has been made penniless and that all his businesses in South
Africa have been liquidated as a result of the seizure.
We spoke with the businessman who says he is now in the UK to defend
attempts by the Mugabe regime to complete the expropriation of his companies
through the UK courts.
Mawere was accused of externalising foreign currency and was specified
under the Prevention of Corruption Act, in 2004. His mines, together with
companies in finance, insurance and agriculture were seized by presidential
decree. He lost his flagship business, Shabanie Mashaba Mines (SMM
Holdings), which he had bought for US$60 million from British company Turner
& Newell in 1996, to the state. Following the expropriation of SMM Holdings
by the government , an administrator Afaras Gwaradzimba, was appointed to
replace the company's board of directors and assume control of the company.
Gwaradzimba is reported to have accused Mutumwa Mawere of asset-stripping
the group and starving SMM of foreign currency, leading to its collapse last
Mawere was arrested in SA in 2004, but freed after Zimbabwe failed in
its bid to get him extradited.
The businessman has in the past criticised the fact that the
Zimbabwean government, which always attacks the British, is being defended
and presented by British lawyers in the UK courts.
The Zimbabwe government claims it is owed Z$700 billion by SMM
The businessman denies this saying the government has stolen his
companies. "If the solution is that, if a company is sick you need an
administrator, why is President Mugabe not proposing an administrator for
Zimbabwe and place Zimbabwe under reconstruction?"
When asked how he could be penniless when he has companies in South
Africa Mawere said even these companies, which he says were set up to
support Zimbabwe, have been liquidated, "Imagine to be accused when you have
created 19 000 jobs and being accused of externalisation when the jobs are
internal? Can you imagine how painful it is?"
The businessman said the end result is that, "I got nothing, got
expropriated but can't go to Blair or Bush. The people who lost land can go
to Australia, they can go elsewhere but we chose to be in Africa to remain
in Africa so that we can contribute and now we are penniless. I maybe be
looking for a job to drive a cab."
Mawere goes to court on Wednesday where he is claiming against AMG
Global Nominees Private Limited, the front company used by the government to
expropriate his assets.
SW Radio Africa Zimbabwe news
By Tererai Karimakwenda
28 February 2006
Tuesday was the first day of trial for the six directors of Voice of
the People radio, and by most accounts, the proceedings seemed like a joke.
The VOP directors were on trial at the Harare Magistrates Court, charged
with contravening sections of the draconian Broadcasting Act. The state
claims the 6 directors are guilty of running a station that is broadcasting
without a license. And yet, as the only 2 witnesses called today testified,
VOP does not and cannot broadcast from Zimbabwe because they do not have a
transmitter or a booster. In other words, the state's witness agreed with
Those facing charges are David Masunda, Arnold Tsumba, Lawrence
Chibwe, Nhlanhla Ngwenya, Millie Phiri and Isabella Matambanadzo. The
Penalty for breaching the Broadcasting Act can be $5 million dollar or a two
years in jail. The directors were arrested after police used illegal tactics
to force them to turn themselves in. First, they raided the VOP offices in
Harare and arrested reporters Maria Nyanyiwa, Takunda Chigwanda and Nyasha
Bosha. Then they returned on December 15 and arrested other staff members.
They were all later released without charge after the directors reported to
Itai Zimunya of The Crisis Coalition was in the magistrate court on
Tuesday for the first day of trial. He said the experts were asked rather
silly questions like whether or not a microphone or a computer can
broadcast. The idea of sending e-mails as a means to broadcast was also
questioned. But Zimunya said he sees a method to this seemingly pointless
questioning. He thinks the government knows they will not succeed should
they pursue the original charges. He believes the expert witnesses on
Tuesday pretty much destroyed that possibility. Zimunya said the prosecution
appears to be already building a case centered around the production-end of
the VOP broadcasts. He believes the charge will most likely change from
contravening the Broadcast Act, tp will They
be building original charge will not using or whether comnputers can
send broadcast signals eithtrial began The reporters were held in filthy
cells for four days. This was not the first time that VOP has been targeted.
In August 2002, its offices were petrol bombed by assailants suspected to be
government agents. In an effort to circumvent, Zimbabwe's laws, VOP
broadcasts on shortwave from its transmitter in Madagascar.
SW Radio Africa Zimbabwe news
By Lance Guma
28 February 2006
Lawyers representing six student leaders arrested on Monday for
leading a demonstration against tuition fee hikes at the University of
Zimbabwe have approached the High Court seeking their urgent release.
Tafadzwa Mugabe a lawyer with the Zimbabwe Lawyers for Human Rights (ZLHR)
says the continued detention without charge of his clients was illegal. He
has filed an urgent chamber application in the High Court and says they
might get an audience with a judge even after hours Tuesday evening. The
court application also cites the fact that two of the detained students
Sande and Mahohoma need urgent medical attention following brutal assaults
by the riot police during the arrests and they have so far been denied this.
The police have since charged the students under section 19 of the
Public Order and Security Act accusing them of gathering in a manner
conducive to rioting or public disorder. Washington Katema, Mfundo Mlilo,
Wellington Mahohoma, Collen Chibango, Tineyi Sande and one Chitekwe were
arrested following a planned demonstration inside the campus which coincided
with the opening of the new term. Katema who heads the Zimbabwe National
Students Union as president is said to have been held in isolation overnight
at Matapi police station in Mbare with concern over his welfare growing.
Their lawyer says they have since been moved back to Harare Central and he
spoke to them inside the offices of the police law and order section.
Immediately after that meeting the students were herded back to the cells by
police officers and effectively condemned to a second day in detention.
In another story highlighting just how bad the plight of students is,
IRIN news agency reports that increasing travel costs are forcing most of
them to stay home because they can't raise the fares to travel to school.
Most are attending lessons once or twice a week depending on how much money
they have. The Secretary General of the Progressive Teachers Union (PTUZ),
Raymond Majongwe is quoted by IRIN as saying 'classes are empty, in most
cases we find ourselves having to teach only a fraction of the whole class
after students fail to turn up. It is a sad development that is unfolding at
national level that should be addressed as a matter of urgency.' The PTUZ
are said to have petitioned the government to enforce a law that will compel
minibus operators to charge pupils half the normal rate.
The spokesperson for the MDC, Nelson Chamisa condemned government's
policy on education. He told Newsreel in an interview that the state is
abdicating its responsibility to fund education and is trying to dump the
burden on parents who are already struggling to make ends meet. The problems
at the colleges reflect the general rot that has beset the country and
according to Chamisa an overhaul of the entire government is the only way to
solve the problem.
SW Radio Africa Zimbabwe news
Institute for War and Peace Reporting
So many Zimbabweans are now dying that burial at Harare's cemeteries is
becoming a privilege of the rich.
By Hativagone Mushonga in Harare (AR No.55, 28-Feb-06)
Luis Mutero's last days of life and his subsequent death portray the scale
of collapse of basic services that historically had supported the common
Luis, 38, was one among millions of unemployed Zimbabwean youths. For much
of his life, he was what is commonly referred to in Zimbabwe as a
"small-time dealer", the means by which millions of formally unemployed
Zimbabweans eke out a bare living by selling essential commodities on a
But Luis fell ill. He could no longer trade and he became homeless. He was
forced to hop from one relative to the next seeking shelter. As his health
got worse, he was admitted to Harare Central Hospital, the main state
hospital in the capital city catering for the teeming poor.
In Harare Central, Luis became a victim all over again. He was discharged
after three weeks because the hospital was experiencing a critical shortage
of essential drugs, including those necessary to treat his ailments, and
vital equipment was breaking down because of a lack of money to import spare
However, Luis was hit with fees of more than 3 million Zimbabwe dollars
[about 29 US dollars] for his hospital stay. That was the beginning of his
nightmare. The hospital refused to discharge him until the bill had been
Luis did not have the money. Nor did his widowed and unemployed mother, who
was told her son would not receive water, food or clean bedding until the
fee was paid. For two weeks Luis lay in his bed in pain without food or
water. He could only eat when or if his mother could raise the bus fare to
travel from Mabvuku, on the eastern outskirts of Harare, to the hospital on
the western boundary of the city.
She was already struggling to put food on the table for her other six
children, and so Luis lay neglected on his hospital bed for days and nights
until he gave his last gasps.
Sympathetic hospital workers who watched him die of neglect must have
thought that finally, at least, his spirit was at rest. But, alas, the
hospital's mortuary refused to release his body until the 3 million Zimbabwe
dollars had been settled. Three days after Luis died, the family managed to
raise the money and only then could they start organising his burial.
But now, to their shock and horror, they discovered that registered funeral
parlours were charging between 30 and 50 million Zimbabwe dollars for the
cheapest grave space and other funeral costs. Illegal operators charge about
half this amount.
So many Zimbabweans are now dying - many from AIDS-related infections and an
increasing number from hunger-related causes - that burial at Harare's
cemeteries is becoming a privilege of the rich.
A grave space at the low-income Granville cemetery costs from 5.5 to 8.5
million Zimbabwe dollars during weekdays and ten to 15 million at weekends.
This is in a country where the lowest paid people earn less than 5 million
Zimbabwe dollars a month and the majority earn barely three times more, and
where a large number of family breadwinners have died from HIV/AIDS, leaving
families headed by the elderly or by children.
The Harare authorities are about to increase the price for the cheapest
grave space to 18 million Zimbabwe dollars.
Joyce Chikomo, a friend at Luis's funeral service, said, "Where do people
think we are going to get this kind of money from to bury our loved ones
when most of us are unemployed and can't even afford to buy bread."
One of Luis's uncles said, "I would like to give my nephew a decent burial.
But let's be realistic. We can't even feed people who are coming here to
grieve with us. We are not talking about sadza [maize porridge], meat and
vegetables. We can't even offer them a cup of tea and slice of bread. So
what do we do?"
Another relative, Stanford Mashiri, said costs were so high it would be
better to bury Luis in a field, "We can't even think of ferrying the body to
our rural home because of fuel costs. I am telling you, people are going to
end up (burying in open spaces) or they will creep into cemeteries at night
and bury their relatives without paying."
Luis was eventually buried in a coffin which looked as though it might fall
apart if not handled carefully. Only a few relatives accompanied the body
because they could not afford to hire a bus to ferry mourners.
There were none of the usual flowers and wreaths at the funeral in Mbare,
one of Harare's poorest suburbs. Mourners could not afford them. They also
went hungry, because Luis's immediate relatives did not have enough money to
For the people who viewed Luis's body, there was no doubt about the pain and
horror he went through in his last days and hours. They are still haunted by
what they saw and tears still flow as they pray that his spirit and soul can
now rest in peace.
"People are slowly losing their right to dignity in life, and what angers me
the most is that the government is also taking away that right of a
dignified burial. People are being hit twice, in life and at death," Phillip
Mutero told IWPR at the funeral service of his nephew.
Now that inflation is topping 613 per cent and predicted to rise to 1,000
per cent before the end of the year, only those with close relatives
overseas can now afford to have a decent and dignified burial.
With more than 200 people dying each day nationwide from HIV/AIDS, it is
inevitable that more and more families will resort to unorthodox and
In an attempt to alleviate the crisis, Harare City Council has launched a
public relations campaign to show that cremation is both quicker and cheaper
However, most Zimbabweans believe that the burial ceremony is an important
preparation for the soul's journey after bodily death and that burning the
corpse could also extinguish the spirit.
Hativagone Mushonga is the pseudonym of an IWPR contributor in Zimbabwe.
February 28, 2006,
By Tagu Mkwenyani
Harare : THE pro-senate faction of the Movement for Democratic Change
(MDC) has announced a full list of its leaders who were elected at the
Headed by Professor Arthur Mutambara, the team has a few surprises
and include people who had previously claimed that they were on the fence.
David Coltart, the MDC secretary for Legal Affairs who had steered clear of
factional politics was elected a committee member.
All along, Coltart had pledged to work towards finding an amicable
"divorce" between the pro- senate and anti senate faction headed by MDC
President Morgan Tsvangirai. Job Sikhala, the controversial St Mary's MP who
was suspended from the party by Tsvangirai after claiming that the dispute
in the opposition party was about the control of donated funds was rewarded
at the congress. Sikhala, who has been hurling insults at Tsvangirai ever
since the split emerged, is now the new secretary for Defence and Security.
A former student leader, the MP gained prominence when he spearheaded the
deployment of MDC youths in areas dominated by the ruling party.
During the height of political violence in 2002, Sikhala fled into the
mountains after getting cornered by Zanu PF militias. Besides Sikhala,
another surprise inclusion is Sam Sipepa Nkomo who is the deputy director of
Elections. Before getting actively involved in MDC politics last year, Nkomo
was the Chief executive officer of the Daily News and its sister paper The
Daily News on Sunday.
The two papers were banned by government in 2003 after they failed to
register with a government appointed Media and Information Commission.
Sikhala's alignment to the opposition party had been a subject of
speculation. MDC Secretary General Welshman Ncube said: "We congratulate
those elected as new office bearers for the party. We will endeavour to
co-operate with them in our effort to rebuild and strengthen the party.
Government of the United Kingdom
Date: 28 Feb 2006
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Jack
Straw): The General Affairs and External Relations Council decided on 30
January to renew the European Union's sanctions against the Government of
Zimbabwe, with effect from 21 February, for a further twelve months. The
European Union's sanctions are an arms embargo, and a travel ban and assets
freeze on Mr Mugabe and leading members of his regime. The renewal of these
measures sends a powerful message of the European Union's continued concern
about the erosion of democracy, respect for human rights and the rule of law
in Zimbabwe. The European Union's measures are specifically targeted against
the Mugabe regime rather than the economic interests of ordinary
Zimbabweans. Indeed, the European Union and its member states continue to
provide considerable humanitarian aid to ordinary Zimbabweans. The United
Kingdom is one of the three largest cash donors to Zimbabwe, alongside the
European Union and the United States, providing £38 million in the 2005/6
financial year on humanitarian assistance and tackling HIV/AIDs.
In the last twelve months the situation has deteriorated, with two flawed
elections, further human rights abuses, woeful economic mismanagement, an
unchecked food crisis, and country-wide destruction of informal settlements
and markets, affecting more than 700,000 people. These developments have
created growing international concern, with the United Nations, European
Union, African Union and neighbouring states seeking an urgent resolution of
the crisis. Sadly, Mr Mugabe's policies continue to damage his country. In
the last few weeks his regime has underlined its contempt for basic human
rights and for the welfare of its people. They have launched a sustained
programme of intimidation against an independent radio station, Voice of the
People, and are preventing journalists, for both foreign media organisations
and Zimbabwean newspapers, from legally carrying out their work. There has
been a renewed campaign of violent land seizures, including for the first
time in urban areas, aimed to benefit Mr Mugabe's cronies. There have also
been attacks on opposition-led local councils. Most recently they have
arrested hundreds of women and children taking part in peaceful
demonstrations. We are strongly concerned by these developments. A free
media is essential to the healthy development of any country, and media
repression is the hallmark of regimes attempting to hide their failings.
Continued land seizures destroy Zimbabwe's agricultural productivity, and
underline Mr Mugabe's contempt for property rights and the rule of law.
Vibrant and independent local government, and the right to freely express
views through peaceful demonstrations, are the building blocks of healthy
We call on the Government of Zimbabwe to respond without delay to the
concerns set out by the international community, including the United
Nations, European Union and the African Commission on Human and People's
Rights. The Government of Zimbabwe needs to demonstrate commitment to the
restoration of democracy, respect for human rights and the rule of law, and
the pursuit of sustainable economic policies. We will continue our pressure
on the Government of Zimbabwe to reform, and will continue to provide
support for the long-suffering Zimbabwean people.
They have come from Zimbabwe and other African countries where it's
become difficult to operate as a journalist, but find a less than warm
welcome in SA. Despite their professional experience back home, a lack of
resources, newsroom prejudices and other issues make it almost impossible
for exiled journalists to get any real work in SA. Magugu Nyathi describes
their tough life.
Freelancer Magugu Nyathi writes:
Precisely at 3.00am, Emmanuel Matandamaviri (not his real name) a
former senior journalist with a weekly newspaper in Zimbabwe jumps out of
his blankets and heads towards a common bathroom in downtown Johannesburg.
After taking a five-minute bath he takes out a set of rumpled clothes
from a Shangaan bag and dresses for the day. Emmanuel has no breakfast.
Clutching newspaper clippings of his previously published stories and
certificates in a plastic bag, he set off to Sandton on foot to submit his
credentials to potential employers.
His journey takes him through Hillbrow, Parktown, Forest Town and
He could have faxed or e-mailed his material, but he did not have any
money to pay for Internet access.
"I have to walk to organizations and media houses looking for
freelancing chances. My skills have deteriorated but I can't give up my
profession easily. The problem in South Africa is that even odd jobs are
scarce. Each day I walk an average of 35km.
"Life has become unbearable and there is nowhere to go to look for
help. Journalists unlike other refugees do not have an organisation
representing them. At every organisation we go for assistance we are told
they don't deal with professionals," said Emmanuel.
He has only R1 to buy "magwinya" (deep fried buns) at the end of the
day. He passes the day pacifying his empty stomach with his saliva.
After Sandton, he hopes to proceed to Auckland Park. At some
organisations he is told to phone first for an appointment with the editor.
In other newsrooms he is told to come back the next day.
When night falls, he is still in Rosebank and he opts to join
vagrants. The next day an editor of a news agency asks him to do a story
about a demonstration in Pretoria against a doctor who is giving illegal
vitamin tablets to HIV/AIDS patients. He is requested to fax or e-mail the
story when he is done.
But Emmanuel does not have the money to go to Pretoria or to e-mail,
so yet another chance of a job slips through.
"It's always the case, its either you can't fulfil the tasks you are
given or there is nothing to be offered at the moment. How am I expected to
cover the Pretoria story when I don't even have anything to feed my
stomach?" said Emmanuel.
From the day one he ran away from Robert Mugabe's repressive media
laws, life has been rough and he has been reduced to a life of destitution.
Emmanuel says: "After victimisation by the militia youth brigade and
Central Intelligence Organization for my articles which were anti-Mugabe,
like many Zimbabwean I decided to flee the country to South Africa for my
own security and seek employment for survival with high hopes of getting a
decent job. But twelve months down the line all my hopes have been reduced
to misery". For Amphious Panda, a journalist who walked almost thousand
kilometres to SA from Kivu in the Democratic Republic of Congo in 2000 to
escape persecution, life is worse.
"Good" is the only English word he knew. A further disadvantage is
that he is unfamiliar with the computer equipment used in SA newsrooms: at
home, he wrote on old typewriters.
"Even now I have problem in writing in English and I need someone to
translate from French if I am to write a good story. The writing style is
quite different, you need time and training to adapt to the situation," said
Emmanuel's situation is typical for exiled journalist who are finding
it hard to break into the mainstream media in South Africa.
"South Africa is not sympathetic to journalists like any other
nationals, it doesn't matter how experienced you are as a journalist as long
as you are not connected you will never get the job, menial jobs yes. Exiled
journalists have been reduced to a life of destitution. Some fine
journalists end up discarding their thriving careers after getting
frustrated in a foreign land.
Although it is hard to establish exact figures, it seems that there
has been a dramatic increase in the numbers of exiled journalists in South
Africa in recent years.
Foreign journalists who take refuge in South Africa are usually
experienced professionals. They suffer from the usual problems refugees
face, but with the added difficulty of finding work in the mainstream media
that is already flooded with local journalists.
However, exiled journalists have now founded the Cross Border
Journalists' Association, which intends to address their problems.
* Magugu Nyathi is a freelance journalist based in Johannesburg.
Tue Feb 28, 2006 12:04 PM GMT
HARARE (Reuters) - A dry spell which has hit various parts of Zimbabwe is
likely to reduce yields of the staple maize crop, state radio reported on
President Robert Mugabe's government has not yet released crop estimates for
this season, but has generally predicted a bumper maize crop after chronic
food shortages in the last five years forced the former breadbasket country
to import maize.
The Zimbabwe Broadcasting Corporation quoted Shadreck Mlambo, director of
the state Agricultural Research and Extension Service (Arex), as saying
crops in parts of the drought-prone Manicaland, Masvingo and Midlands
provinces were showing signs of moisture stress.
"Unless we get rain quickly things are likely to go bad. Yields are likely
to be reduced," Mlambo said in remarks broadcast on the radio. He did not
give any estimates.
Water logging due to heavy rains in the southwestern Matabeleland regions
was also keeping farmers from tending to their crop, Mlambo said, adding
that the crop in the northeastern Mashonaland region was 'reasonably looking
Mlambo was not immediately available for comment.
Critics say failure by the government to equip the beneficiaries of a
controversial land reform programme with adequate seed and fertilizer is
also likely to undermine domestic output from the 2005/06 (Oct-April) crop
The government has seized vast tracts of formerly white-owned farms for
redistribution to landless blacks.
Aid agencies say about 4.3 million Zimbabweans require food aid until at
least the April harvest because of scorching drought last year.
Mugabe, 82 and in power since independence from Britain in 1980, in turn
accuses his critics of sabotaging the economy to punish him for the land
reforms which he says were meant to restore land 'stolen' from blacks during
Turkeltaub CAMBRIDGE, Mass. (Frontier
Strategy Group) -- As the mining community gathers this week in
Toronto for the annual PDAC show, the industry is facing a critical above-ground
challenge: the active emergence of China as a competitor for resources in Africa
and Latin America. While almost every senior executive recognizes the importance
of the China phenomenon, few companies have developed coherent strategies for
dealing with the new competitive dynamics. Such short-sightedness could severely
impede the ability of Western firms to replace reserves and deliver value to
shareholders. Most companies have failed to develop China response strategies
for three reasons. First, many companies mistakenly believe that the Chinese
will focus on doing business in countries such as Zimbabwe, Venezuela and Sudan,
where most western companies choose not to invest because of sanctions, war, or
other above-ground challenges. Second, companies look for the wrong signposts of
the China challenge in the countries where they do business, meaning that by the
time the Chinese presence is changing the above-ground environment, it is
usually too late to develop proactive response strategies. Third, most companies
do not understand the wide variety of tools available to them in order to win in
the new competitive environment.
28 Feb 2006 at 08:59 AM EST
CAMBRIDGE, Mass. (Frontier Strategy Group) -- As the mining community gathers this week in Toronto for the annual PDAC show, the industry is facing a critical above-ground challenge: the active emergence of China as a competitor for resources in Africa and Latin America. While almost every senior executive recognizes the importance of the China phenomenon, few companies have developed coherent strategies for dealing with the new competitive dynamics. Such short-sightedness could severely impede the ability of Western firms to replace reserves and deliver value to shareholders.
Most companies have failed to develop China response strategies for three reasons. First, many companies mistakenly believe that the Chinese will focus on doing business in countries such as Zimbabwe, Venezuela and Sudan, where most western companies choose not to invest because of sanctions, war, or other above-ground challenges. Second, companies look for the wrong signposts of the China challenge in the countries where they do business, meaning that by the time the Chinese presence is changing the above-ground environment, it is usually too late to develop proactive response strategies. Third, most companies do not understand the wide variety of tools available to them in order to win in the new competitive environment.
Because of our belief that how mining companies manage the rise of China will be a critical factor in separating winners and losers in the industry, we are launching a study entitled “The Future of Mining to 2025: The Rise of China and its Impact on the Global Mining Industry.” This article will highlight some of the ideas which will drive this study and help mining companies successfully manage the rise of Chinese competition.
Chinese Mining Companies Will Invest Across a Broad Spectrum of Countries in Africa and Latin America
There is a widely-held perception in the mining industry that while the Chinese challenge is an important long-term issue for the industry, in the short-term, most Chinese investment in concentrated in countries where Western firms can not, or choose not to, invest. Examples include Myanmar, the Sudan, Zimbabwe and numerous other countries around the world.
While this has been more or less accurate for the mining industry, mining executives would be well advised to study the experience of oil and gas companies in Africa. With the exception of Sudan, China has made substantial investments in the same areas as most Western multinationals, including Nigeria, Angola and other Gulf of Guinea countries. Most worryingly, new Chinese involvement and active government lobbying has helped Chinese companies over-take concessions previously granted to western oil firms.
The mining industry is likely to experience the same phenomenon. China’s appetite for iron ore, copper, nickel, zinc and even precious metals will soon drive Chinese companies to invest in countries that form the bread-and-butter of Africa and Latin America strategies for western mining companies. Aside from the Democratic Republic of Congo, which is on everyone’s radar screen, impacted countries could include Botswana, Cote d’Ivoire, Guinea, Guinea-Bissau, Mali, Sierra Leone, Tanzania, Togo and Zambia in Africa and Argentina, Brazil, Columbia, Ecuador, Peru and Venezuela in Latin America.
The result will be both a change in the operating environment of these countries and a substantial challenge to the property rights and concessions of western firms. Chinese mining companies, backed by state-to-state infrastructure deals and China’s understanding of how to operate in the developing world, will make every effort to replay the oil scenario described above in the mining sector.
How to Obtain an Early-Warning on the Chinese Challenge
Another key mistake made by most mining companies is that they become concerned with the impact of new Chinese competitors only once these competitors have begun executing visible market-entry strategies. This approach forces mining companies to be reactive in responding to the new circumstances. While it is possible to develop successful response strategies after a Chinese competitor has entered an important market, the strategic nature of this challenge requires earlier action.
Fortunately, advance preparation and action are possible because there are important early indicators of China’s interest in a specific country or property. Because so much of China’s search for resources is driven by government policy, there are several geopolitical factors that mining companies can monitor in order to adopt effective response strategies.
For example, just in the past several weeks, the Chinese government has begun actively assisting Nigeria with defense equipment to quell the uprising in the Niger Delta, a key source of oil. There can be no doubt that the critical impetus for such a policy from the Chinese perspective is strengthening the hand of Chinese companies as they negotiate deals in that country. Similar cooperative acts on the part of Beijing with respect to multiple African countries serve as “early-warning signals” of Chinese entry into resource rich markets. The table below summarizes some of the key indicators senior mining executives should monitor as they evaluate the likelihood that Chinese competitors will enter countries where they currently do business:
Figure 1: Early Warning System for Understanding Trends in Chinese Investment
Chinese Government Actions That May Indicate Investment Interest
Agreements on infrastructure collaboration with potential target country
Offers of assistance with infrastructure, education, health and other issues are usually the first step in China’s geopolitical courtship of resource-rich regimes.
Chinese state-to-state deals in countries that neighbor a resource-rich target country
A key strategy utilized by China is the development of strong relationship with a potential target country’s neighbors. By gradually building influence in the region, China can make its eventual entry into the mineral –rich country much easier. A good example of this strategy is China’s use of Congo-Brazzaville as both a source of oil and an important stepping stone for eventual investment in the Democratic Republic of Congo (DRC).
Military cooperation between China and various regimes in Africa and Latin America
China’s willingness to sell military equipment to most regimes provides a strong incentive for governments which require this technology to stay in power to encourage Chinese investment.
Bilateral trade agreements between China and the target country
Another method for China to attract developing countries to its orbit and pave the way for investment by Chinese mining firms is to offer special trading privileges for the exports of countries China believes could be important sources of minerals. The ability of China to quickly implement trade agreements, bypassing the political procedures which in Western countries can delay such agreements for substantial periods of time, are a primary attraction of China as a partner for African states.
The expansion of the Chinese diaspora in a country, even if this diaspora is focused on other industries
The presence of a Chinese expatriate community facilitates ties with China and provides a ready source of intelligence for Chinese investors about conditions in a given country.
The clear implication of this early-warning system is that mining companies are going to have to become more sophisticated about monitoring geopolitical events. Understanding foreign policy, and not only in the countries where one does business but in the entire region, will become a valuable skill for senior mining executives as it has for oil and gas companies.
What Can Mining Companies Do to Address the China Challenge?
Despite the scope of the challenge presented by the entry of Chinese mining companies into developing markets, there are a number of effective strategies available to existing players to protect their current concessions and grow reserves despite the presence of new competitors. We highlight two such strategies below.
Strategy 1: All Parts of a Mining Company - Exploration, Corporate Development, Operating Divisions and Others - Must Prepare Robust China Strategies
As the pervious section made clear, China’s mining strategy in the developing world can often be accurately predicted by relying on key geopolitical indicators. But it is not enough for companies to simply conduct internal research or purchase outside advice on the geopolitical trends in regions of interest to the industry. In our work with clients, we have emphasized the need for proactive strategies that will enhance the competitiveness of a company in a given country or region.
Prudent companies will create robust strategies to understand the challenge presented by China and its mining companies around different divisions of the business. Exploration divisions must map out the key countries of interest to them that will provide reserve replacement for the foreseeable future and understand the China challenge in that context. Any exploration strategy that does not take into account the likelihood that above-ground environments in most African and Latin American countries may shift rapidly due to Chinese influence is unlikely to be successful. Corporate development teams need to appreciate that a new variable in any transaction is the competitive landscape that will be created by Chinese entrants into markets where acquisition targets may have assets. Particularly as the industry prepares for further consolidation, a key part of properly valuing the assets of any target is understanding the ability of the target’s properties to withstand property rights and other challenges from Chinese mining companies. Managers of existing operations need to be cognizant that sudden changes in geopolitical realities in their regions may be possible and could profoundly impact the profitability of their divisions. This is true even for countries currently considered absolutely stable, such as Ghana and Chile.
Strategy 2: Companies Must Learn to Leverage the Assets of Their Home Country Governments
Another important strategy that will help mining companies avoid the loss of property rights and position themselves to gain access to new resources and concessions is to utilize the assets of their governments in the countries where they do business.
Most operating executives already engage the embassies of their countries in the places where they have assets. While this is important, it is not enough to overcome the challenge presented by Chinese mining companies. Executives must engage the central foreign policy apparatus of their home countries – the State Department in the case of American companies, the Foreign Office in the United Kingdom, etc. – in order to both draw attention to the challenge discussed in this article and to put pressure on host governments to respect property rights and have open and fair processes for the allocation of future concessions.
Fundamentally, these strategies can be thought of as a combination of two key forces: the level of a company’s internal preparation to manage the new competitive environment and the ability of a company to leverage the resources of its own government on its behalf. Investors should look for companies that are able to do both.
The mining industry is undergoing a major transformation as new competitors from the developing world, and particularly China, are actively seeking resources around the world. Senior executives and Boards of Directors must develop comprehensive strategies for responding to this challenge. This issue cannot be put off till the challenge is present in the countries where one does business; only by preemptively preparing themselves, can companies successfully respond to the new competitive environment facing the mining industry. The ability of companies to maintain property rights to existing assets and expand their reserves in developing countries depends on successfully designing and executing such strategies.
© Frontier Strategy Group 2006
Alexander Turkeltaub is a Managing Director at the Frontier Strategy Group, a global research and advisory firm headquartered in Cambridge, Massachusetts that specializes in analyzing above-ground risks in the natural resources industries. Comments and/or inquiries about the “Future of Mining to 2025: The Rise of China and its Impact on the Global Mining Industry” study may be sent to firstname.lastname@example.org.
Regional-USA, Politics, 2/28/2006
Sub-Saharan Africa must be a primary component of US foreign policy because
it will continue to grow in importance to US economic and strategic
interests as the decade progresses, a panel of policy specialists stressed
The panel discussion, organized by the Council on Foreign Relations (CFR)
and held at its Washington headquarters, spotlighted CFR's recently
published independent task force report, More Than Humanitarianism: A
Strategic US Approach Toward Africa.
The report's two project directors, CFR's Princeton Lyman and J. Stephen
Morrison of the Center for Strategic and International Studies (CSIS),
discussed many of the report's themes and recommendations.
Morrison mentioned US Secretary of State Condoleezza Rice's recent policy
address on "transformational diplomacy," with its emphasis on reallocating a
heavily weighted US diplomatic presence in Western and Northern Europe to
less-developed areas of the world, such as Africa. He said this reallocation
would fill a gap in terms of US security in the region and would increase US
public diplomacy engagement.
"To have the secretary say, 'Let's step back and take a new look at the way
we do foreign aid and how we engage in countries and regions,' is
refreshing, because in Africa there are a lot of resources flowing and new
ways to coordinate our aid and trade programs," he added.
Lyman complimented Rice "on this new phase of engagement" with the
developing world. "What you have," he said, "is a big switch in American
foreign policy, away from Russia and Europe to the areas where our interests
are heavily engaged in a new way."
Africa always has been a bipartisan issue in the United States, unlike Iraq,
Lyman said. "If you look at all the recent initiatives on Africa -- MCC
(Millennium Challenge Corporation), AGOA (African Growth and Opportunity
Act] or PEPFAR [President's Emergency Plan for AIDS Relief) -- you have
strong bipartisan support. That's a plus."
Responding to a question from the audience on conflict resolution in Africa,
Lyman said US involvement needs to be more flexible so that "we can deal
with more than one crisis at a time."
Lyman also recognized "a tremendous growth in African leadership in conflict
resolution -- the Africans who have been in the forefront in helping to
negotiate an end to war in the Congo, as they are in the lead in trying to
bring a political solution in Darfur." African leadership in the political
process has been critical "in whatever progress has been made" in these and
other conflicts, he said.
In regard to supplying foreign aid to energy-rich areas of Africa, Morrison
said, "We are calling for a high-level forum that would begin to get
leadership committed to norms of accountability and transparency. We need to
find the reformers and support them."
He called for "greater flexibility" and "the kind of geopolitical shift that
puts a much higher priority on this region within the White House and within
the upper reaches of the State Department."
Commenting on the progress of democratization on the continent, Lyman called
for a doubling of resources in the region to help Africans demand
accountability from their governments.
China was mentioned as a very real competitor with the United States because
of its aggressive economic programs in sub-Saharan Africa, but Lyman was
critical of the country for seeming to ignore human rights and corruption in
favor of "business for business' sake."
Morrison said that Sudan has been an example "where China and the US have
collided" in terms of blocking effective sanctions on the Khartoum
government in response to armed militias' violence in Darfur. Similarly,
"with [President Robert] Mugabe in Zimbabwe."
"We believe that in the broader context, a serious and strategic dialogue
with China can begin to bring those issues forward," he said.
"They want to be seen as a major 'player' in the world, and to be a major
'player' you have to carry a certain degree of responsibility," Lyman said.
With regard to the proper role for the US private sector in Africa's
development, Lyman said that even though American business largely has been
involved in the extractive industries, "we should encourage involvement on a
grander scale" and prod African states to come together to invest jointly in
the United States.
He added that the Bush administration's Millennium Challenge Corporation is
playing a positive role in the development of democracy in Africa.