The sour taste of the Russian deals

By Shame Makoshori

President Vladimir Putin’s Russia has made an emphatic and strategic move into Zimbabwe’s platinum mining sector in the Great Dyke, in the latest signal of an intensifying scramble for Zimbabwe’s minerals.

Recently, Zimbabwe played host to over 50 Russians, sealing deals that span from mining, mining equipment supplies to delivery of military helicopter gunships.

The mostly secretive transactions, whose flagship was the US$3 billion Darwendale platinum deal, boosted business relations between Harare and Moscow, who have traditionally been allies but largely on a political level.

Russia is the largest and most powerful of countries that emerged out of the collapse of the Soviet Union after the cold war.

Behind the scenes, there have been diplomatic moves towards economic integration between Harare and Moscow, with Zimbabwe hoping to benefit from Russia’s economic capacity through foreign direct investment inflows, while Russia is expected to benefit from exploitation of the southern African country’s vast platinum resources to feed its strong automotive industries.

On paper, the deals are expected to bolster Zimbabwe’s elusive economic recovery. But analysts have been questioning if this time around, the entrance of another global power, following China’s march into Zimbabwe a decade ago, would have a positive impact on the state of the economy that has not responded to several injections from Beijing.

Godfrey Kanyenze, an economist at the Labour and Economic Development Research Institute of Zimbabwe, said the Russian deals were not something Zimbabwe should “be excited about”.

“We are heading for further disaster. These guys are known for doing things that do not benefit us. The major challenge is we do not know what these deals entail to the country. It is alarming in the sense that we do not know what they are about. The Russians were already in Penhalonga and the Chinese have been in Chiadzwa diamond fields. But these deals have not benefitted us,” Kanyenze said.

Several analysts are worried that Harare could have negotiated bad deals, given the fact that full details of the transactions with Russia have remained out of public limelight. But the Russians and their Zimbabwean counterparts are buoyant. “We identified the Darwendale project as the flagship project of our cooperation,” said Foreign Affairs Minister, Samuel Mumbengegwi.

Dennis Manturov, Russia’s Minister of Trade and Industry, said the deals opened new opportunities for the two countries. “There is strong potential for cooperation between our two countries,” said Manturov.

The two countries have formed a joint venture firm, Great Dyke Investments, to spearhead the development of platinum mines in Zimbabwe. But with China already on its side, and failing to produce the results that Zimbabwe requires to return the country to the robustly growing economy of the mid 1990s, the southern African country seems to be broadening its ties in the east following a fall-out with the West over a decade ago.

Russians are likely to benefit from the supply of cheaper platinum for their automotive industries. Kanyenze argued that the ongoing deals were sealed by a desperate government anxious to give the impression that it is handling the economic crisis, and was ready to deal with the east alone. “These guys are just doing it to spite the west. It is like a girl who has found a new boyfriend and is telling the old boyfriend that I can do without you,” said Kanyenze.

There are also fears that the multibillion dollar deals may benefit only a few within government and the ruling party, as has previously happened with deals involving the Chinese. “The discovery of minerals, oil and gas generates great expectations from citizens,” says Claude Kabemba, executive director at the Southern Africa Resources Watch.

“The challenge today is how to ensure that African countries escape the resource curse. How to use efficiently the abundant resources for the benefits of citizens. The ‘resource curse’ is one of the most persistent and debilitating clichés about African countries blessed with deposits of oil, gas and valuable minerals. In most developing countries, resource extraction continues to produce enclave economies similar to extraction during the colonial times,” says Kabemba.

He said the problem with the region was that it had weak States (weak institutions, weak regulations, weak administration) to take on the rich economies in discussions for natural resources exploitation.

“Deals are not made known before they are signed, contracts are not published. In all the countries, the resource curse has been fundamentally a political problem-corruption. The entire extractive industry must be built on the principle of people before profit. The biggest challenge that resource rich countries face, is how to ensure that the resource are extracted in a sustainable manner and its proceeds distributed in an equitable manner. The country can consider bringing in external skills (negotiators) to be able to counter the vast expertise and knowledge that EI companies bring to bear,” says Kabemba. Financial Gazette