Opinion: Taxpayers to suffer from Chimuka’s US$88m contract with govt
In a move that is seemingly meant to relentlessly fleece the public purse for the umpteenth time, President Emmerson Mnangagwa’s administration, through the Ministry of Finance on Wednesday gazetted the US$88 million loan for the Mbudzi Interchange in Harare.
The Government of Zimbabwe is the borrower in this shady deal, while Fossil Mines (Private) Limited, owned by controversial and sanctioned businessman Obey Chimuka, is the lender.
The contract, whose price was US$85 million before being revised to US$88 million, is shared by Fossil and a consortium called TEFOMA that consists of Tensor Construction, Fossil Contracting and Masimba Holdings.
The gazetted contract between the government of Zimbabwe and Fossil Mines is designed to fleece the public through debt assumption by overpricing and indexing payments mechanism through the London Stock Exchange.
Effectively, this ensures that the contractors have fiscal advantage by virtue of asymmetrical exchange rate between London and the RBZ interbank rate.
Put simply, Fossil Mines and its partners are Zimbabwean companies which should be paid in Zimbabwean currency as dictated by the RBZ interbank rate.
The compromised contract between the government and Fossil Mines will see taxpayers losing, at a minimum, US$0.25 for every dollar expended on the multimillion dollar project. For the whole project this is a total of US$22 million which will go into private pockets by the stroke of a signature.
There is no doubt that this constitutes reaping off the public purse through shady and cronistic dealings which is in violation of the provisions of the Constitution and the Public Finance and Management Act.
The Minister of Finance, Mthuli Ncube, acted criminally in agreeing to those terms which were not debated in parliament.
Fossil, the financier of the project, together with its owner front Chimuka, were recently sanctioned by the United States Treasury’s Office of Foreign Assets Control over allegations of corruption and aiding the Zanu-PF regime.
In a General Notice 131B of 2023, the Minister of Finance and Economic Development Professor Mthuli Ncube gazetted the US$88 million loan, agreed in 2021, between the government and a consortium of contractors led by the Fossil Group, for the construction of the Mbudzi Interchange in Harare.
“It is hereby notified, in terms of section 300(3) of the Constitution of Zimbabwe, as read with section 18(2) of the Public Debt Management Act [Chapter 22:21] that on the 6th of December, 2021, the Minister of Finance and Economic Development signed a Loan Agreement between the Government of Zimbabwe and Fossil Mines (Private) Limited on the terms specified in the Schedule-
“1. The loan amount is US$88 000 000,00 (eighty-eight million United States dollars). The borrower is the Government of Zimbabwe. The lender is Fossil Mines (Private) Limited. The Final Maturity date for the loan is 6th June, 2025. The loan interest rate shall be London Interbank Offered Rate (LIBOR) plus “5%” per annum.”
The notice further stated that grace period is a period of nine (9) months on the Principal Amount.
Accordingly, the Treasury said the loan facility would be utilised for the sole purpose of funding the construction of the Mbudzi Interchange and Divergence Routes Road Infrastructure Project.
“The Financier, (Fossil Mines) shall oversee the project implementation and disburse directly towards the project implementation,” read the notice.
Against this background, Fossil Mines can construct the Mbudzi Interchange at a cost much lower than the gazetted and still claim it used more than US$88 million.
Fossil Group is allegedly linked to businessman Kudakwashe Tagwirei who is reportedly receiving millions of dollars from the Zanu-PF government led by his alleged business partner in President Mnangagwa for road construction contracts and many other projects.