Zimbabwe’s Sovereign Wealth Fund embroiled in US$1.6 billion scandal

Zimbabwe’s new sovereign wealth fund, Mutapa Investment Fund, has reportedly paid US$1.6 billion using public debt for a 35% stake in Kuvimba Mining House, a mining conglomerate with ties to presidential advisor and ruling party donor Kudakwashe Tagwirei.

The deal, which values Kuvimba at US$4.6 billion, has raised eyebrows due to the company’s recent links to Tagwirei, who has been accused of corruption.

The purchase was made using a Treasury Bill, a form of short-term government debt, which has increased Zimbabwe’s debt by US$3 billion in just a few months.

The country’s debt now stands at US$21 billion, with US$1.9 billion of that being used to “recapitalise” Mutapa Investment Fund.

Kuvimba Mining House owns several gold, lithium, nickel, and platinum mines, but its valuation has been questioned due to the mixed fortunes of its mines. The company’s gold production could bring in around US$250 million a year, but its other mines have been struggling.

The deal has sparked concerns about corruption and the use of public funds for private gain. The Sentry, an international watchdog organisation, has called for an investigation into the deal and for the publication of records showing the ultimate beneficiaries of the payment.

Zimbabwe’s Auditor General and the parliamentary Public Accounts Committee have been urged to open inquiries into the deal, with five key questions to be answered: the purchase price, the valuation process, the ownership structure of Kuvimba at the time of payment, who received the payment, and what happened to the Treasury Bill after it was issued.

The controversy has also raised questions about Zimbabwe’s debt sustainability and its ability to access cheap loans from development banks. The African Development Bank is leading a debt restructuring process, but the new debt issuance has made it harder to reach a deal.

The government of Zimbabwe has been asked to publish a list of entities and financial institutions holding the domestic debt, including the Treasury Bill used to purchase the Kuvimba shares.

“Issues raised by the new debt issuance should be discussed in the AfDB-led structured dialogues on debt clearance, including those working groups that include civil society representatives, so that the government of Zimbabwe can explain the thinking behind the purchase of the Kuvimba shares.

“The AfDB should push the government of Zimbabwe to publish a list of the entities and financial institutions holding the domestic debt, including this particular Treasury Bill,” the Sentry noted.