Mujuru told Zimplats he was running the country

Former army commander Solomon Mujuru told Zimplats chief executive Greg Sebborn way back in 2005 that he was running the country on a day-to-day basis.

Sebborn told United States embassy officials that Mujuru had approached the company offering to be its indigenous partner and protector.

He said Zimplats had tried unsuccessfully to meet President Robert Mugabe to clear up some misunderstandings, especially reports that the Chinese wanted to enter the platinum industry.

Mujuru had told him that Mugabe was quite unstable and was subject to dramatic mood swings, but he, Mujuru, was now running the country day-to-day.

Mujuru also promised Sebborn that he would prevent China from entering the platinum industry.

Embassy officials said Mujuru’s claim to be running the government may have been exaggerated to magnify the appeal of his “protection” offer to Zimplats, but it was consistent with other reports that the embassy had been hearing that while Mugabe remained firmly in control, he was exercising that control only episodically.

Full cable:

Viewing cable 05HARARE1088, ZIMPLATS CEO ON CHINESE INTEREST IN PLATINUM

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This record is a partial extract of the original cable. The full text of the original cable is not available.

021022Z Aug 05

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 001088

SIPDIS

SENSITIVE

AF FOR DAS T. WOODS

AF/S FOR B. NEULING

NSC FOR DNSA ABRAMS, SENIOR AFRICA DIRECTOR C. COURVILLE

USDOC FOR ROBERT TELCHIN

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FOR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

E.O. 12958: DECL: 12/31/2010

TAGS: EMIN EFIN ETRD PREL PGOV ZI

SUBJECT: ZIMPLATS CEO ON CHINESE INTEREST IN PLATINUM

SECTOR, INTERNAL GOZ POLITICS

Classified By: Charge d’ Affaires a.i. under Section 1.4 b/d

——–

Summary

——–

¶1. (C) Zimbabwe Platinum Mines (Zimplats) CEO Greg Sebborn

told CDA on July 29 that his company was not worried about

China’s interest in Zimbabwean platinum in the long-term

because China lacked the technological know-how to compete.

However, the Chinese could cause short-term problems by

leveraging their political influence with Mugabe into control

of a part of the deposits. Sebborn speculated that some in

China might have realized that Zimbabwean platinum deposits

were severely undervalued and would be worth a great deal

when the country became more stable. However, such a move

would violate Zimplats agreement with the GOZ and lead to

arbitration. Sebborn said Zimplats had unsuccessfully sought

a meeting with Mugabe to clear the air. In the interval,

Solomon Mujuru had offered to be the company’s indigenous

partner and protector. Sebborn said Mujuru had claimed to be

running the country day-to-day and had promised to prevent

Chinese involvement in Zimbabwean platinum mining. Sebborn

added that the company was still prepared to invest US$ 2

billion in Zimbabwe but was still waiting for the GOZ to

agree. End Summary.

—————-

China,s Interest

—————-

¶2. (C) The CDA asked Sebborn about China’s reported interest

in Zimbabwe’s platinum sector. Sebborn responded that China

was clearly interested in long-term access to Zimbabwe’s

platinum deposits, the fifth largest in the world, and was

using its political clout with Mugabe to that end. However,

China was selling the GOZ a bill of goods. They had promised

to build a platinum refinery in return for a share of the

deposits but in fact lacked sufficient technical expertise to

do so. (N.B. There are only five platinum refineries in the

world, two in South Africa.) At best, China could build

another base metal refinery similar to the one that Zimplats

had already built in Zimbabwe. These refineries produced a

semi-processed “conglomerate” that needed to be further

refined to extract platinum.

¶3. (C) Sebborn said his company had told the GOZ that they

were willing to talk to potential Chinese investors but

feared that the GOZ would instead force Zimplats to give the

Chinese a portion of the ore-body. He said the Chinese

seemed most interested in the northern end of the deposits,

which ran northeast to southwest for nearly 100 kilometers,

starting just outside Harare. The northern portion was

attractive because it was close to the capital and to water,

and because the platinum was relatively close to the surface

and easy to mine. However, it was a “greenfield” site that

would still require a massive investment even beyond the base

metal refinery and Sebborn stated that he had been unable to

learn anything about the Chinese company rumored to be

involved, Wan Bad. It was not clear that the company even

existed except on paper.

¶4. (C) Sebborn said any such move would violate the

agreements signed between the GOZ and his parent company,

Impala Platinum (Implats) and would provoke arbitration under

Swiss jurisdiction as provided for in the agreement.

Moreover, Sebborn questioned China,s motives. He noted

China buys the majority of its platinum from Implats and that

Implats could easily reduce China’s access to platinum by the

exact amount that its Zimbabwe affiliate lost as a result of

any GOZ deal with China. Instead, he speculated that someone

in China might want control of part of Zimbabwe’s ore body as

a cheap asset that could later be sold at a huge profit. Due

to Zimbabwe,s astronomical sovereign risk, Sebborn estimated

that the ore body was undervalued by a factor of 10.

——————

Relations With GOZ

——————

¶5. (C) Sebborn said that although Zimplats did not fear

China’s interest in the long-term, they were concerned that

it could cause delays and confusion in developing the

platinum deposits. Zimplats was still prepared to invest

US$2 billion in Zimbabwe. Zimbabwe only needed to properly

enforce already existing mining laws, sign an already

agreed-to Bilateral Investment Protection Agreement with

South Africa, and come up with a detailed credible

indigenization scheme that could be implemented. The

investment would include a 10-fold increase in Zimplat,s

local direct hires, plus an additional 55,000 jobs in support

industries resulting from the expansion. It would also dwarf

the loan package the GOZ was currently negotiating with the

South African Government and would not require repayment.

¶6. (C) However, Sebborn said the GOZ was continuing to drag

its feet. Given Mugabe’s desire to reward the Chinese, no

one wanted to make the wrong decision and agree to a deeper

Zimplats investment. Moreover, Zimbabwean officials were

deeply distrustful of private enterprise and the mining

industry in particular. This was exacerbated because they

lacked a clear understanding of how the platinum industry

worked. The GOZ officials thought they could purchase

platinum from the mine, as they did with gold, using the

official exchange rate and then turn the precious metal into

hard currency abroad at world prices. In fact, the GOZ had

posted monitors at the mines to detect platinum smuggling,

when the platinum itself was still part of the semi-processed

going to South Africa for further refining.

¶7. (C) Sebborn said Zimplats had been seeking a meeting with

Mugabe for some time to clear up misunderstandings but to no

avail. However, in the interval, Solomon Mujuru, the

powerful ex-military commander and husband of Vice President

Joyce Mujuru, had approached the company offering to be its

indigenous partner and protector. Sebborn noted that in so

doing, Mujuru was going against Mugabe’s wishes. Mugabe had

personally picked out Zimplats “indigenous” partner, a group

that had so far been unable to obtain the financing needed to

buy into the company. Moreover, according to Sebborn, Mujuru

had also promised that he would prevent China would from

entering the platinum industry. Sebborn said Mujuru had told

him that Mugabe was “quite unstable” and subject to dramatic

mood swings and that he, Mujuru, was now running the country

day-to-day.

——-

Comment

——-

¶8. (C) Mujuru’s claim to be running the government may have

been exaggerated to magnify the appeal of his “protection”

offer to Zimplats, but it is consistent with other reports we

have been hearing that while Mugabe remains firmly in

control, he is exercising that control only episodically.

The result is increasing government paralysis and a growing

power vacuum. It may be the case that no one is truly

“running” government operations any more so much as acting in

his/her narrow personal interest; and the Mujuru’s sway and

energy in that regard are unrivaled save by the aging and

increasingly distant Mugabe himself.

¶9. (C) South African diplomats have stressed to us SAG

concern about Chinese designs on Zimbabwe’s platinum, but

mining insiders here share Sebborn’s dismissive attitude

about prospects for any Chinese platinum refining plant.

Mining is the sector perhaps most poised to revive in

Zimbabwe’s gasping economy, but even it remains constricted

by GOZ incompetence and the narrow avarice of key ruling

party figures.

SCHULTZ

(153 VIEWS)