Who are the local partners of the $4.2 billion platinum deal?


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Pertaining to fiscal linkages, it is necessary to leverage on mineral resource exploitation to mobilise a fair share of tax revenue from mining activities to fund programmes that enhance progressive realisation of Socio-Economic Rights (SERs) like health and education, that are enshrined in the Constitution.

Because the $4.2 billion agreement is not public, it is difficult to check whether Karo Resources will pay a fair share of tax revenue from exploiting the country’s rich platinum deposits.

Ominously, government has not fared well in the past on mining fiscal linkages. A drawback is that the Mines and Minerals Act does not provide for competitive bidding on known lucrative mineral deposits as encouraged by the African Mining Vision.

Competitive bidding creates opportunities such as huge signing on fees and better fiscal terms. As much as we celebrate the $4.2 billion platinum deal, it is sad to note that the economic value of platinum resources given to the investors is not known. Therefore, government must prioritise geological knowledge to ascertain the quantity and quality of mineral resources in order to negotiate better deals.

Another contentious issue is that of toxic tax incentives, for instance, platinum houses holding special mining lease agreements have been paying 2.5 percent mineral royalty fees against 10 percent prescribed by the Finance Act. It is noteworthy that the 2018 national budget statement provided for all platinum houses to pay 2.5 percent royalty rate despite consistently lamenting poor mining contribution to the fiscus (national budgets 2010-2017).

Mining is associated with heavy infrastructure investments, water, power, transport and communication infrastructure. To maximises infrastructure linkages, other economic activities like agriculture, with no capacity to develop mega infrastructure, must have access to infrastructure developed by mining operations.

Some features around the Karo Resources deal are welcome: a 600-megawatt thermal power station will be built, 250MW to service the mine, processing and refining. The excess 350MW will be released to the national grid to help to ease power shortages, which augurs well for the development of other economic sectors. It is also vital to point out that this will ease foreign currency shortages because Zimbabwe is relying on power imports from Mozambique and South Africa to plug power deficits.

Another critical area that could have been open for scrutiny if the $4.2 billion deal was public include the promotion of small to medium enterprises to supply goods and services required in the mining. The development of upstream or downward industries is quite important to avoid an unhinged mining sector to the country’s economy. Procurement, notably constitute the largest share of revenue consumed in mining operations.

Commendably, it was disclosed that Karo Resources will process it platinum right up to the last final stage of recovering precious metals like platinum, palladium, rhodium and gold locally. Contract disclosure will then allow public performance monitoring on this deal to hold the investors and government to account.

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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