News / National
Mnangagwa in dodgy project
04 Aug 2017 at 07:58hrs | Views
VICE-President Emmerson Mnangagwa is entangled in a multi-million dollar chrome deal involving dodgy South African investors illegally granted permission to import fuel duty-free under the guise they are running a project with national status, investigations by the Zimbabwe Independent have shown.
Mnangagwa played an important role to facilitate for Africa Chrome Fields (Pvt) Ltd, a subsidiary of South African mining company Fanshawe Mining Holdings, to invest in a chrome mining and smelting project in Chirumhanzu-Zibagwe constituency.
The vice-president is said to be close to ACF director Zunaid Moti, a flashy car-loving tycoon arrested in 2012 over armed robbery and attempted murder allegations.
Moti denied the allegations.
ACF was granted a duty-free fuel importation certificate by the Ministry of Transport, alongside the Dema Emergency Power Project and Kariba South Extension. This has raised eyebrows and parliament is now investigating the issue.
The duty-free certificate was issued through the Central Mechanical Equipment Department (CMED). Other mining companies operating in Zimbabwe have not been given the same privilege.
Under Statutory Instrument (SI) 184 of 2014, equipment for national projects - not fuel - can be imported duty-free.
The Parliamentary Portfolio Committee on Mines and Energy, chaired by Daniel Shumba, in June grilled Transport minister Joram Gumbo on the issue. The committee argued SI184 of 2014 does not allow private companies to import fuel duty-free.
As a result, the committee has also quizzed former Transport ministry permanent secretary Munesu Munodawafa, CMED chief executive Davison Mhaka and CMED board chair Sheunesu Mupepereki over this. It also visited some of the projects.
The law says duty-free fuel can only be imported for use by government exclusively.
"So for African Chrome Fields to get 12 million litres of diesel duty-free and Sakunda 300 million litres under this statutory instrument is corrupt and unlawful," one government official said this week. "They cannot hide under the cover of national project status. That is exclusively for government. Private companies are only allowed to bring in equipment, not fuel, under that dispensation."
The law says once a project has been granted national status by the Ministry of Finance, it is eligible for "rebate of duty on capital equipment imported for use in specified industries".
It clearly defines capital equipment as "plant, equipment and machinery" to be used in the mining, manufacturing, agricultural and energy generation sectors. That does not include rebate on fuel imports.
Asked about the legality of issuing the controversial duty-free certificates, Gumbo told the committee his secretary had written to Treasury highlighting the possibility of legal gaps with respect to SI184 of 2014 and requested that the Finance ministry, in liaison with the Attorney-General's Office, to close such loopholes.
In February, the committee questioned Mhaka and Mupepereki over the matter after it emerged some private companies were taking advantage of the duty-free fuel import certificates to bring in cheap fuel to sell in the parallel market.
A letter written by Mhaka, addressed to Shumba, dated December 1 2016, seen by the Independent, showed CMED had cleared ACF to import more than a million litres of fuel.
"As custodians of SI184 of 2014, CMED was requested by Ministry of Finance and Economic Development, through the Ministry of Transport and Infrastructural Development, to facilitate the importation of duty-free fuel for African Chrome Fields (Pvt) Ltd, for electricity generation on the chrome smelting project," Mhaka writes.
"A total of 1 095 million litres of diesel have so far been cleared. So far 600 119 litres of diesel have been utilised and the acquittals are attached. 495 000 litres are yet to be consumed and will be acquitted. CMED has been paid US$24 000 for the services rendered."
Mnangagwa's dealings with ACF were debated in an explosive politburo meeting a fortnight ago where a titanic battle between Higher and Tertiary Education minister Jonathan Moyo and him erupted.
Moyo accused Mnangagwa of deceiving cabinet into lifting an export ban on raw chrome in 2015 for self-serving purposes. He said ACF was granted mining rights after Mnangagwa "wilfully misled" President Robert Mugabe into believing ACF investors had the latest technology to process chrome ore into ferrochrome.
It was on the basis of that promise ACF was granted mining rights. Mugabe was invited to officiate at the commissioning of the plant in 2015. He was shown what was claimed to be the chrome ore processing machinery.
Mugabe at the event said he was told that the company would require only 11 months to fully establish and start operating full throttle.
Moyo said truckloads of chrome ore had been smuggled out, charging Mnangagwa's business associates had in the process made over US$49 million.
Government lifted the ban on chrome ore exports and scrapped the 20% export tax on the mineral, saying the move would improve viability of miners, create thousands of jobs and improve revenue inflows for the fiscus.
The ban on chrome exports was imposed in April 2011 to encourage beneficiation of the mineral.
In e-mailed responses to the Independent, ACF national project liaison director Ashruf Kaka said the aluminothermic technology that would process chrome ore into ferrochrome is expected to be installed by the end of January 2018. He also said commissioning of the plant will be complete by February next year.
"The project is dependent on obtaining an Environmental Impact Assessment approval which approval is imminently awaited," he said. "To date we have established six sites with 19 operating spiral wash plants covering an area of approximately 30km along the Great Dyke. We are currently employing approximately 900 workers."
Kaka said his company was granted a duty-free certificate to import fuel as a result of the remoteness of their sites as there was no electricity in the remote areas. He said as a result, ACF was relying on power from diesel generators.
"In the absence of electricity, we became acutely aware that progress in the project was being stunted by the lack of electricity and the only alternative to electric power was diesel-generated power," he said. "At a tremendous cost from a capital expenditure perspective, we embarked on diesel-generated power as the only alternative, hence approached the Ministry of Finance with a request to obtain a rebate on diesel such that the project could continue in the absence of availability of electricity.
"The request was a formal application which was considered over a period of a few months and eventually granted in 2015, and renewed towards the end of 2016 for import in 2017."
Asked to comment on the nature of Mnangagwa's relationship with his company, Kaka said: "At the risk of repeating ourselves in the media, we are in the business of mining and beneficiation and are not politicians and leave politics to the politicians.
"Having said that, we invested in Zimbabwe in the first quarter of 2014 prior to us having any interaction with the vice-president and our interaction with him commenced with the introduction to him of the aluminothermic technology during the latter part of 2014, and more particularly in the beginning of 2015. We had sought other investments in the chrome industry from 2012 with particular reference to ZimAlloys.
"The relationships that we have with all politicians and their respective departments are project-related and accordingly professional in nature. We do not delve into the realm of politics as our focus is and will always be beneficiation and all politicians, including the Honourable Vice-President Mnangagwa, have considered the project beneficial to Zimbabwe and the interest of Zimbabwe."
Kaka refused to confirm whether or not ACF had siphoned US$49 million worth of chrome through shady exports as Moyo alleged in the politburo meeting.
"We do not wish to comment on the amount referred to herein save to state that it is substantially exaggerated and it is not our policy to detail this information in the public domain as we are a private company," he said.
"Our information relating to exports are succinctly documented with the Minerals Marketing Corporation of Zimbabwe (MMCZ) on a daily basis and you are free to approach the MMCZ for whatever information they are able to furnish in the public domain. As you are aware, the MMCZ reports to the Ministry of Mining and Mining Development, which is in itself kept updated with all information."
Efforts to get comment from Mnangagwa's office were fruitless.
Mnangagwa played an important role to facilitate for Africa Chrome Fields (Pvt) Ltd, a subsidiary of South African mining company Fanshawe Mining Holdings, to invest in a chrome mining and smelting project in Chirumhanzu-Zibagwe constituency.
The vice-president is said to be close to ACF director Zunaid Moti, a flashy car-loving tycoon arrested in 2012 over armed robbery and attempted murder allegations.
Moti denied the allegations.
ACF was granted a duty-free fuel importation certificate by the Ministry of Transport, alongside the Dema Emergency Power Project and Kariba South Extension. This has raised eyebrows and parliament is now investigating the issue.
The duty-free certificate was issued through the Central Mechanical Equipment Department (CMED). Other mining companies operating in Zimbabwe have not been given the same privilege.
Under Statutory Instrument (SI) 184 of 2014, equipment for national projects - not fuel - can be imported duty-free.
The Parliamentary Portfolio Committee on Mines and Energy, chaired by Daniel Shumba, in June grilled Transport minister Joram Gumbo on the issue. The committee argued SI184 of 2014 does not allow private companies to import fuel duty-free.
As a result, the committee has also quizzed former Transport ministry permanent secretary Munesu Munodawafa, CMED chief executive Davison Mhaka and CMED board chair Sheunesu Mupepereki over this. It also visited some of the projects.
The law says duty-free fuel can only be imported for use by government exclusively.
"So for African Chrome Fields to get 12 million litres of diesel duty-free and Sakunda 300 million litres under this statutory instrument is corrupt and unlawful," one government official said this week. "They cannot hide under the cover of national project status. That is exclusively for government. Private companies are only allowed to bring in equipment, not fuel, under that dispensation."
The law says once a project has been granted national status by the Ministry of Finance, it is eligible for "rebate of duty on capital equipment imported for use in specified industries".
It clearly defines capital equipment as "plant, equipment and machinery" to be used in the mining, manufacturing, agricultural and energy generation sectors. That does not include rebate on fuel imports.
Asked about the legality of issuing the controversial duty-free certificates, Gumbo told the committee his secretary had written to Treasury highlighting the possibility of legal gaps with respect to SI184 of 2014 and requested that the Finance ministry, in liaison with the Attorney-General's Office, to close such loopholes.
In February, the committee questioned Mhaka and Mupepereki over the matter after it emerged some private companies were taking advantage of the duty-free fuel import certificates to bring in cheap fuel to sell in the parallel market.
A letter written by Mhaka, addressed to Shumba, dated December 1 2016, seen by the Independent, showed CMED had cleared ACF to import more than a million litres of fuel.
"As custodians of SI184 of 2014, CMED was requested by Ministry of Finance and Economic Development, through the Ministry of Transport and Infrastructural Development, to facilitate the importation of duty-free fuel for African Chrome Fields (Pvt) Ltd, for electricity generation on the chrome smelting project," Mhaka writes.
"A total of 1 095 million litres of diesel have so far been cleared. So far 600 119 litres of diesel have been utilised and the acquittals are attached. 495 000 litres are yet to be consumed and will be acquitted. CMED has been paid US$24 000 for the services rendered."
Mnangagwa's dealings with ACF were debated in an explosive politburo meeting a fortnight ago where a titanic battle between Higher and Tertiary Education minister Jonathan Moyo and him erupted.
Moyo accused Mnangagwa of deceiving cabinet into lifting an export ban on raw chrome in 2015 for self-serving purposes. He said ACF was granted mining rights after Mnangagwa "wilfully misled" President Robert Mugabe into believing ACF investors had the latest technology to process chrome ore into ferrochrome.
It was on the basis of that promise ACF was granted mining rights. Mugabe was invited to officiate at the commissioning of the plant in 2015. He was shown what was claimed to be the chrome ore processing machinery.
Mugabe at the event said he was told that the company would require only 11 months to fully establish and start operating full throttle.
Moyo said truckloads of chrome ore had been smuggled out, charging Mnangagwa's business associates had in the process made over US$49 million.
Government lifted the ban on chrome ore exports and scrapped the 20% export tax on the mineral, saying the move would improve viability of miners, create thousands of jobs and improve revenue inflows for the fiscus.
The ban on chrome exports was imposed in April 2011 to encourage beneficiation of the mineral.
In e-mailed responses to the Independent, ACF national project liaison director Ashruf Kaka said the aluminothermic technology that would process chrome ore into ferrochrome is expected to be installed by the end of January 2018. He also said commissioning of the plant will be complete by February next year.
"The project is dependent on obtaining an Environmental Impact Assessment approval which approval is imminently awaited," he said. "To date we have established six sites with 19 operating spiral wash plants covering an area of approximately 30km along the Great Dyke. We are currently employing approximately 900 workers."
Kaka said his company was granted a duty-free certificate to import fuel as a result of the remoteness of their sites as there was no electricity in the remote areas. He said as a result, ACF was relying on power from diesel generators.
"In the absence of electricity, we became acutely aware that progress in the project was being stunted by the lack of electricity and the only alternative to electric power was diesel-generated power," he said. "At a tremendous cost from a capital expenditure perspective, we embarked on diesel-generated power as the only alternative, hence approached the Ministry of Finance with a request to obtain a rebate on diesel such that the project could continue in the absence of availability of electricity.
"The request was a formal application which was considered over a period of a few months and eventually granted in 2015, and renewed towards the end of 2016 for import in 2017."
Asked to comment on the nature of Mnangagwa's relationship with his company, Kaka said: "At the risk of repeating ourselves in the media, we are in the business of mining and beneficiation and are not politicians and leave politics to the politicians.
"Having said that, we invested in Zimbabwe in the first quarter of 2014 prior to us having any interaction with the vice-president and our interaction with him commenced with the introduction to him of the aluminothermic technology during the latter part of 2014, and more particularly in the beginning of 2015. We had sought other investments in the chrome industry from 2012 with particular reference to ZimAlloys.
"The relationships that we have with all politicians and their respective departments are project-related and accordingly professional in nature. We do not delve into the realm of politics as our focus is and will always be beneficiation and all politicians, including the Honourable Vice-President Mnangagwa, have considered the project beneficial to Zimbabwe and the interest of Zimbabwe."
Kaka refused to confirm whether or not ACF had siphoned US$49 million worth of chrome through shady exports as Moyo alleged in the politburo meeting.
"We do not wish to comment on the amount referred to herein save to state that it is substantially exaggerated and it is not our policy to detail this information in the public domain as we are a private company," he said.
"Our information relating to exports are succinctly documented with the Minerals Marketing Corporation of Zimbabwe (MMCZ) on a daily basis and you are free to approach the MMCZ for whatever information they are able to furnish in the public domain. As you are aware, the MMCZ reports to the Ministry of Mining and Mining Development, which is in itself kept updated with all information."
Efforts to get comment from Mnangagwa's office were fruitless.
Source - Zim Ind
