Controversial pipeline deal to balloon to US$4 billion

FRESH details on the controversial US$1.3 billion new pipeline project, whose implementation is being spearheaded by President Emmerson Mnangagwa's political and business cronies, have emerged showing that upon completion the deal's cost would have escalated to US$4 billion.

The cost of the project, being driven by Mnangagwa's new associate Eddie Cross and others, has quickened from US$850 million to US$1.3 billion, and will ultimately surge to US$4 billion.

It is fronted by South African businessman Errol Gregor, chairperson of Coven Energy Ltd, the company given the deal.

The project is a 50-50 joint venture between Coven and the National Oil Infrastructure Company of Zimbabwe (Noic).

Documents show that after cabinet approved the project last week, the feasibility study will now follow. It will take three months. Once that is completed, the project will go back to the government for approval and then the design phase will follow before it goes to tender for construction.

The projects will include the following:

- Strengthening the infrastructure at Mozambican ports to establish the capacity to handle regional petroleum needs;

- Establishing a floating single point mooring (SPM) off the coast of Beira capable of handling large tankers (Beira can only handle small tankers because of draft). A SPM is a floating buoy/jetty anchored offshore to allow handling of liquid cargo such as petroleum products for tanker ships. It serves as a link between the shore facilities and the tankers for loading or off-loading liquid and gas cargo;

- Building a new pipeline for refined fuels from Beira to Harare terminating at Mabvuku storage facilities where Noic has underground tanks for 400 000 tonnes of petroleum products;

- Constructing the capacity to distribute fuel by rail from the Harare hub to regional states; and eventually building pipe-lines to the Congo, South Africa and Malawi.

Information obtained shows that once the preliminary work is done, there would be official releases and possibly a press conference sometime soon by the principals, including Mnangagwa, Noic management, Coven executives and regional leaders.

Investigations by The NewsHawks have unearthed revealing details about the project that was facilitated by Cross and chairperson Daniel McKenzie-Ncube (pictured), an engineer who is a long-time Mnangagwa ally. Ncube is also Zanu-PF Midlands provincial chair.

Cross, previously a top business executive and former main opposition MDC senior leader and MP, is now an informal adviser to Mnangagwa and Finance minister Mthuli Ncube.

He is more listened to by Mnangagwa than the redundant and dysfunctional Presidential Advisory Council, hence he enabled the deal. A fortnight ago, Cross launched Mnangagwa's biography, opening a new chapter in their cosy relations.

The President's men want to build Zimbabwe's second fuel pipeline from Beira in Mozambique to Harare, which they say will service the whole of southern Africa.

Documents obtained from the United  Kingdom show the  project is a 50-50 joint venture between British-registered Coven, fronted by Gregor, and Noic, which imports, transports, stores and handles petroleum products locally.
 
The state enterprise has depots at strategic sites around the country, including Harare (Mabvuku and Msasa), Bulawayo, Mutare and Beitbridge that have capacity to store 400 000 tonnes of product.

The project resembles one which Gregor tried to implement in 2018 working with Cross and Christopher Mutsvangwa, a former minister and Mnangagwa's ex-adviser.

Investigations show that the project was actually mulled in 2010 during the Government of National Unity between the late former president Robert Mugabe and founding main opposition MDC leader Morgan Tsvangirai, who has also died.

Cross was the deal-maker. He initially worked with former Energy minister Elton Mangoma over the deal. Mangoma wanted to build a regional fuel hub in Zimbabwe.

A UK source said given his experience as a business executive, first as Dairy Marketing Board boss, then head of the Cold Storage Commission and later as chief executive of the Beira Corridor Group, which rehabilitated the Beira pipeline in the late 1980s, Cross was given the task to push the project.

"His task was to look for a company that could design and fund a new Beira-Harare pipeline. He did so and found the Mining, Oil and Gas Supply Company (Mogs) in Johannesburg, South Africa," the source said.

"The company had been founded by Gregor, a South African chemical engineer who refused to serve in the apartheid army and left South Africa to start a new life in Texas, the United States.

"While there, Gregor established Mogs as a service company for the oil and gas business in the southern states of America. This became a major operation and spread wings into the Middle East region."

Another source in Johannesburg added: "When Nelson Mandela was released from jail in February 1990, Gregor returned home to South Africa and moved his headquarters to Johannesburg.

After some time, he sold 51% to Royal Bafokeng Holdings (RBH) and they built up the company to the point where they were operating drilling machines for the mining oil and gas industry as well as building and operating storage and pipelines for fuel and gas."

Mangoma and Cross tabled the project at a cost of US$850 million. However, when Zanu-PF won the election in 2013 it stalled movement on the proposed project.

The Noic pipeline remained the main petroleum products transportation infrastructure, largely used by several fuel companies. It was later mainly controlled in terms of capacity utilisation by Trafigura, an international commodities giant, and its local partner Sakunda Holdings owned by business tycoon Kudakwashe Tagwirei.

The new pipeline was seen as a commercial threat to their Beira-Harare oil infrastructure stranglehold. Noic controls the existing pipeline despite reports that Tagwirei does.

In the past, Noic had a partnership with Lonmin, formerly the mining division of Lonrho plc, now acquired by Sibanye-Stillwater, a South Africa mining giant, but the shares were acquired by the government after the 2017 coup.

When Mnangagwa seized power in November 2017, the new pipeline project was revived, with Cross – who had crossed sides from the opposition to government – playing a major role.

However, Tagwirei and business partners resisted it and Mnangagwa's government shelved it again. Mutsvangwa was livid about it at the time, and had public outbursts over it.

Tagwirei eventually let go of the project when he disinvested from the fuel business and sold his equity to multinational commodities company Trafigura.

Trafigura said in February last year it would take control of its Zimbabwe business after buying out local partner Sakunda Holdings, owned by Tagwirei.

It increased its stake in Trafigura Zimbabwe to 100%, from 49%. The 51% was owned by Tagwirei's Sakunda, which also operated Trafigura's Puma Energy fuel outlets.

The global commodities trader said at the time it had signed an agreement with Sakunda in December 2019 to take full control of the Zimbabwean business after buying Sakunda's shares.

Part of the problem became that Gregor later sold his 51% to Royal Bafokeng Holdings. Mogs was already controlled 49% by South Africa's state-owned Public Investment Corporation.

Various engagements subsequently followed behind the scenes and after Tagwirei sold his fuel business to Trafigura to concentrate on building a new business empire – one of the biggest companies in southern Africa as he said in recent leaked documents – a new window of opportunity opened.

But Gregor had moved on. He had gone to establish Coven in the UK. So when he was given a second bite of the cherry he agreed.

In 2019, Mnangagwa then moved to appoint Ncube Noic chairperson to further facilitate the project which is opaque and controversial.