Maravi

(HERALD) ZMDC defies sanctions

ZMDC defies sanctions
Sunday, 13 March 2011 00:00 Business
By Africa Moyo

THE Zimbabwe Mining Development Corporation (ZMDC) and its associate companies have defied the crippling sanctions imposed on the country by the West and contributed about US$180 million to the economy since last year, a top official has said.

Zimbabwe has been reeling under sanctions imposed by Britain, the European Union (EU) and the United States following the historic land reform programme embarked upon by Government at the turn of the millennium to right colonial wrongs.

The West has flatly denied the existence of sanctions which have had a deleterious effect on numerous sectors of the economy, especially mining, manufacturing and agriculture, the country’s economic backbone.

Presenting a paper on a topic, “Illegal economic sanctions: Challenges on Zimbabwe’s mining industry” during last week’s Euromoney Conference in Harare, ZMDC chairman Mr Godwills Masimirembwa said despite the sanctions, his organisation and its associate companies have contributed significantly to the economy.

“(The) ZMDC, its subsidiaries, associate companies and joint ventures have contributed in excess of US$120 million during the financial year. These contributions have been in the form of dividends, corporate tax, royalties and VAT (Value Added Tax).

“This year alone the entities have contributed approximately US$56 million and will continue to make significant contributions should the KPCS (Kimberley Process Certification Scheme) certification be granted without any limitations or conditions,” said Mr Masimirembwa.

However, he said while the ZMDC and its associate companies have been contributing significantly to the economy, the roundly condemned sanctions represent the biggest threat to the companies’ contributions going forward.

“ . . . the biggest challenge to our contributions are the illegal sanctions imposed on our corporation (ZMDC) and it associate companies. We have had no problems with our joint venture partners remitting their dividends to their respective countries; so far these companies have remitted over US$70 million in dividends without any difficulties or hitches whatsoever,” said Mr Masimirembwa.

There are 22 joint venture mining companies that were incorporated in 2005, some of whom are from China.

Analysts say Zimbabwe has abundant mineral deposits and the joint venture companies are mining a number of metals including graphite, chrome, copper, platinum, diamonds, uranium and gold.

Mr Masimirembwa said the sanctions have resulted in companies failing to access inputs from EU companies while receipts from gold and diamond sales have been blocked and withheld by the Office of Foreign Assets Control (Offac).

“A total of US$2,9 million has been blocked, broken down as follows; Mineral Marketing Corporation of Zimbabwe (MMCZ) US$186 836, Government royalties US$1 638 948,80, Bindura Nickel Corporation (BNC) US$262 193, Varonet Private Limited US$26 173 and other producers US$1 135 996.

“BNC went into care and maintenance and are struggling to capitalise and Banc ABC, who lost US$41 625 748,80 in the process of transferring the royalties to Government, so it is royalties lost,” said Masimirembwa.

He added that sanctions have resulted in the conclusion of diamond sales taking up to three months instead of the normal 48 hours while companies are also failing to “fully implement business plans”.

Zimbabwe is battling to obtain credit lines to boost production due to the reluctance by multilateral financiers to extend funds because of arrears estimated at US$7 billion, rendering the country a cash economy.

Players in the manufacturing, agriculture and mining sectors say where credit lines are available, they are largely on a short-term basis (for between 30 and 90 days) while the interest rates and collateral demanded are prohibitive, especially for small companies.

The country has struggled to obtain the KP certificate that would allow it to sell its diamonds freely under circumstances that some commentators say are designed to protect other countries’ diamond industries at the expense of Zimbabwe.

It is argued that countries such as Australia and Canada invest huge sums of money into their operations while the average cost of production per carat at Marange is between US$19 and US$30, which is cheaper and therefore profitable.

Labels: DIAMONDS, SANCTIONS, ZMDC

posted by MrK @ 7:26 PM