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How a Zimbabwe Tycoon Made a Fortune from a Trafigura Partnership and Spiralling National Debt – NewsDay

Kudakwashe Tagwirei, who is close to Zimbabwe’s president and his inner circle, leveraged his privileged access to fuel and mining markets to strike a lucrative partnership with commodities giant Trafigura. Sanctioned by the U.S. and U.K. for corruption, Tagwirei continued to do business by relocating his network to Mauritius.

Key Findings

  • Tagwirei has earned at least $100 million in fees from a partnership with Swiss-based Trafigura. Together, they have profited extensively by dominating Zimbabwe’s fuel market since 2013.
  • Trafigura quietly extended $1 billion in loans to the Zimbabwean government, at exorbitant interest rates.
  • As controversy grew, Tagwirei moved his business network offshore to Mauritius, where he secured a new near-monopoly fuel deal with the government. He is still active in mining and fuel deals in Zimbabwe.
  • Government officials appear on key company records and Tagwirei’s own correspondence, indicating that there might be more powerful people behind the network

When Zimbabwe’s long-ruling strongman Robert Mugabe was forced to resign in 2017, his downfall was greeted by jubilant crowds hopeful that decades of misrule and corruption were finally coming to an end.

His successor, Emmerson Mnangagwa, set off on an international tour to declare Zimbabwe “open for business.” Sporting a scarf knitted in the five colors of the country’s flag, he assured world leaders that all that was needed to jumpstart Zimbabwe’s moribund economy was new leadership and an infusion of foreign investment.

Four years on, Mnangagwa’s promised “New Dawn” has not arrived. Instead, Zimbabwe’s economy remains in tatters. Public debt — much of it illegally accrued — has ballooned, a lack of foreign currency and fuel shortages continue to cripple the economy, and the value of Zimbabwe’s local currency has plummeted.

The turmoil has not been without its winners, though. One man in particular has prospered from the state’s largesse: Kudakwashe Tagwirei, a tycoon known locally as “Queen Bee” because of his vast economic influence.

Under Mnangagwa’s reign, the businessman came to dominate Zimbabwe’s fuel, platinum, and gold sectors. Benefitting from opaquely awarded government contracts worth billions of dollars and preferential access to minerals as well as scarce foreign currency, Tagwirei’s network also got huge state loans he used to enrich himself while indebting the Zimbabwean public.

Those came from a surprising source that proved a key player in Tagiwirei’s network: Zimbabwe’s central bank. At least $3 billion in treasury bills issued by the Reserve Bank of Zimbabwe — which may have had no legal authority to do so — were awarded to Tagwirei’s group between 2017 and 2019, a parliamentary report said, with the group then funneling the windfall into a massive expansion that included a mining acquisition spree at bargain bin prices. As the country’s currency crashed, Tagwirei’s fortunes soared.

But it’s not clear if Tagwirei is the sole, or even the main beneficiary of this largesse. The presence of a handful of state officials in some of the network structures imply he is also a proxy for others. Since 2019 the Reserve Bank of Zimbabwe’s governor, John Mangudya, was even named in Tagwirei-connected corporate trusts. Insiders say Tagwirei is close both to President Manangagwa and his deputy General Constantino Chiwenga.

Besides the government, one foreign company also played a critical role in Tagwirei’s rise over nearly a decade: Swiss-headquartered commodity trader Trafigura Group Pte Ltd. Trafigura formed a joint venture with Tagwirei as far back as 2013 that gave the company priority access to the country’s fuel infrastructure and supply business through Tagwirei’s local influence. Tagwirei’s links to Trafigura, his business successes at home, and U.S. and U.K. sanctions against him have attracted critical press coverage in recent months.

Now, using contracts, invoices and email correspondence between Tagwirei’s network, former Trafigura officials involved in the joint venture, and government officials, OCCRP can reveal new details of how Trafigura and Tagwirei’s partnership worked.

OCCRP learned that Trafigura paid Tagwirei at least $100 million in fees through early 2018 for his help in creating a dominant position in the Zimbabwean fuel market. Their joint venture, initially called Sakunda Supplies and later renamed Trafigura Zimbabwe, would do this by advancing massive cash prepayments and fuel to the government in exchange for significant control over the Zimbabwean market and priority use of the state’s fuel pipelines.

“Only one set of interests controls the fuel: Trafigura and Tagwirei,” Zimbabwe’s former finance minister, Tendai Biti, told OCCRP.

The joint venture would last until December 2019, when Trafigura bought out the soon-to-be-sanctioned Tagwirei.

But the partnership may have been too lucrative to discontinue.

Only one set of interests controls the fuel: Trafigura and Tagwirei.Tendai Biti, Former Zimbabwean Finance Minister

Instead, Trafigura sought to continue its relationship with Tagwirei via Sotic International Ltd., a new company that he had set up in Mauritius, and associated shell companies fronted by South Africa-based directors, several of whom were former Trafigura employees.

In an email to OCCRP, Tagwirei said, “Some of the questions you raise are an embarrassing demonstration of an apparent lack of understanding of the issues you purport to investigate … I unequivocally deny all the accusations and allegations you are making against me in your email.”

Wilfred Mutakeni, head of Zimbabwe’s National Oil Infrastructure Company, the regulatory agency that provided the joint venture its dominant rights, did not respond to a request for comment.

The exterior of the Trafiguras Offices in Johannesburg

Trafigura’s offices in Johannesburg

In a response to OCCRP, a Trafigura spokesperson said, “Trafigura exited our business relationships with Mr Tagwirei in December 2019, prior to US sanctions being imposed, through the purchase of [[Tagwirei’s stake]]. All commercial arrangements are conducted in full compliance with applicable laws and regulations. Trafigura is one of a number of suppliers to Zimbabwe, South Africa and Mozambique. There is no exclusivity or market dominance.”

Trafigura said OCCRP’s details were “factually inaccurate,” but declined to answer specific questions about advance payments, payments to Tagwirei, or the purchase price of his shares. The company said “commercial arrangements are commercially sensitive and as such, are confidential.”

A Captive Market

On Harare’s bustling streets, where centuries-old churches compete for space with modern high-rises, one building stands above its neighbors. Century Towers, an imposing glass structure perched next to one of the capital’s main thoroughfares, houses the main office of Tagwirei’s holding company for his share of the joint venture, Sakunda Holdings Private Ltd, on several floors – including the 15th. One floor below are the offices of Zimbabwe’s energy regulator.

Harare city with cars driving past the Century Towers
Century Towers in Harare.

This proximity hints at the closeness critics say allowed Tagwirei to make a fortune from preferential government contracts.

Tagwirei originally signed a contract in 2011 with the National Oil Infrastructure Company of Zimbabwe (NOIC) that gave him many of the rights he would later share with Trafigura.

In July 2013, Tagwirei and his companies Sakunda Holdings and Sakunda Trading agreed to sell access to their existing petroleum contract with NOIC to Trafigura, affording it 49 percent of the shares of a new joint venture.

They agreed to form Sakunda Supplies, based in Zimbabwe, which would hand Trafigura a host of benefits, including preferential access to the crucial Beira pipeline from Mozambique. NOIC, which had initially awarded Sakunda Holdings the deal in 2011, confirmed in a 2018 letter that Trafigura was entitled to all the benefits enjoyed by Sakunda. -OCCRP

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economy

“Zim dollar now in real peril,” back on the slippery slope again – Cathy Buckle – BizNews

Our neighbouring country, Zimbabwe, yet again finds itself at the cusp of an economic crisis. Zimbabwean author Cathy Buckle compares its current state to that of being dragged up a steep, slippery slope, going nowhere without help. She notes that even while the Zimbabwean dollar is in trouble and losing confidence as a currency, its leaders carry on with old habits: “shouting, blaming, arresting, accusing, and threatening”. The value of the Zimbabwean dollar against the US dollar has greatly depreciated as a result of short supply on the foreign currency auction system. The system would resolve its year-old foreign currency crises, but it now poses a significant threat on importers and retailers to keep business afloat. Officials have arrested plenty foreign currency traders for being “saboteurs” and “fraudsters”. Meantime, life for the ordinary Zimbabwean is becoming increasingly worse. Buckle notes that perhaps the slippery slope needs a different approach. – Sharidyn Rogers

By Cathy Buckle*

When it started raining at dusk and went on all night I knew I had a problem. With a friend on the banks of a river in a mountainous area where the roads are all steep hills, sharp corners and red soil I knew it was going to be a treacherous 17km journey the following morning. Still raining at 7.30am we had to abandon one last walk along the banks of the beautiful crystal clear river and leave it rushing along the pebbles and gushing over the rocks. The first 15 km were bad: heart pounding, hands gripping the wheel and sideways driving we crept along, the red roads sticky, clingy and slick. Three or four bends from the end the wheels gave up, thick red mud in the tread and then another inch on top of that and a steep slippery slope ahead. We were going nowhere without help, a tow rope and a powerful pull.

Cathy Buckle
Cathy Buckle

Being dragged up the hill was very appropriate for the state of Zimbabwe which again finds itself driving sideways and backwards and on a slippery slope to nowhere. Zimbabwe is on the cusp of another economic crisis. The last one was between 2005 and 2008 and in just thirteen years our leaders are doing the same things all over again: shouting, blaming, arresting, accusing, threatening. (See my book “Millions, Billions, Trillions” for that slice of our history)

Foreign currency is in such short supply that the value of US dollars against the Zimbabwe Bond dollar is soaring. The government’s auction system where companies and businesses have to bid for US dollars to meet their costs and imports is a joke. Successful bids for US dollars which are supposed to result in currency arriving in two days are now taking 15 weeks before funds are allocated by the Reserve Bank. It’s all but impossible for importers and retailers to do business when they have to wait almost four months for the currency they need to keep operating.

In 2019 President Mnangagwa ordered the return of the Zimbabwe dollar saying it was “the strongest currency in the region.” At that time one US dollar was the same value as one Zimbabwe dollar. Two years later one US dollar is equivalent to 170-200 Zimbabwe dollars on the street. Meanwhile the government continues to insist that one US dollar is worth 88 Zimbabwe dollars but you can only get that one US dollar on the black market and it costs 170 to 200 Zimbabwe dollars.

Over the past few weeks scores of foreign currency traders have been arrested. Government says they are weeding out ‘saboteurs’ and ‘fraudsters.’ Government is threatening to suspend operating licences of businesses they accuse of using black market rates to price their goods and services. Vice President Chiwenga said the Zimbabwe dollar was being deliberately sabotaged and said “I wish to warn perpetrators of this heinous crime that the long arm of the law will soon catch up with them.” Chiwenga said people being arrested on “currency manipulation” charges will spend Christmas in prison. The CZI (Confederation of Zimbabwe Industries) said: “The Zimbabwe dollar is now in real peril” and“ clamping down on informal foreign exchange trading in the absence of a viable formal market will have catastrophic consequences for the economy.”

Meanwhile for ordinary Zimbabweans the nightmare is getting worse. Food prices are increasing because retailers are charging more in order to keep up with the cost of buying US dollars to import goods to restock their shelves. Tel One, the country’s telecommunications provider which is owned by the government, just increased their prices by 30%. Fuel prices increased from $1.25 a litre to $1.35 this week. And then, to make life harder my home town is crippled by electricity power cuts which are lasting up to 14 hours at a time, three or four or five times a week. An enquiry to the local electricity supplier (ZESA) requesting the schedule of power cuts they said they aren’t following their own recently published Load Shedding Schedule anymore saying they just get instructions from HQ to load shed which they do. Oh Zimbabwe, the slippery slope needs a different approach this time surely?

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Zimbabwe may be close to adopting cryptocurrency – Micky News

Zimbabwe’s hardline attitude on cryptocurrency may be softening. Mthuli Ncube, the country’s increasingly crypto-friendly finance minister, recently stated it would be hard for the country to ignore cryptocurrencies at this time.

Ncube feels that cryptocurrency will be best suited as an investment class instrument rather than legal cash, according to a Herald report. This means that the Victoria Falls stock exchange platform may list cryptocurrency-based items in the not-too-distant future.

The Central Bank of Zimbabwe published a statement in 2017 outlining its position on cryptocurrency use in the country. It said that Bitcoin and other digital currencies were not legal currencies and should not be considered as such.

Virtual currencies not covered

Zimbabwe’s laws do not govern virtual currencies, according to the central bank. As a result, they risk being used as facilitators for money laundering, fraud, tax evasion, and even terror financing.

Following this, the central bank instructed all banks under its jurisdiction to halt all digital currency transactions. These activities include holding, trading, or transacting in these currencies, as well as providing services to businesses that do so.

Minister Ncube’s recent words may signal a shift in the Zimbabwean government’s attitude toward digital currencies. The minister appears to be lobbying for his administration and others to use blockchain technology to their advantage. That is, without relinquishing economic power.

Reducing costs and increasing remittance value

With commission fees for all remittances from Zimbabweans residing abroad as high as 20%, disruptive technology like blockchain could dramatically reduce these costs, increasing the value of remittances to the Zimbabwean economy from its present 7%.

According to the minister, the Zimbabwean government has started the process of regulating digital currencies. The government has already put in place a regulatory sandbox in which bitcoin use in the country can be evaluated in a controlled environment.

Image courtesy of Cointelegraph News/YouTube

Micky is a news site and does not provide trading, investing, or other financial advice. By using this website, you affirm that you have read and agree to abide by our Terms and Conditions.
Micky readers – you can get a 10% discount on trading fees on FTX and Binance when you sign up using the links above.

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'Offshore centre plans on track' – NewsDay

BY MELODY CHIKONO

FINANCE minister Mthuli Ncube says Zimbabwe has made significant strides in its quest to set up an offshore financial services centre in Victoria Falls.

He said a planned commodities exchange would be a key component of the offshore financial services centre, which had been on the cards for some time.

The offshore financial services centre is expected to scale-up foreign direct investment inflows.

Speaking during a virtual workshop hosted by the Victoria Falls Stock Exchange (VFEX) in partnership with the Dubai Gold and Commodities Exchange (DGCX) yesterday, Ncube said the offshore financial services centre would help develop and deepen the financial services sector.

“We can all agree that investment is essential in driving economic growth and creating an attractive investment climate is one step towards achieving that,” said Ncube.

“An offshore financial services centre is in reality an attempt to create an investment environment in which international capital can flow freely,” he said.

He said the free flow of capital required supporting legislation.

Yesterday’s event came after a high-level ministerial delegation accompanied the VFEX to Dubai recently, where the VFEX and DGCX inked a memorandum of understanding.

As part of the agreement, DGCX undertook to extend technical support, knowledge and skills to VFEX.

The organisations are planning to establish an international commodities exchange in Zimbabwe.

“My ministry has supported the VFEX since it was mooted as an idea and we are encouraged to see that such a young exchange is quickly looking to broaden its products and services.

“DGCX is a leading derivatives exchange in the Middle East and has played a pioneering role in developing the regional market for derivatives trading, clearing and settlement. It is, therefore, prudent and opportune for VFEX to tap into their expertise in setting up a commodities exchange,” Ncube said.

He added that enhancing investment in the mining sector towards exploration, beneficiation and value addition of minerals including levelling the playing field to accommodate small-scale miners, would create more jobs and increase foreign currency earnings for the country.

The establishment of a local commodity exchange is one of the major steps towards achieving this goal, the minister said.

“If we are to make an impact in the global financial markets, we have to diversify from share trading into bonds and commodity trading.

“The growth in our financial markets will no doubt lead to creation of employment, increase export earnings in the formal channels and strengthen capital-raising opportunities for our extractive sectors.

“This will ultimately help in transforming our country to an upper middle-income economy in line with Vision 2030,” Ncube said.

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