Zimbabwe’s sovereign wealth fund paid ‘grossly inflated’ $1.6bn for shares in mining house

Zimbabwe’s sovereign wealth fund reportedly paid a “grossly inflated” $1.6-billion to a set of unknown private individuals to buy their shares in a mining conglomerate with recent links to Kudakwashe Tagwirei, a controversial presidential adviser and ruling party donor accused of corruption.

The massive debt-fuelled transfer of public wealth, an amount equivalent to 5% of the nation’s GDP, to Kuvimba Mining House, is exposed in an investigation by The Sentry, a US-based investigative organisation that tracks corruption.

The Sentry said in a report published on Wednesday that evidence acquired by the Zimbabwean media outlet The NewsHawks, indicated that $1.6-billion in public debt was used by the Mutapa Investment Fund (formerly known as the Sovereign Wealth Fund of Zimbabwe), to purchase shares in Kuvimba, which owns about a dozen gold, lithium, nickel and platinum mines.

“The Sentry’s analysis suggests that Mutapa paid a grossly inflated price for the shares,” it said. The report noted that until recently, the state had owned 65% of Kuvimba and private investors had held 35% of the shares.

But in April, The NewsHawks revealed that Mutapa had bought out the private investors for $1.6-billion using government debt.

Read more in Daily Maverick: Fronts, false invoices and offshore financial façades raise questions about Tagwirei’s Zimbabwean mine purchases

“A $1.6-billion price tag for a 35% stake would value Kuvimba at $4.6-billion overall — triple the $1.5-billion valuation given to Kuvimba by the government in 2022. This would raise serious questions about whether Mutapa has grossly overvalued the shares,” said The Sentry.  

A $4.6-billion valuation would also be much more than the amount — probably in the low hundreds of millions of dollars — that Tagwirei’s firms spent in 2019 on acquiring the mines, before they transferred the assets to Kuvimba in 2020.

Soaring gold prices since 2020 might explain some of the increase in  Kuvimba’s value: the group’s present gold production might bring in about $250-million a year, before costs and taxes.

“However, a $4.6-billion valuation seems distinctly frothy given that Kuvimba’s other mines have had mixed fortunes: Declining lithium prices have caused stockpiling, and the firm’s platinum and nickel projects are either inactive or loss-making,” said The Sentry.

The report said that Mutapa had received $1.9-billion in government loans to revive failing state-owned enterprises, more than 20 of which it has shares in. The report calls Kuvimba the jewel in Mutapa’s crown. And it says that if The NewsHawks report was correct, then about four-fifths of this $1.9-billion debt had been used to pay a few private anonymous shareholders in Mutapa. 

Who was paid?

Debt distress