Of Mthuli’s new farmer compensation deal, and his grand ambitions for Kuvimba

Mthuli Ncube optimistic on economy, but worries remain (pic: Tateguru)

Inside a new deal to compensate white former farmers, Finance Minister Mthuli Ncube is showing his lofty ambitions for Kuvimba, the resources company that was controversially handed multiple state mining assets.

Zimbabwe in 2020 agreed to pay US$3.5 billion to the farmers for improvements on the land, but not for the land itself, in a controversial deal that the government said was necessary to put a lid on land reform. Initially, Zimbabwe was to pay half of the money in 12 months, with a quarter of the rest paid in each subsequent year and full payment over five years.

But, unable to raise that money as quickly as promised, the government has reached a new payment plan with the farmers.

Under the new deal, Zimbabwe will pay US$35 million over the next three years, Ncube says in his 2023 budget. There will be an interim cash payment of 10% (US$350 million) over four years. The farmers will also be paid from earnings from the 12% stake that they got in Kuvimba.

“Government will pay interim cash payments of US$35 million per year for three years, starting in 2023 to 2025, with the balance of US$295 million being paid in 2026 from the sale proceeds of the FFO (funds from operations) 12.5% Kuvimba shareholding and/or sale of any other Government asset,” Ncube said.

Using the value that Ncube has placed on the farmers’ 12% stake would mean Kuvimba would have a valuation of US$2.35 billion in 2026.

That would make Kuvimba bigger than South Africa’s Harmony Gold and place it on par with Royal Bafokeng Platinum.

Kuvimba’s key assets include Bindura Nickel Corporation, whose valuation on VFEX is US$38 million. Annual gold production from Kuvimba’s gold mines is around 115,000 ounces. The mines include Freda Rebecca, Shamva and Jena. Kuvimba also owns a large platinum project in Darwendale. It is potentially Zimbabwe’s biggest platinum mine, but is stalled after Russian partners withdrew.

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Kuvimba: new cash cow

Farmers have previously raised doubts about using Kuvimba as part of their compensation.

Andy Pascoe, president of the Commercial Farmers Union, said last year that farmers were wary about the shareholding in “unknown ventures, unknown proceeds”.

Government is relying on Kuvimba to pay off many of its debts.

Earlier this year, US$354 700 of Kuvimba dividends were used for US$100 payouts to 3 547 pensioners. In 2021, the company paid an inaugural dividend to shareholders, including the government, which got US$1.72 million for its 21.5% stake.

The government has also discussed a deal to use earnings from Kuvimba to pay off US$225.6 million owed to commodities trader Trafigura for fuel bills dating back to 2016.

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