Why Trafigura is buying out long-time partner Kuda Tagwirei

Trafigura Zimbabwe fuel crisis
Trafigura: One of the biggest suppliers of fuel to Zimbabwe

Trafigura has bought out Kudakwashe Tagwirei from Sakunda, which could help the company, one of the world’s largest oil and metals brokers, to stave off the likely impact of growing Western and local pressure on its long-time Zimbabwean partner.

Trafigura held a minority stake of 49% in Trafigura Zimbabwe, with Tagwirei’s Sakunda, which operated Puma Energy, holding the controlling interest.

“In December 2019, Trafigura Pte Ltd signed an agreement to become the 100% owner of fuel supply business Trafigura Zimbabwe. This follows the purchase of Sakunda Holding’s 51% stake in the company which is currently awaiting final regulatory approval,” Trafigura said in a statement on Tuesday.

Puma Energy is jointly owned by Trafigura and Sonangol, the Angolan fuel company.

The company says, despite the shareholding change, it remains in the Zimbabwe fuel business, despite a continuing forex crisis.

“This will bring improved clarity on Trafigura’s activities in the country, an opportunity for more robust financing of Trafigura Zimbabwe and aims to help improve the security of supply of fuel to Zimbabwe.”

The company adds: “USD liquidity remains tight, contributing to a challenging business environment for suppliers and consumers. Nevertheless, Trafigura is committed to continuing to work closely with the Reserve Bank of Zimbabwe to provide credit and flexibility, notwithstanding its limited commercial role in the country.”

Government sources suggest Finance Minister Mthuli Ncube and Tagwirei separately met Trafigura officials in Switzerland in January. An attempt by Tagwirei to hold a joint meeting, presumably to stave off the forced buyout, had failed after Ncube declined, officials say.

Ncube, the sources said, has met separately with Trafigura officials over recent months.

Sakunda has been at the centre of several controversies regarding Government spending, including its involvement in fuel procurement and commodities under the Command Agriculture scheme.

Government has been under pressure to loosen Sakunda’s grip on commodities supply, both for grain and fuel. Plans are under discussion within Government on how to break the company’s control of fuel distribution, including the pipeline, in the face of political fighting over the future of Tagwirei’s ties to top figures in the administration.

US sanctions threat

Recently, the two US senators wrote to the American State Department and Treasury to add to the sanctions list the names of those involved in “public corruption”, raising talk that Sakunda and Tagwirei could be listed.  

Tagwirei has been the target of strong criticism from the US Ambassador Brian Nichols, who has described his relationship with the Government as corrupt.

“An American firm won the tender for the construction of the Dema Power plant in 2016, but the government cancelled the contract and awarded it to Sakunda Holdings, which had not even placed a bid,” Nichols complained last year.

The Sakunda deals, under which the company received US$366m in Treasury Bills for Command Agriculture in 2018, was also subject to criticism by the IMF in 2019. Maturity of the bills, the IMF team noted privately to Treasury officials, had driven money supply by as much as 80% last year.

Zimbabwe is running a Staff Monitored Programme with the IMF, under which its implementation of the Transitional Stabilisation Probramme (TSP) is being monitored. However, Zimbabwe has missed many targets under the SMP, which the IMF will make public in a report expected shortly.

Trafigura’s PR push

In October 2019, Trafigura was forced to release a statement saying it had nothing to do with Sakunda’s operations outside of the fuel business.

“Trafigura Zimbabwe is only involved in petroleum supply and distribution, and the joint venture company was renamed from ‘Sakunda Supplies’ to ‘Trafigura Zimbabwe’ to differentiate our joint activities marketing fuel, from that of the wider Sakunda group of companies – in which Trafigura has no involvement,” Trafigura said then.

This was the first sign that the company was keen on distancing itself from the Tagwirei controversies.

Trafigura has, for over the past decade, been working hard to clean up its image worldwide after a series of scandals. The most prominent of these was the dumping of toxic materials off the coast of Ivory Coast, which led to the arrest and jailing of senior executives in 2006. Since then, the company has appointed new management, and has run a strong PR campaign to win back credibility.

US sanctions on a business partner would hurt the Trafigura’s image.

Based in Geneva, the company is owned by 600 top employees and turns annual profits of about US$1 billion from its commodity broking around the world.

Tagwirei’s recent deals

Tagwirei has been deepening his investment in mining, and has made several deals over the past year.

Through his Landela Mining, Tagwirei has recently become the local 50% partner in Great Dyke Investments, which is developing the US$500 million Darwendale platinum project. Landela and Afromet JSC now have equal 50% stakes in the project. Afromet JSC is 100% owned by Russia’s investment and industrial group Vi Holding, which has spearheaded the Darwendale project since its inception in 2013.

Obey Chimuka, MD of Fossil Contracting, a company associated with Tagwirei, now sits on the GDI board. Chimuka has in the past sat on the boards of the ZMDC and Marange Resources. He also sat on the board of Sakunda Supplies, according to his company’s website.

In October 2019, Sotic International, a Mauritius-based commodities company in which Tagwirei and Trafigura are partners, bought UK-listed Asa Holdings’ controlling 74.13% stake in Bindura Nickel Corporation. Bindura then appointed three Tagwirei associates to the board; Christopher Fourie, a director of Sotic International, Jozef Behr, the commodity company’s head of trading, and Chimuka.

It remains unclear whether Trafigura will also unwind this partnership.

Tagwirei already has an interest in Africa Chrome Fields and has been tied to a bid for ferrochrome producer Zimbabwe Alloys.

Landela is also the front runner to take over ZMDC mines. Last year, government withdrew the proposed sale of ZMDC’s loss-making operations, paving the way for Landela to gain a long-term lease over the mines. 

At the ongoing Mining Indaba in Cape Town, Tagwirei’s Landela Mining and BNC, together with Freda Rebecca, hosted an investment event and a cocktail for the Ministry of Mines.