Lack of funds stops Muzarabani gas, oil project
THE Confederation of Zimbabwe Industries (CZI) says its members have not received their share of the government’s $18 billion rescue package meant to scale up production in response to the adverse effects of COVID-19 on the economy.
On May 1, 2020, President Emmerson Mnangagwa announced an $18 billion economic stimulus package to scale up production in all sectors affected by the COVID-19 pandemic, but three months down the line, industry players say they are yet to access the funds.
Out of the amount, agriculture was allocated $6,08 billion, industry (working capital fund) $3,02 billion, mining sector ($1 billion), SME support fund ($500 million), arts sector fund ($20 million), liquidity release from statutory reserves ($2 billion), health sector support fund ($1 billion), broad relief measures ($1,50 billion) and food grant ($2,40 billion).
“There is no evidence of any one of our members having received a bailout from the government, even though they announced a provision of $3 billion for the manufacturing sector as in other countries like South Africa. This remains a serious concern for us as a chamber and I believe it is the same with other chambers as well,” CZI Matabeleland chamber president Shepherd Chawira said during the chamber’s annual general meeting.
Chawira said the outbreak of COVID-19 and the subsequent necessary measures taken by various governments across the globe, including Zimbabwe, had a serious impact on the economy and business. He said supply chains and movement of goods and services were severely disrupted.
“The movement restrictions resulted in companies either scaling down or shutting down completely. Businesses have been forced to adjust the way they work in an effort to keep production going in the face of COVID 19,” Chawira said.
He said compliance regulations to bolster preventive measures had resulted in increased operating costs for businesses, which were already burdened by low capacity utilisation.
“Although the measures are being eased, some things may never be the same, and, therefore, companies need to innovate and adapt new ways of doing things,” the CZI Matabeleland chamber official said.
“Of concern though, is the enforcement of lookdown rules by the authorities, which have come in the form of unannounced, abrupt and haphazard lockdown measures, where we have all woke up to road blocks all over and people being barred from going to work, even if they have permits.”
Chawira said this posed planning challenges to businesses in the chamber and everywhere, as it resulted in wasted days as we are still expected to foot the costs of salaries and wages.
“Even now, with the current working hours imposed by the government under the lockdown measures, business is still expected to pay wages and salaries in full for less work,” he said.
AUSTRALIAN energy firm, Invictus Energy Limited (IEL) says the estimated drilling cost for its Cabora Bassa project in Muzarabani ranges between US$5,2 million and US$16,4 million.
IEL has been struggling to take the Cabora Bassa project off the ground since late 2018. The oil and gas project encompasses the Muzarabani Prospect in Zimbabwe believed to have multi-trillion cubic feet worth of liquids rich in conventional gascondensate.
According to IEL’s quarterly statement ended June 2020, the firm had total available funding for future operating activities of nearly AUD1,5 million (US$1 064 941,20).
And over the past 12 months ended June 2020, IEL incurred a loss of AUD1,51 million (US$1,07 million) from net cash used in operating activities.
“During the quarter, the company received an independent drilling cost estimate for a range of well designs (vertical and directional) with the total depth ranging from 2 000m down to 4 000m,” said IEL
AFRICAN Development Bank (AfBD) Zimbabwe country manager Damoni Kitabire has retired after spending 13 years at the institution.
His last day in office was July 31, 2020. During a virtual meeting held last Thursday, Kitabire said the experience was fulfilling before commending the government and private sector for taking ownership of the projects financed by the bank.
“It has been a great honour and enormous pleasure for me to serve Zimbabwe for the past 13 years. It has been a rewarding experience as we took steps to improve the lives of Zimbabweans,” he said.
Finance and Economic Development minister Mthuli Ncube commended Kitabire for his contribution to the country over the years.
“Kitabire has been at the forefront in helping us find resources from the bank to fight crises such as Cyclone Idai, COVID-19 and waterborne diseases. We are grateful and implore the bank to find someone equal to the task (as the new country manager),” Ncube said.
Foreign Affairs and International Trade minister Sibusiso Moyo said Kitabire worked professionally and tirelessly towards the country’s development agenda, “and we would like to wish him well in his future endeavours”.
Zimbabwe Revenue Authority (Zimra) commisin a statement.
“The drilling cost estimates range from US$5,2 million (2 000m vertical well -low side estimate) to US$16,4 million (4 000m directional well-high side estimate) are consistent with the company’s internal estimates.”
Added IEL: “The best estimate for a 3 200m directionally drilled well to test the 8,2 Tcf + 249 million bbl Mzarabani Prospect is US$11,7m (excluding mobilisation) which confirms the ability to test a worldclass, material target at relatively low cost”.
According to financial literacy website Investopedia, for land drilling, equipment represents one of the two major expenses for an oil producer, the other being the cost of establishing infrastructure access — roads, water, and electricity.
The website further states that the cost of oil rigs and drilling equipment invariably represents a considerable capital expenditure for an oil producer.
“The massively greater investment required in drilling equipment is one reason why oil producers are willing to undertake the time and expense of doing extensive seismological surveys to determine proven sioner-general Faith Mazani expressed gratitude to Kitabire for being responsive to the tax collector’s call for help towards modernisation of her organisation’s information technology systems to enhance its domestic resource mobilisation efforts.
Zimra together with the Parliament of Zimbabwe and the Office of the Auditor-General are some of the beneficiaries of the African bank’s recent financial support to improve tax and accountability enhancement in the country. and probable reserves available for recovery before drilling,” Investopedia said.
However, currently IEL is struggling to raise capital which led to the firm entering into a share subscription agreement with local niche investment boutique and private equity firm, Mangwana Capital worth AUD0,44 million (US$287 825,48).
Further, the company continues to negotiate a production sharing agreement with the government through the appointed technical committee and legal representatives.
“The technical committee is chaired by the permanent secretary for Finance and Economic Development with the permanent secretaries for Mines and Mining Development and Energy and Power Development as members together with officials from the Reserve Bank of Zimbabwe, Zimbabwe Investment and Development Agency, Office of the President and Cabinet, Office of the Attorney-General and Local Government and Public Works,” IEL said.
IEL has made a 25% cut to its board and management annual fees and remuneration in light of the slowing global market and uncertainty over the coronavirus pandemic.
Before being posted to Zimbabwe as AfDB country manager, Kitabire worked as lead economist in Tunisia as well as adviser to the vice-president’s operations and resident representative in the Zambia country office.
Before joining AfDB, Kitabire held various positions including director of budget in Uganda’s Finance, Planning and Economic Development ministry and also worked as a senior economist at the International Monetary Fund, Washington DC.