Zimbabwe Gives China Access To Oil & Diamonds For Printing New Currency

Lea van der Merwe

Following the end of a reign of terror by former President Robert Mugabe, Zimbabwe is trying to rebuild itself under the leadership of his successor, Zanu PF leader Emmerson Mnangagwa. A large part of that process seems to involve China, according to a report by Bulawayo 24.

China has tightened its grip on the Southern African country, demanding more access to Zimbabwe's oil and diamond reserves, in exchange for printing a new Zimbabwean currency and helping to build the county's new capital city in Mount Hampden. The new currency is supposed to be launched as early as 2020, with the new capital city set to be up and functioning by 2021.

The currency will replace the current surrogate currency of bond notes after their fiat currency was axed in 2009 following hyper-inflation which peaked at around 500 billion percent. They were forced to adopt a number of different currencies to stay afloat, including the U.S. Dollar, the British Pound, the Euro, and the South African Rand. With China in support, the new currency will be backed by the country's diamond and gold reserves.

Mnangagwa tried to spearhead the idea of a new capital city when he was the vice president in 2015, but was shut down. Once the city is operational, it will have a Chinese-funded parliament. The location of the new city is just 20km outside of central Harare, the current capital city.

"It is all about oil and diamonds," said one envoy representing a South Asian country. "China has demanded for oil rights and exclusive access to your country's diamonds in Marange, without having to cede ownership of those assests to locals under the indigenisation threshold. It will soon not be applying to their firms coming back to mine diamonds, following a fallout with Robert Mugabe's government. Actually it could be the reason why Mugabe is no longer in power, because he wanted Chinese companies to be under Zimbabwean miners thus posing a threat to Beijing's diamond interests and long term future reserves."

Marange has actually become China's biggest single source of foreign diamonds, with about 50 percent of the stores in the Liaoning Province coming from the Zimbabwean mountains.

The deal for China to secure access to the oil and diamonds in Zimbabwe was originally mentioned in 2009, but nothing was finalized at the time. All of those deals were revisited after Mugabe left office and was replaced by Mnangagwa. For China, the deal means future energy security, as they now have rights to oil and gas exploration covering millions of acres of land on the Zambezi Valley.