Foreign mining firms under siege in Zimbabwe
By Tobias Manyuchi & Edward Jones
HARARE – Zimbabwe on Sunday made public radical regulations forcing foreign mining companies to sell majority stakes to blacks by September this year, sending shares in miners with local operations tumbling amid jitters their businesses could be nationalized.
A government gazette, dated Friday but which was made public yesterday gave mining companies 45 days to submit details of their indigenisation plans to the Minister of Youth and Indigenisation Saviour Kasukuwere, failure of which they could be prosecuted.
Aquarius Platinum Ltd that jointly owns Mimosa platinum mine with Impala Platinum (Implats) mines, took the biggest knock in yesterday’s trade, shedding seven percent of its value due to fears over Harare’s indigenisation policy.
President Robert Mugabe vowed on Sunday he would press ahead with the empowerment drive targeting foreign-owned businesses, which has rattled foreign investors keen to exploit Zimbabwe’s huge minerals resources.
The empowerment plans are opposed by Mugabe’s coalition partner Prime Minister Morgan Tsvangirai, who favours a gradual approach, fearing that wholesale indigenisation could wreck a fragile economy.
Implats, which operates the largest platinum mine in Zimbabwe fell five percent yesterday. Its Zimbabwe unit has fallen 20 percent this year in Australia on fears of nationalisation.
Government sources say Implats has over the last two months come under a lot of pressure to sell shares to Mugabe’s political allies but the firm has resisted, arguing the government should honour an agreement that protects it from the empowerment drive.
Zimplats wants to sell 15 percent of its shares to locals. Analysts say Zimbabwe maybe putting pressure on foreign mines to pay more in taxes.
Miners may come under pressure, torn between pulling out and risk losing rights to the massive platinum reserves and other minerals to Mugabe’s preferred investors from China or negotiate revised deals that will see the government getting more from the country’s resources.
Zimplats has already ceded 33 percent of its platinum concessions on the great dyke to the government, which sold these to Russian and Chinese investors. The resource rich southern African nation boasts the world’s second largest reserves of platinum, has discovered alluvial diamonds which experts say could generate $2 billion a year and has large gold, chrome and coal deposits.
The new regulations now target foreign mining companies with a value above $1, effectively forcing all mines to be in local hands. Previously, only companies with a net asset value of $500,000 were targeted for indigenisation.
The regulations said that the six-month period for compliance could be revised only if the mining company shows good cause why the deadline should be extended by a maximum three months.
Economic analysts said a clause which requires Kasukuwere to agree with the foreign miners on the valuation of the business could cause friction as the government wants valuations to “take into account the State’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited” by the miner.
“This basically means the government does not want to pay for the shares. The argument being that the minerals belong to the government in the same way they refused to pay for the land,” an analyst with a Harare-based commercial bank said.
Economist, John Robertson said the reference to the “State’s sovereign ownership of the minerals” was a clear attempt to reduce the amount that will have to be paid for the shares by locals.
“Finding the sums needed to pay for 51percent of the mining industry will be quite a challenge. Not many of the mines are listed on the Zimbabwe Stock Exchange, so a market capitalisation calculation on the quoted shares adds up to a very small part of the answer.”
ZANU-PF has put the issue of indigenisation and Western sanctions at the heart of its election campaign, hoping to sway urban voters who have rallied behind Tsvangirai’s Movement for Democratic Change party. — ZimOnline