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Business must unite against Mugabe's tyranny
Basildon Peta, Business Report
May 28, 2006

http://www.busrep.co.za/index.php?fSectionId=&fArticleId=3265227

Johannesburg - The dismal failure of Zimbabwe's business sector to forge a united front against President Robert Mugabe's "commercial hooliganism" was the biggest nemesis of South African investors trying to ward off a controversial plan to nationalise the country's mining assets, said analysts.

As it emerged this week that there were deep divisions within the Zimbabwean government over the plan to force foreign mining companies to relinquish majority equity to the state, analysts lamented the fragmented approach by the South African-led Zimbabwean business community in dealing with the Mugabe establishment. They said the approach was detrimental to the cause of business.

"The business sector has the power . to influence change, but not when it is as fragmented as it is here," said a Zimbabwean consultant economist, John Robertson, who also advises big corporations.

All the South African investors who have flooded Zimbabwe to take over mainly mining corporations are interested in doing their own thing and protecting their own turf at the expense of working towards an integrated approach that may benefit everyone in the end.

Business Report is authoritatively informed that deep divisions within the Zimbabwean government have pitted greedy politicians - who fear that their unfettered honeymoon under the authoritarian Mugabe might be over soon and hence want to accumulate as much wealth as possible - against the more realistic technocrats who are sympathetic to foreign investors and who believe that forcing multinationals to relinquish majority stakes to the state is as unsustainable as the white land seizures that have destroyed Zimbabwe' farm-based economy.

After amassing several large-scale commercial farms for themselves, their children and relatives, the top politicians want majority equities in mining houses to be ceded to the state as demanded by Mugabe to pass on to their consortiums at a later stage.

Some of the ministers have already abused their positions to acquire exclusive prospecting zones in several mining areas and some have interests in smaller-scale mining operations but want leeway to get to the big stage.

Their poor consortiums cannot afford outright buyouts of empowerment stakes in foreign mining houses, officials said.

Authoritative sources said the technocrats at the ministry of mines wanted a phased empowerment approach in the mining sector similar to the South African model. This would be a phased relinquishing of "realistic levels of equity" either to the state or to Zimbabwe's private sector over a 10- to 15-year period.

"Many of Zimbabwe's mineral resources, especially platinum, are unexploited and still need huge investments. We, therefore, need to build the confidence of foreign conglomerates to invest in extraction and in any other value-adding technologies," said a well-placed official in the mines ministry. "Forcing the companies to give majority equity to government or even establishing 50-50 partnerships will bring us back to square one . The government simply has no money or expertise to invest in these capital-intensive projects."

Officials said it would be better if Mugabe's government avoided being an equity partner in mining ventures and restricted itself to playing a facilitative role for black players who could raise money to be equity partners with the South Africans.

Some black-owned conglomerates such as the Zimbabwe Stock Exchange-listed TA Holdings have expressed an interest in venturing into mining and would probably have the credibility to raise the cash offshore required to partner with foreign mining companies and fulfil Mugabe's preferred indigenisation sentiments.

Officials said another proposal by the technocrats was to exempt specific mining projects needing huge foreign cash injections from being asked to cede equity to the state as originally announced by mines minister Amos Midzi. This was the compromise proposal that giants such as Impala Platinum (Implats) were pushing for.

The draft changes originally announced by Midzi would require foreign mining conglomerates to immediately cede 25 percent equity to the government of Zimbabwe without payment. The remaining 26 percent would be acquired over a five-year period and paid for from dividends.

Although they don't acknowledge it publicly, South African mining companies have withheld development projects worth billions of rands at their mines in Zimbabwe pending clarity of the government's nationalisation plans. Mugabe reiterated his stance to party supporters last week that Zimbabwe's mining resources should be majority controlled by the state for the benefit of Zimbabweans.

At the time of going to press, it was not clear whether Mugabe would be persuaded by the recommendations of the technocrats from his mines ministry or those from the Zimbabwe Chamber of Mines.

But officials agreed with Robertson and other analysts that the failure by the business sector in general and the mining sector in particular to forge a united front was detrimental to their interests.

"They [mining companies] come here one by one like children queueing up for lunch," said another mines ministry official.

Zimbabwean-born South African businessman Mutumwa Maware, whose asbestos and gold mines were nationalised under a decree issued by Mugabe, urged investors to learn from his experiences and to forge a "united front against Mugabe's commercial tyranny and hooliganism".

Implats chief executive Keith Rumble met with Mugabe more than a month ago to safeguard his company's interests in Zimbabwe. Since that meeting, Mugabe has repeated his resolve to seize mines on several occasions. Anglo Platinum (Angloplat) spokesperson Simon Tebele said that his company was still in talks with the Zimbabwe government.

Tebele refused to comment on suggestions that the failure to forge unity within business was hugely counterproductive.

He also declined to confirm or deny information that Angloplat had scaled down investments at its flagship Unki Platinum Mine in central Zimbabwe. Implats head of corporate affairs Bob Gilmore had not returned several calls left for him at the time of going to press.

Implats controls most of Zimbabwe's platinum reserves around the Chegutu/Ngezi area. It benefited greatly when Australia's BHP Billiton abandoned its Chegutu Platinum Mine several years ago. Impala has previously said it was involved in negotiations with the Zimbabwe government. It is understood that the company was withholding R6 billion worth of investment into its Zimbabwe mines pending the final outcome of Mugabe's nationalisation plans.

But Mawere warned firms to tread cautiously. "I am a victim of 100 percent nationalisation under a decree issued by the same government that is negotiating with other asset owners in Zimbabwe.

"Why would Implats have confidence that they will be secure when even blacks like me, in whose names Mugabe want to control the same resources, are not secure and can get victimised?"

If business played a role in helping defeat apartheid through sanctions, then business could certainly forge a united front against "commercial tyranny" in Zimbabwe and help in creating an acceptable business environment.

A South African court dismissed criminal charges raised by Mugabe against Mawere, whose minerals were marketed via South Africa. But that did not stop Mugabe from proceeding with the seizures. It seems Mawere had incensed Mugabe by refusing a top post in Zanu-PF. He has also won a case against the Zimbabwe government in the British courts, but all his efforts have been to no avail as Zimbabwe's government would not let go of his confiscated assets.

Sources say Mzi Khumalo, who operates five large gold mines in Zimbabwe, and produces 51 percent of Zimbabwe's total gold output, has long struck a good working relationship with Reserve Bank of Zimbabwe governor Gideon Gono and has managed to get a deal to repatriate part of his profits back to South Africa despite a foreign currency crunch in Zimbabwe.

"He perhaps has no reason to want to work with anyone else . here for a common approach for the moment," said a mining official.

Robertson said the government of Zimbabwe believed in intimidating everyone into acquiescence. It had in fact institutionalised the mentality of intimidation against the mining community. But because businesses were the real producers and had the wealth, they could easily employ their power.

"Business has the power but it is not using that power," Robertson, Johannesburg-based Zimbabwean economists Lloyd Mutore and Trymore Madondo said. South African businesses perhaps feared losing their mining rights to Chinese and Russian investors who are courting Zimbabwe.

"But by being passive, they will still lose anywhere . For them it is a lose-lose situation unless Uncle Bob is perhaps out of the picture," said Mutore.

It was also not certain whether the Chinese and Russians would invest where others have left.

The Zimbabwe Independent reported last week that Chinese conglomerates had now stopped work at various infrastructure projects in Zimbabwe due to lack of payment.

South African investors have not only taken over Zimbabwe's mining sector, they have invested in other listed Zimbabwean conglomerates abandoned by Western investors. MTN is reportedly in negotiations to take over the government's NetOne cellular company, the second largest. Absa has taken over the Commercial Bank of Zimbabwe and Nedbank was reportedly considering investing in the Merchant Bank of Central Africa.

"It seems the guiding principle for South African businesses is to invest cheaply now in the hope that the Mugabe era would be over soon and then they start reaping the rewards," said Mutore. - Independent Foreign Service

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