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Mining
shock rocks Zimbabwe
Jason Moyo,
Mail and Guardian (SA)
April 01, 2011
http://mg.co.za/article/2011-04-01-mining-shock-rocks-zimbabwe
Zimbabwe has sacrificed
one of its brightest hopes for economic recovery with its hardened
approach on the takeover of foreign-held mines.
Mining grew by 47% last
year, according to the Zimbabwe Chamber of Mines, and had been forecast
to grow a further 44% in 2011. This, with a revival in small-scale
agriculture, was the basis for optimistic forecasts by Finance Minister
Tendai Biti of more than 9% economic growth earlier in March. Biti
said growth could be as high as 15%, but only if there were "no
major disruptions" to the economy this year.
If the radical empowerment
regulations published last Friday cause a major freeze of new investment
in mining, as is feared, those growth forecasts may have to be lowered.
While the empowerment
law itself is not new, the regulations represent a toughening of
President Robert Mugabe's approach to black empowerment in mining.
Mines have 45 days in
which to submit reports on how they plan to transfer 51% ownership
to locals and have six months within which to implement the plans.
Worryingly for the mines, there is no guarantee they will get full
value for the stock they dispose of.
While Empowerment Minister
Saviour Kasukuwere says a sovereign fund will be set up to fund
the takeovers, there is doubt that the government -- $7-billion
in debt and unable to pay civil servants -- can raise enough to
fund the purchase of the shares. This raises fears that investors
may be forced to give away half their shares for nothing.
'Impractical
indigenisation'
"Finding the sums
needed to pay for 51% of the mining industry will be quite a challenge,"
said economist John Robertson. "Allowing for the mines that
are already in indigenous hands, half the value of the balance could
easily come to more than a billion dollars. Apart from the proposed
impractical indigenisation levy, nobody in government has offered
a single suggestion about where a sum of that size might be found."
The regulations came
just as mining appeared to be recovering from years of decline.
A series of investor conferences had raised foreign interest in
Zimbabwean minerals, despite growing risk, while existing mines
were announcing expansion plans.
Victor Gapare, the Chamber
of Mines president, said his group had proposed that mines sell
only 26% to locals because the industry needed huge capital to exploit
Zimbabwe's mineral wealth fully. The industry needed more than $5-billion
of new investment to recover completely, he said.
Among the larger investors
in Zimbabwean mines is Implats, which owns 87% of Zimplats, Zimbabwe's
largest platinum producer and one of its largest investors overall.
Rio Tinto, through local unit RioZim, owns Murowa Diamond Mine,
while Aquarius owns the Mimosa Diamond Mine. The 70 000 ounce-a-year
Unki Mine, 100% owned by Anglo Platinum, is investing in expansion
to raise output to 280 000 ounces by 2013. Zimplats is on a $500-million
expansion drive and has plans to build a $300-million power station
to feed its plant.
The government also appears
to have broken previous promises to lower the 51% level in exchange
for social investment and unused concessions. The effects of a slowdown
in mining are likely to affect other large industries operating
in Zimbabwe. Much Masunda, chairperson of the local unit of Lafarge,
said last week the firm demand for cement his company had seen last
year had been anchored by the growth in mining.
Companies such as Murray
& Roberts (M&R) are also seen taking a knock. Shares in
both Lafarge and M&R were down this week on the Zimbabwe Stock
Exchange, which has been in decline since the regulations were announced.
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