The Eric Bloch Column

Another nail in economy’s coffin


WHEN Mines and Mining Development minister Amos Midzi announced a fortnight ago that government had approved amendments to the proposed Mines and Minerals Bill, the inevitable reaction was that no government could be so veste

d with a national death wish.

Those amendments are tantamount to a gargantuan nationalisation of the mining sector.
 
As the minister outlined the proposals, any rational listener could only assume that government was dismayed in the extreme that, despite its vigorous efforts to that end, it has still not totally destroyed the Zimbabwean economy notwithstanding more than a quarter-century’s endeavours to do so.

So potentially disastrous are the new intents that one must presume that government might have been in a state of great distress, saying: “Although we did our very best to destroy the Zimbabwean economy by collapsing agriculture, which was its foundation, through an ill-conceived, unjust, immoral programme of land acquisition, implemented even more devastatingly than its conception, the economy is still not completely destroyed.
 
“Although we tried very intensively to reinforce the economic collapse by alienating the international community, by contempt for law and order, matched only by like contempt for human rights and for democracy, by allowing corruption to prevail unabated as an ever greater pervading cancer, and by gross fiscal mismanagement, the economy still lingers on, even if in a very debilitated state.
  
“Where did we go wrong?   How did all these actions only bring the economy to its knees, not to total destruction? What can we do?”

Undoubtedly the worthy ministers and their multitudes of advisors pondered and pondered on not only how their strategies could have failed, but also on what now to do.  And, eventually, one of them will have said:
 
“Now that agriculture is almost extinct, and as we do not recognise the informal sector as a genuine element of the economy (and we failed to kill it with Operation Murambatsvina), the strongest remaining element, and that with the greatest potential as catalyst for economic upturn, is the mining sector. So let us destroy it, and how better to do so than by nationalising it.” 

His colleagues will have stared at him with amazement, never having being aware of such deep-seated brilliance! In fact, they had been so unaware of such profound intellect among them that, after some reflection, they probably wondered whether they had missed some key point that would negate the whole scheme.

“How,” they will have asked, “will our taking ownership of the mining sector complete the destruction of the economy?  How will that bring about the long-awaited economic Armageddon?”

The fount of inspiration will have leaned back, savouring the moment of supremacy and undivided attention, and then surely will have explained:  “If we dictate that the state must own 51% of all shares in mines producing energy minerals, platinum and diamonds, and that the state and appropriately approved indigenous companies own a like proportion in large gold mines, we will ring the death knell of mining and, thereby, of what little else remains in the economy.

“On the one hand investors, the world over — foreign and domestic investors alike — will never again want to invest in Zimbabwe, for they will say: ‘First they took the land, now they take the mines, then they’ll take the factories, then the hotels, then the banks, and then anything else that is left.’  And, what is even more, all those already involved in mining will be demoralised in the extreme, losing any and all interest in their operations.”

To ensure that demoralisation and complete loss of interest occurs, the state proposes that all existing platinum, diamond and energy mineral mines — coal, natural and coal-bed methane gas and uranium — must cede to the state 25% of all shares immediately following upon the enactment of the intended laws, no payment whatsoever being given for those shares. A further 26% must then be transferred to the state over the following five years — with no indication, at present, whether there will be any payment for those shares and, if so, the fairness of valuation and the terms of payment. 

The demonic brilliance of the economy-destroying proposals is underscored by the fact that, in addition to the gross inequity of expropriation and deprivation of property rights, government’s track-record of mismanagement of almost every parastatal, and of virtually every economic venture that it has ever been involved with, virtually assures that even the most viable of mines will lose all viability once government is in control.

Soon those mines will have performance records commensurate with those of Ziscosteel, Zesa, the National Railways of Zimbabwe, the Grain Marketing Board, the National Oil Company of Zimbabwe and the majority of the other state-controlled economic enterprises.

In the case of the non-energy minerals — platinum, diamond and large gold mines — the proposals are marginally less oppressive, but only very marginally so!  All existing mines will have to cede to government, or to approved Zimbabwean indigenous companies, 10% of all shares within two years, a further 30% within the next following three years, and another 10% within two years thereafter, so that within seven years the state and Zimbabwean ownership will be at least 50%.
 
No details are released as to the values to be placed on the shares, but clearly government intends that the sellers will effectively pay themselves, without government putting up even one brass farthing, for it is intended that the incoming legislation will also introduce an obligation upon mines to pay royalties to the state (over and above existing liability to income tax and a milliard of indirect taxes). So the generous state will take from one pocket of the mining industry in order to place a little in the other pocket, creating the impression that the enforced disinvestment is pursued with equity.

Yet to be disclosed is how government will determine which Zimbabweans, and which Zimbabwean companies, will be approved as co-shareholders with non-Zimbabweans, but if the past is anything of a guideline, the fundamental criteria will undoubtedly be the extent of nepotistic association, approved political activity and influence-wielding ability of those who will be given the accolades of investment approval, supported by state funding.
  
In like manner, can it now be assumed that in order to pretend that there is still wide-ranging international investor interest in the mining sector, Zimbabweans will shortly be recipients of yet another deluge of state propaganda as to the merits and magnificent successes of its “Look East” policies — which have yielded a cement factory, brickfields, a glass factory, and management of a coal-starved iron and steel producer, a flood of eastern-produced commuter omnibuses, nine aircraft (still being paid for) and comparatively little else!

In his statement, Midzi made no reference to the Bilateral Investment Protection Agreements to which Zimbabwe is party, and the impact that they should have upon the proposed legalised “theft” of the mining industry by government. However, as government has had almost total disregard for those agreements in pursuing its land acquisition, resettlement and redistribution programme, it is too much to expect that it will give them more than even the slightest glance, as it embarks upon its buccaneering intents upon mining.

The one and only redeeming feature of the minister’s statement was his acknowledgement that he has met with some “stakeholders in the mining industry to brief them on the government position”, and they had indicated  “they need to make further consultations, and would respond in a few weeks’ time”.  Although probably a vain one, one must hope that — although improbable — government will heed the responses when they are forthcoming, and will markedly reconsider its cataclysmic intent of completing the implosion of the economy.

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