A few days later, Zimbabwe President Robert Mugabe told the annual general meeting of the Zimbabwe Chamber of Mines that “government has no intention of expropriating the mining industry. No mine has been nationalised since Independence”.
On the contrary, Mugabe, one of the continent’s more belligerent leaders, infamous for land grabs, declared that “recapitalisation of the mining industry remains an immediate imperative”.
No doubt more than a few investors will continue scratching their heads, but Mugabe is apparently bending over in several directions to reassure investors. Government is exploring, said Mugabe, “the path of profitable partnerships and joint venture initiatives with foreign investors in the mining sector. It is our belief that this situation has the potential for a sustainable win-win partnership”.
Aquarius Platinum is also well-established as a miner in the country; several more platinum projects owned by other operators are moving towards mine builds. A number of Zimbabwean politicians, assisted by various promoters, are increasingly keen to draw a line between Zimbabwe’s realities, and perceptions of those realities.
One reality is that dozens of mines — gold was discovered in the 1880s — across a richly endowed landscape are in tatters, on a combination of power shortages, huge shortfalls in foreign currency, logistical failures, shattered infrastructure, and plain neglect. But opportunities there are aplenty.
The key to unlocking the opportunities lies in flexibility, now patently adopted by Zimbabwe, in legislation. In his speech, Mugabe said that government has “accepted the principle of empowerment credits” as an integral component of the 51% equity that Zimbabwean citizens are required, on the face of it, to hold in enterprises where foreign investors are present.
Mugabe said he was “amazed by the rush of negative publicity towards this policy of indigenisation when in fact the regulations provide for flexibility where necessary”.
So-called credits are initiatives that, if recognised, allow the foreign investing mining company to claim against the 51% requirement. Mugabe said that “premier initiatives that qualify for empowerment credits” include the areas of (local) procurement, capacitating industries, and fostering new companies owned by indigenous persons.
Further credits can be claimed for corporate social investment in communities, which “creates a visible platform for local empowerment, thus achieving broad-based and transformative empowerment”. Credits are also available for initiatives such as construction of dams and irrigation schemes, and approved scholarship and skills development programmes.
Mugabe cited Zimplats’ social investment of building roads, schools, clinics and the fibre optic link to Norton and Ngezi. Victor Gapare, president of the Zimbabwe mines chamber, explains that the Indigenisation and Economic Empowerment regulations gazetted in January 2010 “states that in return for achieving certain socially and economically desirable objectives, a business may be allowed to have indigenous ownership at a lower percentage than 51%”.
There are already case studies available from recent transactions. On May 19, Rio Tinto Zimbabwe (RioZim), a unit of transnational mining giant Rio Tinto, announced the decision to proceed, at a cost of around US$300m, with the expansion of the Murowa diamond project.
This followed a restructuring of shareholdings; Rio Tinto will now own a direct 78% interest in the Murowa diamond project; RioZim will become an independent Zimbabwean controlled company owning the remaining 22% of Murowa.
Rio Tinto will cease to be an ordinary shareholder in RioZim, but will retain a reduced cash participation in RioZim’s assets, other than the Murowa diamond project, for a period of 10 years. Clearly, Rio Tinto was satisfied that the landscape was sorted before these announcements.
Meanwhile, there is firm evidence that Zimbabwe is taking serious action to stamp out the wild, substantial, and illegal flow of diamonds from Marange, in the east of the country. The deposit is held, nominally, by London-listed African Consolidated Resources; its interests span Zimbabwe, in gold, platinum, nickel, and rock phosphates.
Zimbabwe’s formal mining sector employs some 45 000 people, contributes around 50% of exports, and comprises nearly 20% of GDP. Mining is, therefore, argues Mugabe, “deservedly a key sector providing impetus for growth and economic development”.
Mugabe left no uncertainties about government’s painful knowledge that recurring power outages continued to impact heavily on the whole economy. “I wish to inform this meeting that several power projects requiring new investors are pending, including the Hwange power Stations 7 and 8, Kariba and Batoka. In addition, government will institute the necessary energy sector reforms required for attracting new investment in that sector”. — mineweb.com