Zimbabwe Mulling Tough Mining Empowerment Legislation

Zimbabwe is considering legislation, along the lines of the South African model of empowerment, to make foreign-owned mining houses sell 30 percent of their stock to local black investors in the next decade.

Most Zimbabwe mines are owned by foreign firms but there are fears the move could lead to mining stakes being secured by a well-connected elite close to the government.

The move is also unlikely to inspire great confidence among foreign investors already rattled by the country’s deep economic problems and political instability given the authoritarian rule of much-criticized President Robert Mugabe.

Industry experts believe the proposed legislation is also aimed at enabling the government, which is desperate for hard foreign currency, to retain some of the mining sector’s profits.

The proposed amendment, yet to be tabled before parliament, says: “In order to increase participation and ownership by historically disadvantaged persons in the mining industry, companies shall achieve 30 percent ownership of the industry assets in 10 years of which 20 percent shall be achieved in two years, 25 percent in seven years and 30 percent in 10 years from the date on which these regulations take effect.

“Mining companies shall give historically disadvantaged persons a preferred supplier status, where possible, in all three levels of procurement, namely capital goods; services; and consumables.”

That will mean miners will need to apply to the government’s mining department in order to import capital goods, services or consumables and give reasons for the moves. Given the inefficiency of the Zimbabwean government’s bureaucracy that requirement could strangle their operations.

International mining companies operating in Zimbabwe include Anglo American, Rio Tinto, Implats, Mimosa Platinum, and Aquarium Platinum.

Zimplats, owned by Impala Platinum, has already offered 15 percent to Zimbabwean investors who have failed to find the means to finance the purchase of the stake.

Zimbabwe produces minerals such as platinum, diamond, gold, black granite, coal, chromate, cobalt, graphite, iron ore, iron pyrites, lithium minerals, magnesite and nickel.