Zimbabwe's new mining regulations are requiring companies to come up with a plan by May 9 to surrender a 51 percent stake in their shares to black Zimbabweans within the next six months. The shares will be paid for by the value of the minerals underground.
Some Zimbabweans fear that changing the mining laws will decimate the mining industry, much like the collapse in the commercial agriculture industry after President Robert Mugabe began seizing land from more than 4,000 white farmers in 2000.
President Robert Mugabe said recently Zimbabwe will not only take white-owned land but mining assets as well.
Speaking recently in Shona at the burial of a senior ZANU-PF official, he said Zimbabweans would get a share of major mining companies such as Lonrho, Anglo American and Rio Tinto.
New laws mean black Zimbabweans must own a majority in all mining companies including undeveloped sites where individuals and companies have concessions on unexplored land.
Zimbabwe's mining sector is expected to earn at least $1 billion annually, most of it from platinum, gold and diamonds. Zimbabwe also has rich coal and chrome deposits.
Indigenization Minister Saviours Kasukuwere, is a member of Mugabe’s ZANU-PF party. His ministry wrote the new regulations. Under the new regulations, all foreign-owned companies with a net asset value of $1 would have to sell controlling stakes to indigenous Zimbabweans by September 25. This is a change from a net asset value of $500,000 last year and the value was changed to include undeveloped concessions.
This means that majority shares in any every foreign-owned mining firm should be sold to designated entities as they are referred to in the new law. There are fears that "designated" means ZANU-PF officials or supporters.
Kasukuwere said his door is open to mining personnel who wanted to talk to him about their operations or future investments.
"These resources belong to us as Zimbabweans," said Kasukuwere. "Our mineral resources are what oil is to Saudi Arabia. This is a business decision. This is the law of the land. Business communities, those who are affected, let us have a chat."
He said that the government was open to suggestions that would help Zimbabwe work towards a new, profitable mining policy.
"Once we legislate once we have come up with a position we have not closed our doors with those business people who have the interests of the country at heart," said Kasukuwere. "How do we structure so that there is that partnerships that win-win?"
South African mineral governance consultant Paul Jourdan said majority ownership of mines could be problematic if the shares were simply transferred to entrepreneurs.
"The indigenous entrepreneur is obviously going to put that in his or her bank account and the earnings from that equity will not go to the people as a whole," said Jourdan.
He said a better method of awarding indigenous shareholding in mining assets or mining companies was by auction.
"The best way of dealing with mineral resources is to delineate all the known areas, where there are known resources, and then to put them out to public tender and to have transparent, competitive tenders, where the bids would be against the developmental goals," said Jourdan.
He said established, rich mining companies would likely be able to afford the new 51 percent ownership laws but as all developers needed a fair return on their investment the law would “sterilize” medium to marginal mining companies which would probably not find new investors.
Veteran Zimbabwe economist John Robertson is highly critical of the new mining laws and said the regulations would frighten off both new investors and established companies wanting to expand.
"It costs money to do further exploration," said Robertson. "The underlying instability comes from these policies, these policy choices have generated the instability."
Robertson says most mining companies are too nervous to talk to the media in any detail about the new ownership law. Several lawyers say several clauses in the new laws on indigenization are carelessly drafted and contradictory.
Zimbabwe Mining Law Boosts Black Ownership
