Magazine article African Business

Indigenisation Law Triggers Mining Dispute: Following the Collapse of Commercial Agriculture, after the 2000 Land Redistribution, the Country Is Now Setting out on a Path to Redistribute Ownership of Companies That Exploit the Country's Munificent Resources-Among Others. M J Morgan Reports on the Controversy This Move Has Aroused

Magazine article African Business

Indigenisation Law Triggers Mining Dispute: Following the Collapse of Commercial Agriculture, after the 2000 Land Redistribution, the Country Is Now Setting out on a Path to Redistribute Ownership of Companies That Exploit the Country's Munificent Resources-Among Others. M J Morgan Reports on the Controversy This Move Has Aroused

Article excerpt

Jack Murehwa, the former president of the Zimbabwean Chamber of Mines, has criticised the new legislation requiring companies to divest their ownership to indigenous residents. Until now, industry representatives have been keeping their powder dry on the subject.

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Zimbabwe's Indigenisation and Economic Empowerment Act, passed last year and, according to President Mugabe, enforceable since April 17th last year, has never been popular with foreign investors in general nor the mining industry in particular.

This law requires all public companies and certain other businesses, such as mines and banks, to be at least 51% owned by indigenous Zimbabweans. No changes to company ownership, be it a proposed merger or other restructuring, are to be permitted unless this requirement is met as a result of the change.

It has been widely reported that the government may use the legislation to seize 25% stakes in the country's $20 bn mining industry without paying compensation, leaving 26% available to buy by indigenous citizens. "We don't believe that setting up empowerment limits is the way to go, it serves no purpose at all," Murehwa commented at a mining conference. "Let the mining companies set the targets."

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Companies are to be assessed, and rated, according to their degree of compliance and all government procurement, at the local and national level, is to be sourced at least 51% from companies that comply with the Act. Mugabe has long been committed to such redistribution as a point of principle.

In a May 2002 interview with African Business' sister publication New African, he said this emphatically, in the context of the cost of sanctions against Zimbabwe: "If that is what we are going to pay, we will pay it for sustaining our principle and the right of our people to be sovereign over their resources, yes. You cannot, as Nkrumah said, sacrifice principle to expediency, no. Principle must never be sacrificed on the altar of expediency. That's Nkrumah. And he is right."

Struggling miners

Zimbabwe's mining industry, like much of the rest of its economy, has been hard hit by the political crisis, which has led to a lack of investment, an exodus of skilled workers and a resulting fall in mining output. There were some 88 mines operating in the country last year, compared with just 20 this year--and only three of these are believed to be operating at capacity.

It is believed that the country's industries as a whole are operating at around 10% of capacity due to the lack of foreign currency, price controls, hyperinflation, a contracting economy and other operating difficulties such as high power prices.

Although confidence has significantly increased since the power-sharing deal was brokered back in February between Mugabe and his MDC rival and now Prime Minister, Morgan Tsvangirai, the country is virtually bankrupt and unemployment is estimated at 90%.

In response to a demand by Zimbabwe's Congress of Trade Unions (ZCTU) for a minimum wage of $454 a month, Tsvangirai said that the country cannot afford more than $100; he added that that is what Mugabe and he will be receiving in salary.

Last month, Economic Planning Minister Elton Mangoma announced the government had exceeded its target of arranging a $1bn credit line to begin a proposed 100-day plan to resuscitate the ravaged economy.

Funds have been forthcoming from the AfDB, the African Export-Import Bank (to the tune of S250m with which to support the gold and tobacco industries), South Africa and Botswana -despite the criticism of Mugabe and the power-sharing arrangement by Botswana's President Ian Khama.

The Eastern and Southern African Trade and Development (PTA) Bank has already agreed a new credit line extension of $178m.

This adds to the $400m credit line from the Common Market for Eastern and Southern Africa (Comesa). …

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