Zim should consider scrapping indigenisation law, say experts

Foreign investors are concerned by the government’s indigenisation law, which has led to many companies withholding investment needed to raise mining production after a slump in the past seven years.
The southern African country has enacted a law which forces foreign companies, including mines and banks, to sell 51 percent ownership to locals while allowing the government to acquire 25 percent of shares in some mines without paying.
Jack Murehwa, past president of the Chamber of Mines, said companies should be allowed to draw up a timetable to meet their own targets to sell a stake to local Zimbabweans, and the government should ensure the mining firms meet the targets.
“We don’t believe that setting up empowerment limits is the way to go, it serves no purpose at all,” Murehwa told a mining conference.
“Let the mining companies set the targets . . . and leave foreign investors to talk to potential local partners of their choice in the country,” Murehwa said, referring to a clause that allows the government to recommend local partners.
Anglo Platinum (Angloplat), which is developing the Unki Platinum Mine in central Zimbabwe, has announced it would set aside 20 percent shareholding for workers, communities and locals before enactment of the indigenisation law.
Mining has become the leading source of foreign exchange for the country with gold accounting for a third of exports, but political turmoil has led to several mines closing.
Miners have since 2002 struggled with a political and economic crisis and foreign currency shortages, forcing mines to shut down while skilled labour fled to other countries.
Alex Mhembere, managing director of Zimbabwe Platinum Mines (Zimplats), a unit of South African firm Impala Platinum Holdings (Implats), said 88 registered mines were in operation in the country last year, but only 20 were now working and a mere three were operating at full capacity.
Implats, Angloplat and Rio Tinto, are some of the biggest mining companies with interests in Zimbabwe.
Zimplats, which offered to sell 15 percent shareholding to locals but could not find a buyer, has also in the past suggested that the government should consider giving mines credits for development made in local communities.
“We need consistency in terms of government policies, we need clarity on indigenisation and empowerment. The perception out there of Zimbabwe being an investment destination is still very low,” Mhembere said.
Mining companies had for the past 10 years shelved any exploration activities because of unfavourable laws.
“Over the last 10 years we have not had exploration, so we have this 10-year gap and if we start full mining production we are going to face a slump (in production) not far from now,” Mhembere said.
A senior mining executive in Tanzania urged the country to put in place viable policies to attract foreign investment in the capital-intensive mining sector.
Emmanuel Jengo, the executive secretary of Tanzania Chamber of Minerals and Energy, said his country had succeeded in increasing the number of gold mines operating in the southern African state after offering investors a catalogue of incentives and allowances to make their ventures viable.
“Tanzania did not have any gold mine, but because of the dialogue, we have been opening a new mine every year since 2000. Currently, we have six gold mines in Tanzania that produce 60 tonnes of gold annually,” said Jengo.
Murowa Diamond Mine managing director, Niel Kristensen, said 85 percent of mining companies never receive real value on investments as government takes 37 percent of the company’s value while investors who would have invested 100 percent into the companies receive much less.
At least three quarters of mines that were operating in Zimbabwe during the first quarter of 2008 have closed down leaving the country with only 20 mines running during the first quarter of 2009. —  Reuters/Staff Reporter.