Law silent on payment for 51% mining shares
http://www.thezimbabwean.co.uk
Written by Staff Reporter
Saturday, 02 April 2011 13:41
Govt must see sense – Chamber of Mines
HARARE – Zimbabwe’s mining companies have complained that the Indigenisation
plan that aims to transfer majority control of foreign mining firms to
locals was silent on how payment was to be made – raising fears the
government wanted to expropriate the mines for free.
A government gazette extraordinary dated March 25 announced that all
foreign-owned mining firms with a net asset value of more than US$1 must
dispose of 51 percent of the shares to designated entities.
“This effectively means every business will be affected,” says Victor
Gapare, president of the Chamber of Mines. “The exemption of those below a
net asset value of $500,000 has been removed. The notice is silent on the
100 percent ownership of alluvial minerals as had been announced by the
Minister through the Herald on February 2, 2011.”
The entities for acquisition of shares include the National Indigenization
and Economic Empowerment Fund, the Zimbabwe Mining Development Corporation,
any entity formed by the Zimbabwe Mining Development Corporation, a
statutory sovereign fund and an employee share ownership scheme, or trust,
or community share ownership scheme
The Chamber of Mines has said it would be preferable to sell stakes of 26
percent to local owners, divided as 26 percent direct equity and 25 percent
being met through corporate social investment credits.
“It is not clear whether the state has a plan for warehousing these shares
for future distribution to the broad majority of the population,” Gapare
said. “Not distributing these shares to the public equates to
nationalization.
“The valuation of the shares shall be agreed with the minister and take into
account the State’s sovereign ownership of the mineral or minerals to be to
be exploited. Effectively, proven reserves can no longer be included in
determining value of the business, which runs contrary to standard practice
in the mining world. This is seen to be nationalization of all mining
assets, and the end result will be killing the incentive for any
exploration. Listed companies have effectively had their value taken away.”
Gapare said there was silence on the commitment of designated entities to
pay for the shares by September 25, yet the shares must be transferred by
that date.
“A normal transaction would require that shares change hands only after
payment has been done,” Gapare said. Failure to comply will constitute a
level 12 offence attracting a fine or a five-year jail term, or both.
The Minister of Indigenisation, Saviour Kasukuwere, who drafted the
regulations, also disregarded recommendations of the Mining Sector Committee
on Indigenization, which recommended 26 percent direct equity, 10 percent to
communities in the form of a tax on gross profit and 15 percent through
social credits.
There is no mention of the fate of the business in such circumstances,
Gapare says.
Like many other economic observers, Gapare said the move was likely to
discourage foreign investment.
“The Minister has decided to fast track indigenization without taking into
consideration the negative consequences on investment and growth. If a
mining company cannot lay claim on the reserves or other inferred resource,
it is not possible to raise capital,” Gapare said.
“For the benefit of the industry and the economy at large, the mining
industry must continue to lobby government to see sense in the
recommendations of the mining sector committee.”
Analysts said impoverished Zimbabwe does not have the money to buy
controlling stakes through the investment vehicles.