Zimbabwe: Dialogue Key to Mining Sector Recovery

Paul Nyakazeya

23 September 2011

THE just ended third mining indaba has shown that more constructive dialogue is needed if the country's major foreign currency earning industry is to recover and continue to increase its output and revenue.

The Chamber of Mines has said the only way the mining sector could grow was if dialogue between miners and government improved and suggestions made to government by miners and other stakeholders were taken seriously.

Some miners cite their attempt to engage government on the indigenisation and economic empowerment policy for two years, only to realise that what they had proposed was not adopted.

That government, contradicted itself sharply on the indigenisation policy at the mining indaba was also another example cited as a challenge to the industry. Mines and Mining Development minister Obert Mpofu told the gathering that government did not have any intention to cancel mining licences held by foreign companies.

This contradicted an earlier statement by the Indigenisation minister and fellow Zanu PF member Saviour Kasukuwere to the effect that government would revoke licences of foreign mining companies that failed to comply with the indigenisation laws.

Economic Planning and Development minister, Tapiwa Mashakada, said one of the reasons why miners, government and other stakeholders were failing to speak with one voice was because the law had either been misunderstood or deliberately vulgarised by some analysts in a manner that gives the imperssion that the two are negotiating in bad faith and scaring away investors.

"Many times, we have been told that investors need clarity and policy consistency. Government's position is very clear. The 51% is ceded for value in the case of new and existing entities," Mashakada said.

"Furthermore, investors were given the opportunity to present their compliance plans to the authorities, subject to a reasonable timeline. The indigenisation law is not about nationalisation or expropriation," Mashakada added.

"It is there only to make sure that the broad-based empowerment of the majority of Zimbabweans is achieved. What happened on the land (redistribution) will not be replicated at the mines. That is the correct government position," he said.

Analysts say the Economic Empowerment Act, passed four years ago, is now literally a patchwork of amendments, shortly after promulgation. From this initial stockpile of conceptual mistakes, government has also made some "discoveries" and retooled the legislation, tightening rather than relaxing fundamental provisions, particularly those pertaining to alluvial diamonds.

"There have been fears that mines will lose their licences, but that is not the view of government. The relevant authorities are working on a rational solution that will not destabilise the mining sector," Mashakada said.

Kasukuwere maintained the law should be followed and an outcome that will benefit locals and foreign investors was expected and had to be respected.

"In disposing of the 51% equity to indigenous Zimbabweans, it is paramount that the policy objective of broad-based empowerment is adhered to," he said.

Kasukuwere said his ministry had an open door policy and listened to and took on board every suggestion which empowered locals. He added that Zimbabweans should strive to be shareholders and not be "strangers at their own wedding".

However, Mpofu said: "There are no intentions for government to revoke licences of any mining company. "Technically how can you do so when there are discussions between the Ministry of Indigenisation and the foreign mines?" Mpofu asked.

Chamber of Mines president Winston Chitando said the mining industry was in favour of a broad-based indigenisation framework that enhanced the growth of the industry. He said this could only be achieved by constructive dialogue by all stakeholders involved.

"Discussions are going on in terms of implementation and we are looking forward to a win-win situation," he said. He suggested that whatever all those involved in mining do, if they do not consult and negotiate in good faith, it will not be easy to see the sector continue to grow.

The Chamber of Mines and the Ministry of Mines and Mining Development are projecting the sector to grow by 44% this year, with platinum and gold being the leading sub-sectors contributing to strong growth.

The chamber envisaged that all sub-sectors would record further growth, with the notable exception of asbestos and, to some extent, granite. Bindura Nickel Mines MD and immediate past president of the Chamber of Mines Victor Gapare told businessdigest in an earlier interview that none of the chamber's views and those of other stakeholders were taken on board in the current indigenisation programme.

"We then ask government why then consult if you are not prepared to listen or even adopt some of the recommendations proffered by those you claim to be consulting?" he asked.

Gapare said the chamber had proposed an equity quota of 26%, with the balance coming from credits emanating from social responsibility activities, local procurement, skills development and release of minerals rights.

"Despite these proposals, government appointed a mining sector committee from which I was fired by the minister and his colleagues for recommending an appropriate score for mining," he said.

He said the committee had recommended 26% equity, 15% credits and a tax of 10% for those not willing to increase their equity by a similar margin.

Gapare said the Chamber of Mines was surprised by the gazetting of General Notice 114 of March 25 2011 which required mining companies to file a plan within 45 days and implement the plan for the disposal of 51% mostly to state entities within six months.

Local and foreign mining firms participating at the Mining Indaba said the country's mining industry has massive potential for business, but there was a need to harmonise various pieces of legislation.

Said Inno X Africa owner Stuart Bateman: "The mining industry in Zimbabwe has huge potential and the legislation has to be clear on what has to be done," he said.

Manhattan Corporation chief executive officer Michael Pouroullis, also from South Africa, said there was a need to improve the operating environment in the mining sector.

"The country is ready to explode in a positive way. This show is fantastic in terms of exposure," Pouroullis said.

Zimbabwe is said to be the only country that has not benefited from its own resources. Everything in Zimbabwe has been taken in its raw form.

Some analysts said if Zimbabwe were allowed to sell its diamonds it would not be talking about the International Monetary Fund nor about debt.

"We have enriched foreigners and neighbours. But at present more dialogue is needed to ensure that more Zimbabweans benefit," an analyst said.

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