Grabbing of mines will further harm the economy

By Lance Guma
08 March 2006.

Zimbabwe’s mining minister Amos Midzi has announced that the cabinet had approved draft proposals to seize 51 percent controlling stakes in all foreign owned mines. This has set the country’s economy up for further damage. Foreign investors are already casting a worried eye on their investments and it is expected that no new investors will want to take risks even in other sectors of the economy. The government says it will pay for only 26 percent of the shares while the remainder will be classed as ‘free carry,’ meaning they will pay nothing them. Midzi even boldly declared that they could find alternative foreign investors if the current ones did not co-operate.

While some commentators agree that mineral resources should belong to the Zimbabwean people, Zanu PF as a government is accused of clearly demonstrating that its primary interest is self-preservation and not the people. Analysts point to the military intervention in the Democratic Republic of Congo as a prime example. Taxpayer’s money was used to finance the war but the resulting mining concessions granted benefited ruling party officials. The new mining industry proposals by government also clearly mirror the chaotic land seizure policy, which crippled the agriculture sector. Ruling party chefs again took most of the land.

Economic consultant John Robertson says the government might actually find itself ‘with 51 percent of very little’ should they proceed to implement the proposals. According to Robertson the move will bring an end to all new mining investments, exploration and even the ordinary maintenace of existing operations. He says few companies will want to continue ploughing money into their operations knowing fully well they might only be entitled to 49 percent of the proceeds when the proposed laws come into place. Robertson believes the government might be trying to frighten away the current investors and attract new ones under conditions favourable to them.

The prospects of the governments plan working is remote and he says there are certain specialist mining ventures like platinum and ferrochrome which could turn into a disaster if the proposals were implemented. Not only was there a need for high capital investment in these operations but prices on the world market fluctuated so rapidly, any under capitalised projects could easily sink if the risks went against them. Robertson says the country’s banks are also not likely to be interested in lending money to mining ventures under this plan.