Mining Empowerment in Zimbabwe
Earlier this year Zimbabwe’s President Robert Mugabe announced a widespread empowerment, or indigenisation programme which - ostensibly - is aimed at shifting commercial ownership from foreign to local hands. While the concept of economic redistribution is a completely understandable and necessary one, the manner in which this has been approached has done little to help either Zimbabwe or its people, and threatens one of the country’s sectors with the biggest potential - mining.
Across a wide number of sectors foreign-owned companies have been told that they must be prepared to willingly sell 51% of their shares or face expulsion and/or a revoke of operating licences. The move was condemned from a range of interest groups as highly irrational.
However, in the mining sector, only months after the process was revealed, the redistribution bid has dismally failed to attract the kind of attention Mugabe and the ruling Zanu-PF expected.
FOOD vs. SHARES
While official inflationary figures for Zimbabwe are becoming increasingly sporadic, the latest understood number (released for March 2008) stands at over 300,000%. Understanding this, quite simply, Zimbabweans can barely afford basic necessities let alone shares in mining contracts. Furthermore, the structure of the empowerment approach is understood to award Zanu-PF supporting members for their loyalty i.e. excluding the comparatively wealthy - and largely opposition supporting - diaspora with accessible funds in places like the UK.
Under the ‘Economic Indigenisation and Empowerment Act’, black Zimbabweans were presented with the opportunity to purchase a portion of a 51% stake in foreign controlled mining operations (in reality, it was understood that citizens could purchase 25%, with the additional 26% set aside for Zanu-PF). The dealing for applications and proposals was set for 16 May but with zero response this has been extended. According to Ozias Hove, Secretary in the Ministry of Indigenisation and Empowerment, the extension was granted as "some stakeholders wanted time to consult to ensure that their submissions will be all inclusive because we are talking of strategic businesses.” - a convoluted excuse with little substance.
SHARES = VOTES
Analysts attributed this latest law to desperation over the March 2008 elections. As a form of extreme vote buying, Mugabe and Zanu-PF hoped to retain support through indigenisation programmes such as the one targeting foreign-run mines. While the elections have passed, a stalemate continues with a run-off scheduled for June 27. Despite the failure in the indigenisation programme pre-March, it is almost a certainty that Mugabe will use angles such as “re-claiming” mining contracts as a political tool in a bid to buy votes.
While Zanu-PF has insisted that shares will not be simply handed over to people, but rather sold at an agrred upon price with companies, the Zimbabwean Government’s track record for keeping to such deals is decidedly weak - the land debacle started out in the “Willing Seller, Willing Buyer” fashion. Undoubtedly, as the next month comes to a close, aspects such as redistribution will play an integral part in Mugabe’s neo-colonial election speeches.
SHORT-SIGHTEDNESS REARS ITS HEAD…AGAIN
With the disastrous effects of the Government’s land redistribution efforts increasingly being felt in terms of food shortages and starvation, observers fear that the little foreign currency that Zimbabwe does bring in will be lost if the mining sector shuts down. While agriculture and specifically tobacco exports were the country’s big earners pre-2000, mining has been increasingly crucial in avoiding a total economic meltdown.
While the mining houses have not been that vocal in commenting on the situation, some foreign companies from South Africa and the UK have warned that it would not be able to operate as a minority partner should the indigenisation plan reach 51% local ownership. This considered, it has become very possible that a successful uptake of local ownership could ostensibly halt the production of minerals and worsen the economic situation if the same attitude is taken.
Meanwhile, the Zimbabwean government - despite its ever worsening economic woes - has announced that it has set-up an “indigenisation fund” aimed at assisting locals in the uptake of shares. As to whether this will be successful is still to be seen but one thing is for sure - Zimbabwe’s mining sector - and its ability to keep the country running - will remain severely in jeopardy as long as authoritarian politics and power desperation is a considering factor.
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