All foreign-owned mining companies in Zimbabwe must sell majority stakes to locals within six months, under new rules released on March 28. The new rules marked the latest attempt by long-ruling President Robert Mugabe to squeeze cash out of the mining industry, after last month hiking exploration fees by 2,000% to one million dollars.
The controversial Indigenization and Economic Empowerment Act issued last year required all foreign firms valued at more than $500,000 to sell 51% stakes to locals. The new rules published on March 28 expand the law to include all mining companies valued at more than one dollar.
Companies are expected to complete their sale plans by May 9 and transactions must be finalized by September 25, according to the gazette.
"It's very messy and it is a harsher approach to the mining sector," said economist John Robertson. It is politically inspired.
After the collapse of manufacturing and agriculture during a decade-long economic crisis, mining now is the largest sector in Zimbawe's economy.
Mugabe has strongly backed the law, describing it as an extension of the struggle against colonialism, in language reminiscent of his land reform campaign blamed for the decimation of farm production in Zimbabwe.
"We are taking over. Listen Britain and America: this is our country. If you have companies which would want to work in our mining sector, they are welcome to come and join us, but we must have our people as the major shareholders," Mugabe said on March 27.
"Lonhro, Anglo American, Rio Tinto you must transform and become Zimbabwean, we want black people, our people, our young people. It's another dimension to the struggle. Let that lesson go deep," Mugabe said.
Both the ministry of mines and of indigenization fall under Mugabe's control under Zimbabwe's two-year-old unity government, making the industry one of the few areas of the economy where he still exerts influence. His stance has stoked tensions with his rival, Prime Minister Morgan Tsvangirai, whose party runs the finance ministry and has embarked on a campaign to lure foreign investors back to the country.
The application of the equity law remains vague and patchy, after India's Essar Group two weeks ago signed a $750-million deal to take a 54% stake in Zimbabwe's moribund Zisco steel. The government has yet to explain how or why Essar was granted a waiver from the equity rules.
Shares of foreign mining companies, including London-listed Aquarius Platinum and Australian-listed Zimbabwe Platinum Mines, have plunged due to uncertainty around the law since its original release one year ago.
Copyright Agence France-Presse, 2011
