Zimbabwe’s government will make sure foreign companies are “junior partners” in the country, President Robert Mugabe said after the state published regulations to take 51 percent of foreign-operated mines.
“We are taking back our country,” Mugabe said yesterday in the capital, Harare. “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.”
Zimbabwe, which has the world’s second-biggest platinum and chrome reserves after South Africa, said in a March 25 decree that foreign mining companies must explain within 45 days how they’ll cede 51 percent of their local assets to “indigenous” Zimbabweans. The companies have six months to sell the stakes, it said. The regulations are in line with the Indigenization and Economic Empowerment Act, signed into law three years ago.
“It’s another dimension to the struggle,” Mugabe said. “Let that lesson go deep.” Investors should “come as friends, not as masters and superiors,” he said.
The government’s order weighed on the shares of companies operating in the southern African nation.
Aquarius Platinum Ltd. (AQP), which has a stake in the Mimosa mine, fell 7 percent, the most in eight months, at the 4:30 p.m. close in London today. The company said March 25 its Mimosa Mining unit is in talks with the Zimbabwean authorities to find out how to comply with the law, and is “confident it will be in a strong position to meet the requirements.”
Impala Platinum Holdings Ltd. (IMP), pursuing a $500 million mine expansion in Zimbabwe, declined 2.8 percent to 192 rand in Johannesburg. Anglo Platinum Ltd. (AMS), majority owned by Anglo American, retreated 2.4 percent to 663 rand.
It’s unclear whether companies will get a market price, or any payment, for the shares they’re forced to sell, John Robertson an independent economist based in Harare, said in an e-mailed statement today.
“Non-payment for what is being purchased would normally be considered very good cause for not parting with the asset, but it appears that the government has no intention of offering the mining companies the right to cancel the sale of their shares on such grounds,” Robertson said. “The much more serious longer- term effect of these regulations will be the almost complete arrest of new mining investment inflows.”
Mugabe is pushing for elections this year, against the wishes of the opposition. His Zimbabwe African National Union- Patriotic Front is in a power-sharing government with the Movement for Democratic Change, led by Prime Minister Morgan Tsvangirai. The law doesn’t allow for expropriation or nationalization, Tsvangirai said on March 8.
Rio Tinto, which operates in Zimbabwe through its 78 percent-owned Murowa unit, said last year it may consider expansion in the country if the “political situation” allows it.
“Rio Tinto continues to engage with the relevant authorities in Zimbabwe so as to ensure that its local operations comply with government indigenization policy,” Illtud Harri, a spokesman for London-based Rio, said in an e- mailed statement.
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