The Chamber of Mines of Zimbabwe, which represents companies including Impala Platinum Holdings Ltd. (IMP), rejected a proposal for the state to control mineral production and prices, a draft response from the industry organization obtained by Bloomberg News shows.
Earlier this month, the country’s Ministry of Mines proposed the auctioning of mineral deposits, restricting production of commodities deemed strategic and that the state sell the output from all mines. The ministry is seeking comment from mining companies before taking the proposed policy to parliament to have it passed into law. Zimbabwe has the world’s second-biggest platinum and chrome reserves.
The proposal is “gritty and confrontational,” the Chamber said in a draft copy of its response, which may be given to the government later this month. “Ideologically the policy seems to be at variance with the market-based national policy that the country has adopted.”
Companies such as Impala and Rio Tinto Group are currently free to sell their own minerals. The policy proposals come after Impala and Anglo American Platinum Ltd. (AMS) agreed to comply with an existing law to cede 51 percent stakes in their local assets to black Zimbabweans or the government.
“We will contribute effectively to the on going development of a new mining policy,” Alex Mhembere, Chamber of Mines president, told the body’s Annual General Meeting, held last week at the fly-fishing resort of Troutbeck in northeastern Zimbabwe. “We do not regard our role as opposition to government but partners seeking the same national goal and aspiration.”
The chamber is due to meet the government on May 22 and again on May 29.
Impala fell 1.4 percent to 96.59 rand in Johannesburg as of 9:21 a.m local time. Amplats fell 0.8 percent to 286.96 rand while Aquarius rose 2.2 percent to 6.15 rand.
If implemented, the marketing policy will be a reversal of an earlier liberalization of mineral sales, which formerly had been undertaken by the Minerals Marketing Corp. of Zimbabwe and, in the case of gold, a unit of the central bank. Under the proposal, gold and platinum group metals will be sold by a dealer authorized by the Ministry of Finance and all other minerals will be sold by the MMCZ.
“This policy on minerals marketing is premised on the notion that the private sector cannot be trusted,” the Chamber of Mines said. “The world over producers have the right to market their own minerals based on an approved marketing contract.”
In addition to the changes to the marketing of minerals the ministry proposed auctions of deposits as well as imposing new taxes, the policy showed. It suggested a resource rent tax, defined as a tax on profits in excess of an average national return on investment, and the regulation of mineral prices.
“Having gone through the lost decade, where the country had a fatal flirtation with price controls, this should be avoided at all costs,” the Chamber said.
Zimbabwe’s economy entered a recession around 2000 after a disputed election and the imposition of a land reform policy that involved the seizure of white-owned commercial farms. Over the next decade the government controlled prices and imports. Inflation rose to 500 billion percent, according to the International Monetary Fund, and the economy contracted by 40 percent between 2000 and 2007.
The country exited recession in 2009 and ended a political stalemate after President Robert Mugabe’s Zimbabwe African National Union - Patriotic Front formed a coalition government with the Movement For Democratic Change following the intervention of the 15-nation Southern African Development Community.
The proposals “will effectively close the country to private exploration,” the Chamber said. The government document “is based on socialist thinking, where the state has a strong hand over the affairs of mineral extraction. Zimbabwe has largely been a market-based economy.”
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