Zimbabwe’s black-empowerment law, which aims to increase the role of black people in the economy, is dissuading foreign groups from investing in the country and its companies, hindering economic growth, according to RioZim Ltd., a gold, nickel and diamond miner.
Efforts by RioZim to raise funds to grow its operations have been crippled by uncertainty around the ownership rules, Chairman Tichaendepi Masaya said in a statement to his board on May 24 and published on the company’s website yesterday.
Foreign investors who had shown the “appetite and capacity” to invest in RioZim withdrew from a proposed funding deal because of the rules, he said. Local investors don’t “have the capacity to fund their aspirations while foreign investors remain uncertain” because of the legislation, Masaya said.
Zimbabwe’s Indigenization and Empowerment Act gives foreign mining companies until June 2 to show how they will sell 51 percent of their shares to black Zimbabweans or state-owned companies. The law hasn’t made it clear who will benefit from the disposal of shares, or how the sale will be accomplished.
RioZim believes it qualifies for indigenous status, meaning the rules don’t apply to it, Masaya said. An application to approve the miner’s indigenous status was rejected because of a “technicality,” he said. The company didn’t provide further details and calls to its head office in Harare weren’t answered.
Decade of Recession
RioZim, which is listed on the Zimbabwe Stock Exchange, said on Feb. 24 that it plans to raise $40 million in a rights offer during the first half of this year.
Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd., the largest miners of the metal, submitted proposals aimed at meeting Zimbabwe’s demands last month, while Rio Tinto Group, Mwana Africa Plc and Eurasian Natural Resources Corp. could also be affected by the laws.
Zimbabwe has the world’s second-largest platinum and chrome reserves after neighboring South Africa. It also has deposits of gold, coal, ferrochrome and diamonds. The country’s economy is recovering from a decade of recession triggered by often-violent seizures of white-owned farms supported by President Robert Mugabe’s Zimbabwe African National Union-Front.