March 5 (Bloomberg) -- Zimbabwe’s Parliamentary Legal Committee said the country’s Sovereign Wealth Fund Bill doesn’t contravene the constitution, paving the way for the adoption of laws that could see the fund allocated as much as a quarter of mining royalties.
The proposed legislation also recommends that the fund get a quarter of “special dividends” on state mineral and metal sales. It will mainly be used to pay for infrastructure development.
“The bill does not contain provisions that, if enacted, would violate the Declaration of Rights or any other provisions of the Constitution,” Jonathan Samukange, chairman of the committee, said in a letter to Speaker of Parliament Jacob Mudenda that was obtained by Bloomberg News. The opinion of the committee is known as a “non-adverse certificate.”
The bill targets raising funds from mines on the world’s second-biggest chrome and platinum reserves as well as gold, diamond, nickel, coal, methane gas and iron-ore operations. Anglo American Platinum Ltd., Impala Platinum Holdings Ltd., Aquarius Platinum Ltd., Mwana Africa Plc and Rio Tinto Plc are among companies that mine in the country.
The bill will still have to pass a second reading in parliament, which is more than two-thirds controlled by the Zimbabwe African National Union-Patriotic Front of President Robert Mugabe. Mugabe was re-elected last year, extending his 33 years in power.
Angola and Nigeria are among African countries that have established sovereign wealth funds.
Mugabe’s government is trying to finance the recovery of Zimbabwe’s economy, which shrank by 40 percent between 2000 and 2008. The country suffered from inflation estimated at 500 billion percent by the International Monetary Fund after the seizure of white-owned commercial farms slashed exports of crops including tobacco, paprika and roses.
The endowment will be split into units geared toward making “secure investments” for the benefit of future generations, to support the government’s “development objectives,” and to “support fiscal or macroeconomic stabilization,” according to the bill.
The law defines special dividends as 50 percent of the gross value of any sales made by the state-owned Zimbabwe Mining Development Corp. from any project in which it’s involved.
The ZMDC has joint ventures with a number of companies on the Marange diamond field in the east of the country.
The government has proposed boosting levies on platinum exports to 15 percent from 10 percent. There is a 15 percent duty on diamonds, while the charge for gold is 7 percent and coal production is charged a 1 percent royalty.
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