By Andrew Meldrum, GlobalPost
Robert Mugabe is pressing ahead with a policy that many warn will be disastrous for the Zimbabwean economy.
Mugabe's regime is moving ahead to implement the controversial "indigenization" of Zimbabwe's mining companies and businesses.
Zimbabwe has a new law requiring all companies to have 51 percent of their shares owned by black Zimbabweans. And the Mugabe regime is making sure that the new black shareholders are supporters of the ruling party, Zanu-PF. In other words the indigenization policy will enrich supporters of the Mugabe regime and will force large mining firms and other business to be controlled by the Harare government.
Saviour Kasukuwere, Mugabe’s indigenization minister, has sent an ultimatum to a dozen foreign-owned groups. He warns that those that don't follow the new rules may lose their assets and operating licences. Their directors may be jailed.
Companies targeted include some of Zimbabwe's biggest: Rio Tinto’s Murowa Diamonds and Impala Platinum’s Zimplats, Standard Chartered Bank and Barclays Bank, British American Tobacco, Nestlé and Cargill Zimbabwe. The deadline for submitting compliance plans was the end of August; for implementing them, it is the end of September.
Kasukuwere, a rising political star, is talking tough. The law allows firms to perform "good works" instead of surrendering equity, but Kasukuwere is not interested in company's charity acts. He also rejects an idea, suggested by Zimplats, that firms could sell their shares to black Zimbabweans by listing them on the stock exchange.
Kasukuwere said that firms must give a 51 percent stake to a sovereign-wealth fund, with no guarantee of any compensation. All mines worth more than $1 are affected.
A showdown looms with major foreign-controlled mining corporations.
Impala Platinum Holdings Ltd. (IMP), the world’s second-largest producer of the metal, said it is in talks with the Mugabe government as the deadline for the company to boost its local ownership has expired.
Impala, which is based in South Africa, declined to say whether it submitted revised proposals, according to Bloomberg. Aquarius Platinum Ltd., which is based in London and also has mines in Zimbabwe, also declined to comment.
Zimbabwe, which has the world’s second largest reserves of platinum after South Africa, is now enforcing the law passed earlier this year requiring foreign companies to cede at least 51 percent of their local assets to black Zimbabweans. Impala and Aquarius had until Aug. 31 to revise proposals of local ownership that the Mugabe government had rejected. Impala is spending $460 million expanding its Ngezi mine in Zimbabwe and co-owns the Mimosa mine with Aquarius.
Impala will not hand control of its Zimbabwean operations to the Mugabe government, said Impala chief executive David Brown in Johannesburg. He said he is disappointed that Impala faces ultimatums in Zimbabwe where it has been a “model investor” for about 10 years.
This showdown over control of Zimbabwe's mines could be the latest area where Mugabe's regime seizes control of valuable economic assets, as it has done with white-owned farms. The farm seizures enriched Mugabe's closest associates, but impoverished the rest of the country as they set off an economic collapse in which agricultural output plummeted and ordinary Zimbabweans went hungry.
The mine and business seizures could result in a similar economic disaster for Zimbabwe, warn economists.
Many are calling the new policy expropriation. Critics say Mugabe's "indigenization" is just a fancy word for plunder.
The views expressed in this article are solely those of Andrew Meldrum.