Zimbabwe seizes controlling stake in foreign mines

April 5, 2012 - 11:45 AM

HARARE, Zimbabwe (AP) — Zimbabwe has taken majority ownership of all foreign-owned mining companies, Zimbabwe's black empowerment minister said Thursday, a move the prime minister told companies to ignore, saying it could create "anarchy in the industry" in the already ruptured economy.

Minister Saviour Kasukuwere said in a statement that all companies that did not meet a late 2011 deadline to submit proposals to cede a controlling stake to blacks have forfeited 51 percent of their shareholdings and are now "deemed to be owned by the state."

Zimbabwe has large Australian, Canadian and South African mining interests — including giants Rio Tinto, Canadile and Anglo American — and with scores of small white-owned gold mines.

The empowerment drive has split the shaky three-year-old coalition government. Critics says it has scared off much-needed investment and is being used as a political ploy ahead of elections President Robert Mugabe wants this year.

Prime Minister Morgan Tsvangirai, the former opposition leader, immediately urged the nation to ignore Kasukuwere and said the empowerment laws did not allow him to "unilaterally nationalize private entities."

"There is no reason to create panic among investors by projecting the image of a voracious government keen to grab compulsorily people's companies without compensation," he said. "It is not the policy of this government to nationalize the mining businesses or any other business."

Tsvangirai said he took a serious view of attempts to incite the public to act unlawfully against mining businesses.

Kasukuwere's statement "poses a real risk of creating anarchy in the industry" and his party in the power sharing coalition will take "corrective measures," he said.

In his Thursday announcement, Kasukuwere said profits since Sept. 25 from the government's new controlling shareholdings were also regarded as "property of the state." But he said companies that made a loss since then would have to cover losses from their side, and not draw from the "indigenized portion" held by the state to pay debt.

There was no immediate reaction from mining companies on the eve of the Easter holiday. Many Zimbabwean businesses shut down early for the four-day break.

Mining firms depend on foreign investment to maintain and replace aging equipment not financed by revenues from mineral exports already subject to royalties and tax.

Tsvangirai said Zimbabwe needed policies that created jobs for the millions of unemployed in the country.

"They want massive investment in the country and not a political campaign platform that will only benefit the elite at the expense of the majority," he said.

Economist John Robertson said Kasukuwere's announcement is likely to be difficult to enforce.

"It may be bullying to scare companies into handing over shares," he said.

He said many firms let the Sept. 25 deadline pass because the government — reeling under debt after a decade of economic turmoil — didn't offer payment for shares as required under the empowerment laws.

"The money isn't here to pay or to develop the mines if they are nationalized in the same way commercial farms were deemed state land. Only foreigners have the money and they won't bring it to have half of it taken from them," he said.

The agriculture-based economy went into meltdown after Mugabe ordered seizures of thousands of white-owned farms in 2000. Many seizures turned violent.

Robertson described the empowerment drive in its present form as "dishonest" and said it will likely lead to mines being left to stagnate, with worsening poverty for all but an elite minority gaining foreign assets.

"Tens of thousands of our young people will be disempowered by being denied skills training and jobs," he said.

Last month, Zimbabwe's biggest platinum producer said it had reached an "acceptable" agreement with the government to yield 51 percent ownership to blacks.

South Africa's Implats, owner of 87 percent of the Zimbabwe producer Zimplats, said a joint technical team of experts from both sides was working out methods of transferring a majority stake worth at least $500 million.

But Implats chief executive David Brown has said the transfer won't take place if Zimbabwe doesn't pay up, adding international legal steps could be taken if Zimplats is forcibly nationalized without payment.

Zimbabwe and South Africa are the world's largest suppliers of platinum, a corrosion-resistant metal with a wide range of industrial uses that is priced in the same range as gold.

Zimplats employs 8,000 workers in Zimbabwe.

Foreign cash inflows have dwindled in recent months amid uncertainty over the security of possible investments.

Tourism, now the second-biggest hard currency earner after mining since agricultural exports collapsed, has been affected by political and economic uncertainty and security concerns ahead of the elections proposed by Mugabe. Tensions and intimidation have heightened this year, rights groups say.

Tourism Minister Walter Mzembi said Wednesday that Westerners were being discouraged by their governments from visiting Zimbabwe.

"We all know what happens when a tourism destination is plagued by insecurity," he said.