Chamber of Mines, Govt on collision course

on how foreign mining firms should meet requirements of the Indigenisation and Empowerment Act.
Outgoing president Mr Victor Gapare said most of the recommendations they submitted were overlooked and what was published contrasted sharply with the chamber’s proposals.
Mr Gapare said this in his opening address at the 72nd annual general meeting of the chamber last last week.
Mimosa Mining managing director Mr Wiston Chitando replaced Mr Gapare as president of the chamber. Mr Gapare said they had proposed 26 percent direct equity by locals in foreign mining firms as opposed to Government’s 51 percent direct equity holding, which was gazetted in March this year as the final position.
According to Notice 114 of March 25, 2011, which states that all foreign mines with net asset value of at least US$1 are required to sell at least 51 percent stake to locals.
The firms’ indigenisation plans should be filed 45 days from the date of announcement while the plan should be implemented within six months from the date of the notice.
Mr Gapare said in the several occasions the chamber engaged Government over indigenisation, it had proposed 26 percent equity for locals and the balance adding to 51 percent to be made up of credits.
He said the credits would emanate from corporate social responsibility activities of the mining firms such as local procurement, skills development and release of mineral rights among other acceptable criteria.
Mr Gapare said the stance taken by Government was puzzling considering that at the chamber’s last AGM, President Mugabe indicated credits were acceptable as part of meeting requirements of the indigenisation law.
The credits, said Mr Gapare, would contribute 15 percent towards meeting the indigenisation threshold and that a tax of 10 percent would be applied on those failing to adhere to such requirements for indigenisation.
“We were therefore surprised by the gazetting of General Notice 114 of March 25, 2011, which requires mining companies to file a plan within 45 days and implement the plan for disposal of 51 percent within six months.
“This notice set several capital raising initiatives back as listed Zimbabwe focused operations like New Dawn and Zimplats lost 40 percent of their market value immediately,” said Mr Gapare.
He added that the decision by Government defeated the whole purpose of consulting the stakeholders in the mining industry.
The Chamber of Mines has since made fresh representations to Government expressing areas of concern, mainly its plea to have credits accepted as a way through which indigenisation requirements could be met.
He said the focus should be on the value of the equity rather than the 51 percent shareholding, adding efforts should be aimed at finding how new business could be started than on sharing existing mining firms.
The immediate past president of the Chamber of Mines said risk associated with the indigenisation law resulted in Zimbabwe missing out completely on the US$14 billion invested in exploration worldwide.
Against this background, he said it was critical for Zimbabwe to adopt principles of Extractive Industries Transparency Initiative for transparency and co-operation between mining firms, communities and Government.
Mr Gapare said locals and State institutions hold 65 percent of mineral rights in Zimbabwe, but most have failed to raise capital due to perceived risk associated with the indigenisation and economic empowerment law.
In a speech read on his behalf by his secretary, Mr Thankful Musukwa, Mines and Mining Development Minister Obert Mpofu said indigenisation was founded on the understanding that locals should benefit from the extraction of minerals.
“Government, therefore, seeks to achieve empowerment and indigenisation in the mining sector in a manner that results in the development of internally and regionally competitive, vibrant and broad-based mining industry for long-lasting community upliftment and economic benefits to both Zimbabweans and investors,” he said.
The mining industry, which is expected to grow by 43 percent this year, required an estimated US$6 billion to retool and raise production to optimal levels within the next five years, as it has not been capitalised in a decade.
Mining has become strategic to Zimbabwe’s plans for economic recovery, growth and development, hence Government’s plan to use it as one of the tools to mainstream locals in the economy.