Zimplats gets 14 days to finalise indigenisation plan

Indigenisation and Empowerment Minister Saviour Kasukuwere.
Zimplats chairman Mr David Brown appears to have stirred some controversy over the issue when he was quoted as saying that there was going to be vigorous debate around the value of the stake to be given to locals.
While the concession by Implats last week to dispose of 51 percent of Zimplats to indigenous Zimbabweans was a major landmark in the struggle for economic emancipation, a major battle still looms on the valuation of Zimplats.
There have been suggestions that the value of the company is significantly higher than its market capitalisation on the Australian Stock Exchange of about US$1,2 billion.
The Mining Weekly wrote: “There is no point in Implats going back to the Zimbabwe negotiating table if South Africa’s neighbour is unable to show that it has access to between US$500 million to US$1 billion in cash to pay for the 31 percent of Zimplats.” 
Mr Brown said that treaty protection under the South Africa-Zimbabwe bilateral agreement committed the Zimbabwe Government to pay fair compensation for shares that Implats was disposing in Zimplats.
It is interesting to note that most black economic empowerment deals done in South Africa were at market value less an “empowerment discount”.
It would appear that Implats is applying a different set of rules suggesting that the National Indigenisation and Economic Fund should pay a premium to market value.
In addition, most South African companies recognised that it was in their interests to facilitate BEE by providing vendor financing or appropriate guarantees, as non-compliance would be costly.
In contrast, Mr Brown made it patently clear during the same conference call that there was absolutely no chance of Zimplats vendor financing NIEEB’s 31 percent purchase.
The South African government had expressed clearly that it was keen to see that any transfer of shares from Implats to an indigenous grouping was transacted on a basis of fair compensation, reported Mining Weekly.
It was not clear whether Mr Brown or his advisers have read the appropriate legislation that governs the valuation process in Zimbabwe.
“The value of the shares or other interests required to be disposed of to a designated entity . . . shall be calculated on a basis of valuation agreed to between the minister and the non-indigenous mining business concerned. This shall take into account the State’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited by the non-indigenous mining business concerned,” the ministry stated in a letter to Zimplats.
The letter giving Implats 14 days to finalise their latest plan also points out that the valuation basis must take into account the State’s sovereign ownership of the mineral resources.
In fact, application of this provision will result in a portion of the stake being done as a “free carry”, as the inferred value of the resource, less the net present value of applicable rentals to Government, is the contribution of NIEEF, as one of the designated entities.
Analysts have pointed out that it was likely that Zimbabwe would soon realise the games that Implats were playing and deem Zimplats non-compliant. This could invoke the punitive measures that are laid out in the Indigenisation Act, resulting in an actual nationalisation of the mine.
“We do not see this announcement removing any of the uncertainty surrounding the Zimbabwe assets. An arbitrary deadline has been met but without financial and timing details the same risks remain, in our view. We maintain our sell rating,” a Goldman Sachs Global Investment Research was quoted in Business Day last week.
According to the same Mining Weekly article, Zimplats would continue to manage its mining operation under a management agreement, which in essence meant that the same team would continue to manage the mine and target expansion.
This appears to miss the point completely as the Zimplats CEO and senior management are indigenous Zimbabweans.
Mr Brown said that once NIEEB succeeded in sourcing funds for fair compensation Implats would reward it (Zimbabwe) with a U$1 billion investment in Phase 3 of the Zimplats expansion. It would also consider investing in a refinery in Zimbabwe that could be used by all the country’s platinum producers.
All the platinum produced in Zimbabwe is refined in South Africa.
There has been an outcry over the years that there is very little contribution being made by platinum to our development.
“Our platinum is developing other countries much more than it is developing Zimbabwe. Platinum also must be managed. I hope the Indigenisation and Empowerment Act will now enable us to get greater benefit from all this mining exercise, which has been taking place in the past by doing so at our expense,” President Mugabe was once quoted as saying.
Mimosa, another platinum giant, last Friday submitted its indigenisation proposal, which complies with the 51 percent requirement, and seeks to benefit a much broader base of Zimbabweans.
Besides the Community Trust, the Employee Trust and NIEEF, the proposed shareholders include the Civil Servants Investment Trust, Mining Industry Pension Fund and consortiums including strategic equity partners and the youth. This is very much in line with the objectives of the Indigenisation Act. The key objective in structuring indigenisation deals for the platinum sector is to ensure that the indigenised companies can continue to expand production to reach the critical mass required for Zimbabwe to develop its own refinery. There is an increasing push for the control of the mining industry by indigenous people in Africa as a whole and this is not only unique in Zimbabwe.
This is different from the gratuitous black economic empowerment that results in black people having minority stakes in mining companies still run and controlled by white people.
The English and the Afrikaners as a way of co-opting black people to assist them in entrenching their position initiated the BEE programme in South Africa.
They also acted as a buffer against the interest of the majority of the people taking rightful control of their underlying mineral resources. The emergence of organisations like the Black Business Council and the recent split from Business Unity South Africa shows that you can’t keep a lid on the rightful economic aspirations of black people against entrenched interests.
The current spat between the Chamber of Mines in South Africa and the Black Business Council best illustrates this war, and was as a result of Bheki Sibiya, a “black” man who is CEO of the Chamber of Mines, saying the Black Business Council is racist.