The Chamber of Mines of Zimbabwe has appealed to Vice-President Joice Mujuru for intervention over the implementation of the Indeginisation and Economic Empowerment Act warning the mining industry could see a decline in production and capital flight.
In a letter to Mujuru last week, chamber president Victor Gapare said the country was at the crossroads hence the urgent need to delicately deal with the issue.
Mining companies have been given 45 days to submit an indigenisation plan and six months within which they should have complied with the regulations.
“We would respectfully suggest that given the current liquidity problems, the compliance period should be left at five years or extended to ten years, as it will be hard for indigenous players to raise cash in a very short space of time,” said Gapare.
“The concern is that buyers of the equity may not be able to put together financing packages for the purchase of shares given the liquidity constraints in the market.”
Gapare said the country required between $5 and $7 billion if it was to benefit from its mineral resources.
He said the new regulations would see all indigenous shares being disposed of to the Zimbabwe Mining Development Corporation (ZMDC), a situation that was undesirable.
“In our meeting with Mines and Mining Development minister Obert Mpofu, he advised that in reality the shareholding will pass on to the ZMDC and that if non-indigenous investors want to offer shares to their employees or other parties, they should do it out of their proposed 49% share,” said Gapare.
“This effectively means individuals, communities and employees will not be allowed to buy or get shareholding from existing non-indigenous companies.
“We would suggest that mining companies be allowed to choose their own partners in line with the Indigenisation and Empowerment Act.”
Gapare said mining finance the world over was based on clear security of tenure of the resource by those raising the capital as this formed the primary basis on which debt or equity could be raised
He said while the government could own up to 51% of the project on the basis of the resource in alluvial minerals, particularly diamonds which were relatively easy and uncomplicated to mine and process, it was doubtful whether this model could work for other minerals like platinum, gold, non-alluvial diamonds and base metals which require significant and constant levels of capital expenditure.
In his response to the gazetting of General Notice 114 of 2011 which require mines to submit proposals within 45 days, Gapare said: “If as a nation we want to earn more out of our minerals, the simple solution is to allow the development of bigger mines which will earn bigger revenues and enjoy economies of scale.
“The quality of jobs and contribution to the community development is always better in bigger enterprises that in small enterprises.
“Zimbabwe has a lot of marginal mines and ore bodies which will not be developed if the indigenisation process places undue burden on the capital required to develop them. In this regard, the Chamber of Mines urges the government to be sensitive to the need of investors, whether domestic or foreign, if mines are to be viable.”
Gapare said the chamber and government should agree on a shareholding that would result in projects being able to raise debt and equity finance with the balance to make up to 51% local ownership being sold to indigenous Zimbabweans at market value or listed on the Zimbabwe Stock Exchange.