With the final countdown underway on the Zimbabwe indigenisation saga, let’s take a hard look at what’s at stake come November 15 when Zimplats is due to submit its final proposal to government.
If it all goes pear-shaped the losers will include Impala Platinum (Implats) — which owns 87% of Zimplats — but also what’s left of the Zimbabwean economy, as well as a host of mining companies trying to get projects off the ground in the rest of Africa.
Other African countries will be watching the outcome closely and they will draw their own conclusions over what is possible if the Zimbabwe government gets away with its latest demands.
Those include reneging on contracts previously struck with Implats and grabbing 51% of the assets of all the mining companies operating in the country.
Zimbabwe’s politicians should realise they have as much to lose here as Implats.
A negative outcome would destroy the country’s last remaining chance of staging a worthwhile economic recovery based on the large-scale development of its platinum group metals (PGM) mining sector.
It would be the mining equivalent of the earlier disastrous farming land grab which transformed Zimbabwe from a bread basket into a basket case in a matter of years.
Zimbabwe hosts the second-largest known PGM resource in the world after South Africa.
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What the past decade has shown through the operations of Zimplats and Mimosa (a 50/50 joint venture between Implats and Aquarius Platinum) is that this resource can be mined very profitably, even though it is lower grade than the South African deposits.
The Zimbabwe mining operations are mechanised, making them low-cost while the workforce is well-educated and highly motivated.
That makes the Zimbabweans far more productive than their South African counterparts.
Zimplats and Mimosa have consistently shown the highest percentage profit margins out of all Implats’ divisions for years, despite the economic and social meltdown that Zimbabwe has been through.
That’s why Implats wants to boost Zimplats to the point where it can produce one million ounces of platinum annually within 10 to 20 years, which would put Zimplats on a par with Implats’ current flagship Rustenburg mining complex.
To make that happen Implats has to build smelters along with base metal and precious metal refineries in Zimbabwe, as well as the necessary mining infrastructure.
That means massive skills and technology transfers to the country in addition to the obvious job creation opportunities, both directly on the mines and indirectly through the economic multiplier effect.
Building those refineries is also likely to help the development of junior platinum companies in Zimbabwe if Implats adopts the same business approach to toll refining that it has employed in South Africa.
But that’s not going to happen if the Zimbabwe government sticks to its 51% indigenisation equity demands.
Throughout all of process so far, Implats — and the other Zimbabwe platinum operators which include Anglo American Platinum’s Unki operation — have kept their public responses both low-key and surprisingly upbeat.
The reason for that only became widely apparent in September when Tapiwa Mashakada — the country’s Minister for Economic Planning and Investment Promotion — presented to the Africa Down Under conference in Australia.
He sounded a lot more conciliatory than the hard-line stance delivered by Saviour Kasukuwere — Zimbabwe’s Indigenisation and Empowerment minister — who had monopolised the headlines up to that point.
Mashakada criticised Kasukuwere for his actions saying he did not have the power to enforce his threats, only the Zimbabwe Cabinet could do that.
A platinum industry source confirms they have been subjected to this “good cop-bad cop” routine for years as Zimbabwe’s politicians have tried to get their way.
But the platinum miners could also put on a convincing “bad-cop” routine if they wanted to. Consider, for example, the ground Implats gave back to the Zimbabwe government so as to secure title to its current mining rights.
That is apparently a huge sticking point in the latest negotiations. Never forget that Zanu PF previously opted for economic suicide over the land issue . . .
The Zimbabwe government passed that ground on to Russian and Chinese investors, but neither has done anything with the rights.
Why has there been no development of that ground? The answer is because the platinum business is a tough nut to crack and there are considerable financial and technical barriers to entry.
So, what if Implats decided to play “bad cop” from its side and threaten to mothball the Zimplats operation? Implats doesn’t even have to threaten — just let the word get out that they are thinking about doing it.
That should focus even the hardest-core Zanu PF political mindset on the realities of the situation, but it would be a dangerous strategy.
Never forget that Zanu PF previously opted for economic suicide over the land issue and business “brinkmanship” of this nature could rapidly lead to a situation where nobody will back off.
So it’s highly likely Implats will continue with its policy of “jaw-jaw” rather than “war-war” until it feels it has absolutely nothing to lose.
