September 29, 2007, 4 :05 PM
Harare - Zimbabwe's proposed empowerment law will hit production in the nation's top foreign currency earning sector, which is already grappling with exchange rate and power problems, an industry official said on Friday.
Zimbabwe's Chamber of Mines, a representative body for an industry still dominated by foreign firms, said the bill was a blow to miners, who contribute about 35% of the country's foreign currency earnings.
"We have all sorts of problems, but these have been made worse by the recent passing of the empowerment bill," the chamber's acting chief executive Douglas Verden told Reuters.
"We must have a foreign investor-friendly environment because mining is very expensive...if government decides to take over 51%, then foreign investment will cease. No foreign investor will come in knowing they will not take control."
On Wednesday, President Robert Mugabe's government pushed through parliament a bill allowing the transfer of majority control of all foreign-owned firms - including mines and banks - to black Zimbabweans.
The bill is expected to sail through the upper Senate, also dominated by Mugabe's ZANU PF, before being signed into law.
Anglo Platinum and Impala Platinum - the world's number one and two platinum producers - and Rio Tinto are some of the foreign mining companies with investments in Zimbabwe.
Verden said the industry, which had been consulting with the government over the past five years regarding the empowerment law, would wait to see how the law would be applied, particularly to firms with considerable social investments.
"Die is cast"
"The die is cast, now we wait and see," Verden said.
"The bill itself as it stands is an enabling act, allowing the minister to make regulations. We are now waiting to see exactly what transpires."
Indigenisation and Economic Empowerment Minister Paul Mangwana has said government would allow companies to comply to the newrules gradually.
Verden said miners were concerned about how they would be paid for shares to be transferred to locals.
"It's still unclear, but we've heard of some fanciful options such as financing the purchase through dividends - remember not many mines are making profits at the moment - or in the Zimbabwe dollar, which is worthless."
Mining output, especially in the key gold sector, would decline further due to the added uncertainty surrounding the bill, persistent electricity cuts and the flight of skills.
Verden said Zimbabwe was losing ground to other countries on the continent with friendly mining policies.
Government officials say Zimbabwe's mining output dipped by 14% in 2006, while gold deliveries to the central bank - the country's sole buyer of the metal - were down to 11 tonnes from 14 tonnes the previous year.
"Unless there is a huge increase in production in the last two months of the year, which is most unlikely, we will have about 8 tonnes of gold this year," Verden said.
"If we fall below the 10 tonnes mark, we will cease to be a member of the bullion club, meaning we'd have to market our gold through a third party... that would increase costs through commission and lead to delays in payment," he said.
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September 29, 2007, 4 :05 PM