No flexibility on 51/49 structure in mining

via No flexibility on 51/49 structure in mining | The Herald January 26, 2015 by Happiness Zengeni

The 51-49 percent indigenisation requirement will apply in the mining sector but flexibility will be allowed only on the compliance time frame. Mines and Mining Development Minister Walter Chidhakwa told The Herald Business last Friday that there would be no change in the application of the threshold for indigenisation in spite of the new roles given to line ministries.

“We are still studying the system but what’s clear is that we will take a simple approach. The 51-49 percent threshold is A requirement enacted by Zimbabwean legislators as such it will stick. It’s not negotiable. We can only be flexible on the period that companies will be able to achieve this.”

The Indigenisation Act gives a time-frame for compliance of five years.

Minister Chidhakwa’s assertion comes after Government amended the Indigenisation Act to include the role of line ministries in approving compliance plans. Under the new structure, businesses shall submit indigenisation implementation plans for approval by the line minister who in turn shall carry out an indigenisation and empowerment assessment rating of every business.

When the assessment has been made, the line minister shall at the written request of the business, issue a certificate of compliance to the business no later than 14 working days.

The line minister will then transmit a copy to the National Indigenisation and Economic Empowerment Board for inclusion in the register.

Government stance on the indigenisation of the mining sector has been consistent with President Mugabe repeatedly saying that for resource-based sectors the 51 /49 structure will not be diverted from because of the finite nature of minerals.

The position resonates with the African Union’s Africa Mining Vision adopted by heads of state at the February 2009 summit.

The vision recognised the need for Africa to be responsible on how it can tackle the paradox of its great mineral wealth to empower its people.

Minister Chidhakwa said the 51 /49 was an easy structure; Zimbabwe contributes minerals and investors bring in the equipment or capital.

“The only drive going forward will therefore be on whether Zimbabwe has the right representation to ensure that it defends its 51 percent or the method it will use to ensure that the stake achieves the desired result.”

Some mining companies such as Blanket Mine have already complied with the indigenisation requirements.

Minister Chidhakwa said the ministry was undertaking various initiatives which would result in improved compliance and production in the sector.

He said the process of transforming the Minerals Marketing Corporation of Zimbabwe Act into the Mining Exploration and Promotions Company Act was underway with the issue having already passed through Cabinet.

“We now have to push it through Parliament for approval. We simply went to MMCZ functions and added exploration to them. Remember when MMCZ was established issues of transfer pricing and marketing were critical.

“However, over the years, the shift has been towards discovery as there are available markets for most of the minerals. So for Government, growing the mining sector through exploration is more important as it determines the value of resource on the ground.”

The method of going through a process of qualification and putting a value to the country’s resources has been employed in Canada Australia and Norway.


  • comment-avatar

    Bye, bye FDI!

    Existing companies will deal with this as slowly as possible to extend any profitability that they still have remaining. However, new investors will shun the country until this stupid rule is repealed.

    Any deals that ZANU-PF claims to bring in under this implementation of the law, will have backdoor clauses allowing the investors to earn their profits clandestinely while publicly claiming that they are are a 51/49 agreement – or they will be Chinese or Russian investors who are not bound by the 51/49 formula.

    Every time Mugabe signs a deal with a foreign firm or country that allows them to be exempt from 51/49, he is turning away an equal amount of deals which are not exempt, and also making Zimbabwe poorer and poorer, and more and more a colony of those countries that are allowed exemptions. Those getting exemption lose all respect for the country, because they know that they are above it’s laws.

    Think about it. Laws by their nature are supposed to be applied equally to all, but Mugabe has proven over and over, again and again, that laws in this country are made to be ignored when it suits the needs of Mugabe or ZANU-PF. (…like DisGrace’s game park!) That attitude makes investors run for the hills, as far away as possible. Investors want stability and predicability, neither of which Mugabe has ever nurtured. If anything he has done just the opposite, which has driven the whole country into the ditch. That’s his legacy.