Zimbabwe's minister today said the country has taken majority ownership of all foreign-owned mining companies—a move the prime minister told companies to ignore.
The move will include all companies failing to meet a late 2011 deadline to submit proposals to cede a controlling stake to blacks for over half of their shareholdings. Those companies are now “deemed to be owned by the state,” Minister Saviour Kasukuwere said in a statement.
Zimbabwe's mining interests include giants Rio Tinto, Canadil and Anglo American as well as smaller white-owned gold mines. Critics fear the empowerment drive to take over mining operations will scare off much needed investment in an already frail economy.
Prime Minister Morgan Tsvangirai of the opposition has said that the new laws do not allow Kasukuwere to “unilaterally nationalize private entities” and it "poses a real risk of creating anarchy in the industry."
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"There is no reason to create panic among investors by projecting the image of a voracious government keen to grab compulsorily people's companies without compensation," he said. "It is not the policy of this government to nationalize the mining businesses or any other business."
In Kasukuwere's announcement, he claimed that profits since September 25 from the government's new shareholders were “property of the state” and that any companies that made a loss since then would have to cover losses from their side versus drawing from the “indigenized portion” to pay debt.
Mining firms have yet to react to Kasukuwere's announcement, which will likely be hard to actually enforce. Many firms didn't reach the deadline, because it didn't offer payment for shares as required under the empowerment laws. Why would foreign companies invest in the country if half of their profits are taken from them? Such a move would hurt also employment and throw tens of thousands into poverty.
With a questionable security of investments, foreign cash inflows are dwindling. Additionally, governments have discouraged tourism due to heightened political tensions within the country.
