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Zim diamond miners told to divest 50pc equity

The government wants a bigger cut of the country's diamonds
The government wants a bigger cut of the country’s diamonds

Diamond mining companies in Zimbabwe will now be half-owned by the state, the country’s mines minister has told parliament. Zimbabwe already requires that all foreign owned mining companies cede 51 percent of their shares to black Zimbabwean groups.

Mines and mining development minister Walter Chidhakwa told a parliamentary portfolio committee on youth and indigenisation on March 12 that he expected all private firms operating in the country’s diamond mining industry to have confirmed their compliance with the dispensation by March 16.

‘The new structure was given to them on Monday [March 9] to consult their boards of directors. They will be coming back on Monday to tell us the outcome of their discussions with their boards,’ Chidhakwa said, adding that the new requirements were a ‘regulatory matter.’

‘The only way you can participate in diamond mining in Zimbabwe is by being in this company’ which will be half owned by the state, he said. The government already has partnerships with most of the diamond mining firms through state corporations such as the Zimbabwe Mining Development Corporation (ZMDC).
One of the biggest diamond miners, Mbada Diamonds, is already struggling with workers demonstrating over payments at its head office in Harare.

Chidakwa said foreign diamond miners that were not prepared to continue under the new arrangement would be allowed to stop their investments, and – significantly – may claim for compensation. However, mining analysts see potential problems with compensation. They say Zimbabwe urgently needs to restore certainty to its regulatory and policy framework. ‘The policy and regulatory framework should be such that investors can plan ahead. But resource nationalism is not a new aspect,’ says mining policy expert Ted Muzoroza.

‘If you do not want to be in this company, we might have to work out’ modalities to part ways, Chidhakwa stressed. He emphasised that ‘methods of parting ways, the kind of compensation that we need to give to those who may not want to participate in this company’ would be worked out. ‘I expect that on Monday, we will be meeting with the companies so that we hear the positions of their shareholders and we know who will be proceeding into the future and who will not be with us as we go into the future.’

An economist, Moses Moyo said it was difficult for companies to walk away from their investments as most would have committed massive capital resources. This comes at a time when the government is apparently pushing for a policy to ban exports of rough diamonds that are not value added.

‘In a way the government is just bundling companies into this partnership with the state as most will find it difficult to abandon their investments halfway through.
Rio Tinto’s Murowa mine has in the past said it is struggling against high fees and royalties among other issues and the new policy will heighten the uncertainty it is facing in Zimbabwe,’ he said.

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