SA com­pa­nies feel the heat in Zim­babwe

Finweek English Edition - - INSIDE -

The gloves are off for the Zim­babwe units of JSE-listed sugar pro­ducer, Ton­gaat Hulett, St a nda r d Bank a nd Mzi Khu­malo’s Me­tal­lon Gold as it has emerged that the em­pow­er­ment min­istry has now clas­si­fied the three South African com­pa­nies’ lo­cal units as un­will­ing to com­ply with the con­tro­ver­sial indi­geni­sa­tion pol­icy.

Zim­babwe pro­mul­gated the Indi­geni­sa­tion and Eco­nomic Em­pow­er­ment Act in 2007 and has sought to im­ple­ment it ahead of elec­tions ex­pected in July. Pres­i­dent Robert Mu­gabe and his Zanu-PF party have adopted the pol­icy as the cen­tre­piece of their re-elec­tion bid although econ­o­mists, fund man­agers and in­vestors have crit­i­cised the law, say­ing it drives away much-need for­eign di­rect in­vest­ments.

While for­eign min­ing com­pa­nies have al­ready been forced to com­ply with the pol­icy, i ndi­geni­sa­tion and eco­nomic em­pow­er­ment min­is­ter, Saviour Ka­sukuwere, has now set his sights on the bank­ing sec­tor, in which he is fac­ing stiff re­sis­tance from other Government of­fi­cials. The banks have been given a fi­nal June dead­line to com­ply through giv­ing away 51% shares.

Re­li­able sources with knowl­edge of de­vel­op­ments re­gard­ing the indi­geni­sa­tion of for­eign com­pa­nies in Zim­babwe last week told Fin­week that the em­pow­er­ment min­istry has clas­si­fied lo­cal units of Ton­gaat Hulett, Stan­dard Bank and min­ing firm, Me­tal­lon Gold un­der Sec­tion 5 of the em­pow­er­ment pol­icy. The sec­tion deals with com­pa­nies deemed as un­will­ing to give away ma­jor­ity shares.

“Three com­pa­nies have been iden­ti­fied as un­will­ing to give away shares. The em­pow­er­ment min­is­ter may de­cide to have the com­pa­nies op­er­at­ing li­cences and land leases can­celled in the case of Me­tal­lon and Ton­gaat Hulett,” said a knowl­edge­able Government of­fi­cial.

Ton­gaat con­trols Tri­an­gle and more t han 50% of t he Zim­babwe Stock Ex­change-listed Hippo Val­ley Es­tates. The Zim­babwe units contributed 19% to Ton­gaat’s to­tal in­terim rev­enue and 32% to op­er­at­ing profit in the half-year pe­riod to Septem­ber.

Me­tal­lon Gold has a mar­ket value of about $320m and em­ploys about 3 600 work­ers. In Zim­babwe it owns f ive gold mines, in­clud­ing Arc­turus mine, Shamva mine, How mine, Red­wing mine and Ma­zowe mine while Africa’s big­gest bank, Stan­dard Bank, has a ma­jor­ity con­trol in Zim­bab­wean-based bank, Stan­bic.

Other man­u­fac­tur­ing com­pa­nies have al­ready com­plied with the pol­icy and th­ese in­clude ce­ment man­u­fac­tur­ers, PPC and La­farge Ce­ment, while in the min­ing sec­tor, Im­pala Plat­inum’s Zim­babwe op­er­a­tion, Zim­plats; Unki – owned by An­glo Amer­i­can Plat­inum – and Mi­mosa, which is jointly owned by Implats and Aquarius Plat­inum, have al­ready agreed to cede ma­jor­ity shares. Fi­nal indi­geni­sa­tion agree­ments for the for­eign min­ing com­pa­nies are ex­pected to be con­cluded in June fol­low­ing the sign­ing of “non-bind­ing” agree­ments.

Ka­sukuwere con­firmed to Fin­week t hat t he t hree com­pa­nies have now been tagged as un­will­ing to com­ply. “Ton­gaat Hul­let, Stan­dard Bank and Me­tal­lon Gold – we are now cov­er­ing them un­der Sec­tion 5; th­ese are com­pa­nies that are against the law and I t hink t here will be a no­tice on t his soon,” Ka­sukuwere said.

There are fears that fail­ure to com­ply with the indi­geni­sa­tion pol­icy could re­sult in the three com­pa­nies be­ing forced out of the coun­try. They are also ac­cused of re­fus­ing to give money to com­mu­nity

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