Mugabe’s shadow looms over Zim miners

The debacle that is the recent election in Zimbabwe is spilling over into the country’s already weakened mining industry.

According to media sources in Zimbabwe, President Robert Mugabe has tabled plans to seize foreign- owned mines as part of a ploy to win over votes for a likely upcoming runoff election.

At presstime, Mugabe’s ruling Zanu (PF) party had held up the release of election results for more than a week, despite national and international pressure to make the results public. The vote was held on March 29. The leading opposition party the Movement for Democratic Change (MDC), headed by Morgan Tsvangirai, has already declared itself the rightful winner.

But even if the MDC is declared victorious, it wouldn’t be the salvation of miners, at least according to one mining industry source in the country.

“There’s a debate in my mind as to whether the MDC can run the country,” said the source, who spoke on the condition of anonymity. “The problem isn’t Zanu (PF) per se, it’s elements within it that feel they are entitled to grab whatever they can. The MDC itself is unproven and those members that have had the opportunity to enrich themselves, have done so.”

What is more, the source says, the idea furthered by some media outlets that the election itself went well, and possible rigging is only taking place now while the Zanu (PF) delays results, is false.

“The election was so far away from being free and fair, possibly on both sides, that I’m astonished anyone is placing anything on it,” the source says. “Rigging of votes, the violent intimidation of voters, and police in polling booths assisting people — any one of those would cause you to say the election is nonsense,” he continues, referring to some of the fraudulent practices alleged to have taken place.

“And preferably, you want an election without voters who have been dead for fifteen or twenty years.”

But that Mugabe would engage in an open election at all surprised many onlookers.

“He’s looking for recognition that his is a legitimate government,” the source explains. “I think that one thing the election did do was shake Mugabe. Like most dictators, they think they are loved, and he isn’t.”

If there was any hope for positive change at the outset of the election, it came in the form of former Zanu (PF) finance minister, Simba Makoni. Highly regarded in the international community, Makoni fell behind in the polls and is no longer considered to be in the running.

“He’s a highly intelligent man and very ethical within my experiences with him,” the source says. “He had been promised support from certain Zanu (PF) heavyweights and when they decided to wait on the sidelines and not publicly endorse him, he fell off.”

As for Mugabe’s latest threat to confiscate mineral properties?

“One has got to divorce political rhetoric from ultimate reality,” the source says. “It would not be the first time Mugabe has made certain statements or has allowed legislation to pass in parliament with no intention of it being implemented.”

Measures announced a month ago to ensure that foreign-owned businesses in the country were 51% held by Zimbabweans, have, to date, not been enforced.

As for the latest manoeuvre, media in Zimbabwe claim that by ramping up the rhetoric, Mugabe is looking to win over large blocks of voters for the runoff election.

The purpose of playing the expropriation card is twofold: it would tap into the nationalism that Zanu (PF) has long stoked to increase its support, and it would give Mugabe much needed assets with which to court powerful players in Zimbabwe.

Word of the planned seizures emerged from a Politburo meeting on April 4. Documents from the meeting accused foreign miners of shutting down operations in an effort to sabotage Zimbabwe’s economy and argued that facilities that weren’t currently operating should be seized.

While the Chamber of Mines of Zimbabwe admitted there were plans to implement a “use it or lose it” policy to help further a broader “indigenization” policy, the Chamber told The Times of South Africa there was no plan to fast track the strategy as reported by the Zimbabwe press.

What is certain is that constant political uncertainty, the deterioration of infrastructure, lack of foreign currency and an inflation rate running at roughly 168,000%, have resulted in foreign miners either scaling back or leaving the country.

Australia’s Aurion Gold and First Quantum Minerals (FM-T, FQM-l) have both shut down operations in Zimbabwe in recent years.

For First Quantum’s part, company president Clive Newal says the closure was prompted by the higher costs that resulted from the political situation in the country. First Quantum closed its Connemara open-pit gold mine in central Zimbabwe in 2001 when inflation was at just 60% — a trifle by today’s standards.

Those closures and overall scale-backs are unfolding in a country rich in mineral potential.

Zimbabwe has the world’s second- biggest deposits of platinum and chrome and also boasts sizable deposits of gold, iron ore, copper, nickel, coal and diamonds. To complement such natural abundance, the country also possesses one of sub-Saharan Africa’s most educated and highly trained populations.

But with gold production at an anemic 7.5 tonnes last year — compared with 29 tonnes in 1999 — and coal and iron ore production dropping by half in the last eight years, that workforce is lying fallow. The unemployment level is currentlysitting at roughly 80%.

Despite such grim indicators, companies like Impala Platinum (IPLA-L, IMP-j),Central African Gold (CAN-l),and Rio Tinto (RTP-N, RIO-l) are trying to wait out the current political situation — and say they are ready to expand should the economic tide in the country turn for the better.

Rio Tinto is active in Zimbabwe via its 78% interest in the Murowa diamond project. While Murowa produced 240,000 carats in 2006, production fell by 40% in 2007 with the company blaming power cuts, equipment failures and a delay in an expansion program due to the political situation.

Anglo Platinum (ANP-L, AMS-j) is trying to develop its Unki platinum project in the country, situated on Zimbabwe’s Great Dyke. The company has projected that the project will go into production in 2009.

As far as the immediate future, the industry source says the best prospect for positive change would be a government that unifies Zanu (PF) and the MDC and is guided by a pragmatic approach to restructuring a shattered economy.

“But in the worse case scenario,” the source said. “They just take over everything.”