Business / Companies
Zimbabwe resources company tries to dodge empowerment act
24 Jul 2011 at 00:47hrs | Views
RESOURCES firm African Consolidated Resources (ACR) has indicated that it might not be compelled by the Government to give up 51 percent of its shareholding to locals, as its net asset value is less than US$1 that is regarded as the minimum threshold for mining firms obliged to comply with the amended indigenisation and empowerment legislation published in March.
A company's net asset value is sometimes regarded as its book value or the equity value of a business.
In an Extraordinary Government Gazette published on March 20 this year, Government noted that a controlling interest of 51 percent in any foreign-owned mining company with a net asset value of at least US$1 is required to be controlled by one of the designated entities such as the National Indigenisation and Economic Empowerment Fund, the Zimbabwe Mining Development Corporation, a statutory sovereign wealth fund, an employee share ownership scheme, management share ownership scheme or a community share ownership scheme.
Companies have up to September to comply with the regulations.
Many mining houses are desperately trying to find loopholes in the legislation in order to shed the responsibility of compliance.
Last week, Youth Development, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere said Government had rejected all the 175 proposals received from mining houses as they were far below expectations.
ACR claims that since it is largely an exploration scheme funded by loans from the parent company it has a net asset value "of less than one dollar".
ACR executive chairman Mr Roy Tucker also intimated that the Government might be prepared to compromise, a position that was rejected by the Government last week.
"The 25 March regulation actively discouraged investment capital. Fortunately, there are, as I write this, some strong indicators that this message is being understood.
"We have reason to have some confidence that before long wise counsel will prevail and the regulations will be substantially modified."
"As far as ACR is concerned we are advised that the 25 March regulation does not affect us as all our Zimbabwean subsidiaries are in exploration phase financed by loans from the parent company and so individually all have a net asset value of 'less than one dollar'," said Mr Tucker in a statement accompanying the firm's annual financial results.
He further added that the company was not comfortable with the regulations that were published at the end of the first quarter as they were likely to discourage investment.
Added Mr Tucker: "Another significant cloud on the business horizon is lack of clarity concerning the indigenisation legislation.
"In particular, the Regulation issued on 25 March 2011, which provided that 51 percent of all "non-indigenous" Zimbabwe companies with a net asset value of US$1 or more should be transferred to a "designated entity", has given rise to much consternation.
"We support the principle of the spreading of wealth to indigenous Zimbabweans ' especially if it is to the many rather than to a privileged few ' however we believe that this must be done in a fair and balanced way. It must not be done in a way which gives rise to a culture of entitlement and, above all, it must not discourage investment capital without which its whole purpose is defeated."
ACR's latest posturing is unlikely to amuse the authorities.
Government is particularly prioritising the mining sector because there is now a realisation that little financial resources are accruing to the fiscus from mining activity.
In addition, some of the agreements that were struck between the Government and the mining houses have been skewed in favour of the investors.
The new regulations are, thus, tailored to ensure that communities in areas where mining activity is taking place benefit from non-renewable resources.
Under the new regulations, Government now considers its minerals resources as equity, which naturally means that for any joint venture mining activity envisaged, Government will be able to also claim a share in the project.
Various foreign mining houses housed under the Chamber of Mines have been insisting on offering between 15 percent and 25 percent shareholding to locals.
However, it is not clear how foreign companies that are still exploring will be treated.
Resource nationalisation has become topical in many African countries, as the majority of them are not benefiting from the exploitation of their mineral resources.
Mining firms have largely been considered as islands of plenty within seas of poverty as communities have also been sidelined.
Separately, ACR noted that it is still engaging Government with regard to the Marange diamond claims.
"With regard to our Marange diamond claims, whilst the matter remains before the courts, we have been involved in extensive dialogue. If this is successful it will render the litigation process irrelevant," said ACR
A company's net asset value is sometimes regarded as its book value or the equity value of a business.
In an Extraordinary Government Gazette published on March 20 this year, Government noted that a controlling interest of 51 percent in any foreign-owned mining company with a net asset value of at least US$1 is required to be controlled by one of the designated entities such as the National Indigenisation and Economic Empowerment Fund, the Zimbabwe Mining Development Corporation, a statutory sovereign wealth fund, an employee share ownership scheme, management share ownership scheme or a community share ownership scheme.
Companies have up to September to comply with the regulations.
Many mining houses are desperately trying to find loopholes in the legislation in order to shed the responsibility of compliance.
Last week, Youth Development, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere said Government had rejected all the 175 proposals received from mining houses as they were far below expectations.
ACR claims that since it is largely an exploration scheme funded by loans from the parent company it has a net asset value "of less than one dollar".
ACR executive chairman Mr Roy Tucker also intimated that the Government might be prepared to compromise, a position that was rejected by the Government last week.
"The 25 March regulation actively discouraged investment capital. Fortunately, there are, as I write this, some strong indicators that this message is being understood.
"We have reason to have some confidence that before long wise counsel will prevail and the regulations will be substantially modified."
"As far as ACR is concerned we are advised that the 25 March regulation does not affect us as all our Zimbabwean subsidiaries are in exploration phase financed by loans from the parent company and so individually all have a net asset value of 'less than one dollar'," said Mr Tucker in a statement accompanying the firm's annual financial results.
He further added that the company was not comfortable with the regulations that were published at the end of the first quarter as they were likely to discourage investment.
Added Mr Tucker: "Another significant cloud on the business horizon is lack of clarity concerning the indigenisation legislation.
"In particular, the Regulation issued on 25 March 2011, which provided that 51 percent of all "non-indigenous" Zimbabwe companies with a net asset value of US$1 or more should be transferred to a "designated entity", has given rise to much consternation.
"We support the principle of the spreading of wealth to indigenous Zimbabweans ' especially if it is to the many rather than to a privileged few ' however we believe that this must be done in a fair and balanced way. It must not be done in a way which gives rise to a culture of entitlement and, above all, it must not discourage investment capital without which its whole purpose is defeated."
ACR's latest posturing is unlikely to amuse the authorities.
Government is particularly prioritising the mining sector because there is now a realisation that little financial resources are accruing to the fiscus from mining activity.
In addition, some of the agreements that were struck between the Government and the mining houses have been skewed in favour of the investors.
The new regulations are, thus, tailored to ensure that communities in areas where mining activity is taking place benefit from non-renewable resources.
Under the new regulations, Government now considers its minerals resources as equity, which naturally means that for any joint venture mining activity envisaged, Government will be able to also claim a share in the project.
Various foreign mining houses housed under the Chamber of Mines have been insisting on offering between 15 percent and 25 percent shareholding to locals.
However, it is not clear how foreign companies that are still exploring will be treated.
Resource nationalisation has become topical in many African countries, as the majority of them are not benefiting from the exploitation of their mineral resources.
Mining firms have largely been considered as islands of plenty within seas of poverty as communities have also been sidelined.
Separately, ACR noted that it is still engaging Government with regard to the Marange diamond claims.
"With regard to our Marange diamond claims, whilst the matter remains before the courts, we have been involved in extensive dialogue. If this is successful it will render the litigation process irrelevant," said ACR
Source - TH
