Business / Economy
Zimbabwe mine takeover could prove difficult: South African analyst
29 Mar 2011 at 15:32hrs | Views
As foreign mining companies draw up plans to sell off 51% of their assets in Zimbabwe, a white Johannesburg-based analyst said the proposed takeover could prove difficult.
Dean Ginsberg, the head of research at Securities Africa, said: "Our sources on the ground inform us that there is still plenty of demand for mining stocks, though mainly from local players, with most foreign clients putting on hold any further buying orders.
Fundamentally, the Zimbabwean market is relatively cheap compared to other markets, but naturally this is due to some of the inherent risks.
"These proposed indigenization policies are messy, and the proposed approach is tougher on the mining sector than other sectors. Mining is the largest sector of the economy.
"At this point it is difficult to say as to whether these new policies will still be implemented in time, as the Zimbabwean market does not have enough resources or cash to pay for these assets. The application of this indigenization law is vague and patchy, as the likes of India's Essar Group only two weeks ago, signed a $750-million deal to take a 54% stake in Zimbabwe's dilapidated Zisco Steel.
The government has plenty to explain as to how or why Essar was granted immunity from these rules. With much uncertainty, and little to no funding, we remain perplexed as to the exact outcome of this proposed act."
Zimbabwe has been trying to take control of its rich mining industry, which mines everything from coal, to gold, nickel and platinum, for more than five years. When the opposition MDC took joint power with Zanu PF in 2008, it vowed to ditch the bill, but Mugabe appears to be pressing ahead regardless.
Dean Ginsberg, the head of research at Securities Africa, said: "Our sources on the ground inform us that there is still plenty of demand for mining stocks, though mainly from local players, with most foreign clients putting on hold any further buying orders.
Fundamentally, the Zimbabwean market is relatively cheap compared to other markets, but naturally this is due to some of the inherent risks.
"At this point it is difficult to say as to whether these new policies will still be implemented in time, as the Zimbabwean market does not have enough resources or cash to pay for these assets. The application of this indigenization law is vague and patchy, as the likes of India's Essar Group only two weeks ago, signed a $750-million deal to take a 54% stake in Zimbabwe's dilapidated Zisco Steel.
The government has plenty to explain as to how or why Essar was granted immunity from these rules. With much uncertainty, and little to no funding, we remain perplexed as to the exact outcome of this proposed act."
Zimbabwe has been trying to take control of its rich mining industry, which mines everything from coal, to gold, nickel and platinum, for more than five years. When the opposition MDC took joint power with Zanu PF in 2008, it vowed to ditch the bill, but Mugabe appears to be pressing ahead regardless.
Source - Byo24News
