The Sunday Mail
GOVERNMENT intends to re-negotiate indigenisation and empowerment pacts that were concluded during the tenure of the inclusive Government following the expiry of the initial term sheets. The move represents a deliberate attempt by Government to bring local mining activities under the ambit of locals.
A term sheet is a bullet-point document outlining the material terms and conditions of a business agreement and usually precedes a proposed final agreement.
Term sheets for both Mimosa and Zimplats were submitted in December 2012 and January 2013 respectively.
Most of the deals in the platinum sector were put together with the help of local advisory firm Brainworks Capital.
However, Government believes that the agreements were prejudicial to the national interest.
In particular, controversy continues to stalk the US$550 million Mimosa deal, including Zimplats’ planned share sale.
While platinum miners have been pushing for vendor financing arrangements with local entities, Government believes the minerals held in claims should suffice as a contribution by the locals.
In a vendor financing agreement, the mining company usually lends the locals money to buy shares in the company, which debt will be offset through dividend repayments.
Of late, there has been outcry over Unki’s proposed plan.
In essence, the miner, wholly owned by Anglo Platinum Mines (Amplats), intended to offload a 21 percent stake to National Indigenous and Economic Empowerment Board, 10 percent to the Tongogara Share Ownership Community Trust, 10 percent to the Employee Share Ownership Trust and 10 percent to a consortium of local investors.
The local investors were not named, raising the spectre that the consortium might be a proxy of foreign interests.
The Youth Development, Indigenisation and Economic Empowerment Minister, Francis Nhema, told The Sunday Mail Business last week that the country’s three platinum mines (Unki, Mimosa and Zimplats) had not yet re-submitted their plans.
He, however, reiterated that an individual should not control more than 5 percent in a mining company after indigenisation.
“We are waiting for the resubmissions, but I must emphasise that an individual should not benefit more than 5 percent,” said Minister Nhema.
Mimosa Platinum Mine, which is jointly controlled by South African mining companies Aquarius Platinum and Implats, had, through its December 2012 plan, intended to sell an aggregate equity of 51 percent to local groups for US$550 million on an agreed fair market value of US$1,078 billion for Mimosa Mine.
Mimosa agreed to provide funding for this through a vendor financed loan mechanism as part of efforts to facilitate the smooth conclusion of the transaction over a period of 10 years.
The 51 percent equity was supposed to be sold to three local entities, namely: an Employee Share Ownership Scheme, a Community Share Ownership Trust and the National Indigenisation and Economic Empowerment Board (NIEEB).
A similar model was also proposed by Zimplats.
While Government is prepared to negotiate the threshold of foreign shareholding in other sectors of the economy, it has cast the 51 percent threshold for the mining sector in stone.
Minerals resources are largely considered non-replenishable.
Resource nationalism, where countries in emerging economies are increasingly asserting their rights in the mining sector, has become prevalent in most of the African countries as they demand an improved share in mining ventures.