Wednesday, October 7, 2009

Zimbabwe: 'Nobody takes the government on its word'

By Cris Chinaka

Zimbabwe's parliament will debate legal reforms badly needed by the battered economy, including the crucial mining sector, in coming weeks, but analysts say foreign investors will wait to see how the laws are applied.

President Robert Mugabe opens a new session of parliament on Tuesday which officials say will consider amendments to the Mines and Minerals Act and a bill governing the operations of the central bank.

Mugabe told a mining conference last month that the government would pass a law on the sector soon and would address concerns raised by an earlier draft that would have given locals control of mining operations owned by foreign companies.

Several mining firms, including the world's two biggest platinum producers, Anglo Platinum and Impala Platinum, have retained operations in Zimbabwe but largely put new projects on hold, fearing the mines could be taken over by the state.

Details of the new legislation have not been published, but analysts say investors will be looking for a firm commitment by the power-sharing government to private property rights and the rule of law.

"The new law will be very important but the most important issue for investors will be to see how the law is applied in practice," said John Robertson, a Harare-based economic consultant.

"We have such a bad history here now that nobody takes the government on its word, and so any good words will have to be accompanied by good deeds," he said.


Investment on hold

After the collapse of commercial agriculture, mining emerged as Zimbabwe's largest foreign currency earner, with gold alone bringing in a third of total mineral export receipts.

Analysts say uncertainty over government policy will likely hold back big new mining investment in Zimbabwe for years as many foreign investors are still shaken by Mugabe's seizures of white-owned farms for redistribution to blacks under an empowerment drive.

Foreign companies with operations in Zimbabwe include Angloplat, Implats and Rio Tinto, majority owner in the country's biggest diamond mine.

Mugabe formed a unity government with opposition leader and arch-rival Morgan Tsvangirai in February to try to end a decade-long political crisis which ruined Zimbabwe's once prosperous economy.

But the fragile coalition between Mugabe's ZANU-PF party and Tsvangirai's Movement for Democratic Change (MDC) is threatened by policy differences, the slow pace of reforms and feuding over some top state jobs.

Besides the mining bill, the new session of parliament - which runs for a year - is expected to consider changes to the operations of the central bank.

Central bank governor Gideon Gono, a Mugabe ally, has had a strained relationship with Finance Minister Tendai Biti, a senior MDC figure. Biti will present the 2010 national budget to parliament next month.

The government says it needs up to $10-billion in foreign aid to help repair an economy which saw inflation surge to over 500-billion percent in 2008, according to the IMF.

In January, the government introduced foreign currencies to stem the hyperinflation that had made the Zimbabwe dollar worthless. Inflation fell to 0.4 percent in August from one percent in July.