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Zimbabwe: Cabinet Action on Ownership of Alluvial Diamond Mines

(Dec. 14, 2010)

On December 7, 2010, Zimbabwe's Cabinet announced unanimous agreement that the country should be the owner of all of the alluvial diamond mining businesses within its borders. (Sydney Kawadza, New Rules on Diamonds, THE HERALD ONLINE (Dec. 9, 2010), World News Connection online subscription database, Doc. No. 201012091477.1_8f0a00ed53f6ac4d.) In taking this step, the Cabinet cited the Indigenisation and Economic Empowerment Act, which was signed into law on April 17, 2008. (Act 14, 2007,
(last visited Dec. 13, 2010) (unofficial source).) That Act provides that businesses operating in the country must have at least 51% ownership in the hands of indigenous Zimbabweans. The Act defines “indigenous Zimbabwean” as

any person who, before the 18th April, 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person, and includes any company, association, syndicate or partnership of which indigenous Zimbabweans form the majority of the members or hold the controlling interest. (Id. art. 2.)

The new decision of the Cabinet, once gazetted, will apply only to alluvial diamonds; mining for other diamonds and all other minerals would remain under the 51% rule. The Cabinet also announced that local communities would receive 10% of the gross profits generated by mining activities in their areas. This local portion is from the Community Share Ownership Scheme, a policy that will apply in the agriculture, education, health, and road sectors, as well as in the mining sector. (Kawadza, supra.)

Regulations on the implementation of the 2007 Act were published on January 29, 2010. These regulations specify that companies in the country must provide information to the Minister of Youth Development, Indigenisation and Empowerment. (Id; Statutory Instrument 21, 2010, Indigenisation and Economic Empowerment (General) Regulations, 2010, Cap. 14:33,
(last visited Dec. 13, 2010).)

With the authority given to his office in these regulations, Minister Saviour Kasukuwere had set up 13 sector committees to evaluate the ownership situation in each aspect of the economy. He stated:

Government has decided on a Sovereign Wealth Fund whose main objective is to house value deriving from the ownership requirements provided for in terms of the law. …
All new projects in the mining sector are expected to comply with the above requirements of the law. … Recognising that our communities have not been benefiting from the exploitation of natural resources which they host, Cabinet has resolved that through a Community Share Ownership Scheme already provided for in the law, communities shall be entitled to 10 percent of gross profit – that is 10 percent of profit before tax. (Kawadza, supra.)

Kasukuwere went on to say that the government will be meeting with companies involved in mining alluvial diamonds to review the steps they will take to comply with the 100% rule. The 2010 regulation required businesses with a net worth of US$500,000 or more to submit plans for compliance with the indigenization law within five years. To date, 620 companies have filed such plans. (Id.)