Identifier
Created
Classification
Origin
08PRETORIA585
2008-03-19 14:46:00
CONFIDENTIAL
Embassy Pretoria
Cable title:
IMPALA PLATINUM ON DOING BUSINESS IN ZIMBABWE
how-toVZCZCXYZ0025 RR RUEHWEB DE RUEHSA #0585/01 0791446 ZNY CCCCC ZZH R 191446Z MAR 08 FM AMEMBASSY PRETORIA TO RUEHC/SECSTATE WASHDC 3874 INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE RUEHAK/AMEMBASSY ANKARA 0194 RUEHBY/AMEMBASSY CANBERRA 0637 RUEHLO/AMEMBASSY LONDON 1460 RUEHMO/AMEMBASSY MOSCOW 0766 RUEHOT/AMEMBASSY OTTAWA 0598 RUEHFR/AMEMBASSY PARIS 1314 RUEHSG/AMEMBASSY SANTIAGO 0183 RUCPDC/DEPT OF COMMERCE WASHDC RHEBAAA/DEPT OF ENERGY WASHINGTON DC RUEHC/DEPT OF INTERIOR WASHDC RUEHC/DEPT OF LABOR WASHDC
C O N F I D E N T I A L PRETORIA 000585
SIPDIS
SIPDIS
STATE PLEASE PASS USAID
STATE PLEASE PASS USGS
STATE FOR AF/S, EEB/ESC, EEB CBA
DOE FOR SPERL, PERSON
DOC FOR ITA/DIEMOND
E.O. 12958: DECL: 03/18/2018
TAGS: EMIN ENRG EINV ETRD EPET PGOV ZI SF
SUBJECT: IMPALA PLATINUM ON DOING BUSINESS IN ZIMBABWE
REF: HARARE 215
Classified By: Economic Counselor Perry Ball for reasons 1.5 (b) and (d
)
C O N F I D E N T I A L PRETORIA 000585
SIPDIS
SIPDIS
STATE PLEASE PASS USAID
STATE PLEASE PASS USGS
STATE FOR AF/S, EEB/ESC, EEB CBA
DOE FOR SPERL, PERSON
DOC FOR ITA/DIEMOND
E.O. 12958: DECL: 03/18/2018
TAGS: EMIN ENRG EINV ETRD EPET PGOV ZI SF
SUBJECT: IMPALA PLATINUM ON DOING BUSINESS IN ZIMBABWE
REF: HARARE 215
Classified By: Economic Counselor Perry Ball for reasons 1.5 (b) and (d
)
1. (C) SUMMARY: Impala Platinum (Implats) Executive Director
Les Paton told Energy Officer and Specialist on March 18 that
Implats remains confident that they can continue successfully
mining platinum in the Great Dyke in Zimbabwe via Zimplats
(86.9 percent held by Implats, headquartered in
Johannesburg). He offered some insights on doing business in
Zimbabwe. Although he asserts the indigenization law was not
fully signed, Zimplats was seeking to meet the spirit of the
law. The company imports and/or provides all its own
services, such as power and fuel. End Summary.
--------------
INDIGENIZATION LAW
--------------
2. (C) Paton stated that Zimplats was operating under
business as usual. He asserted that President Mugabe had
"assented" to the controversial 51 percent local
indigenization law, but Mugabe had not signed it (reftel).
Paton maintained that the law was effectively an
electioneering tool, as well as a threat he was "holding in
his back pocket" to pressure mining companies not to cavort
with the political opposition. Paton emphasized that the
company was studiously apolitical. He noted that the law was
a legal "mish-mash" and had not been debated in parliament,
but he admitted that the company was seeking to broadly
comply, but without an explicit recognition of its
satisfaction of the law's requirements.
3. (C) Paton said the company had broadly complied with the
spirit of the indigenization in the law, particularly via its
May 2006 agreement with the Government of Zimbabwe to give
back 36 percent of its resource base, in exchange for renewal
of its license regime. Paton said Zimplats would gain
effective localization/empowerment credit of 29.5 percent,
assuming that the GOZ does not pay $51 million in cash owed
for part of the GOZ share. In addition, the GOZ recognizes a
7 percent share for Zimplats for sewage and other
infrastructure services the company provides instead of the
GOZ. Paton said Zimplats has been seeking, so far
unsuccessfully, to put 15 percent into local hands, and would
likely settle for a 10 percent employee share ownership plan.
4. (C) Paton noted that foreign mining companies are not
likely to accept minority control. He commented that Russian
and Chinese companies that had stepped into the ground ceded
by Zimplats would not be willing to accept minority control.
--------------
POWER
--------------
5. (C) Paton noted that Zimplats has to import and provide
the bulk of its services and supplies, including fuel and
power. He said the company is securing its power from the
Cahora Bassa hydroelectric station in Mozambique. Paton
expected that Zimplats would convert its one-year renewable
contract (at 4.5 U.S. cents per kwh) to a five-year contract.
He commented that the Zimbabwe grid is not reliable. Paton
noted that NamPower refurbished one coal-fired electricity
generation unit at Hwange, in exchange for provision of
Qgeneration unit at Hwange, in exchange for provision of
electricity to Namibia. He wondered why Eskom did not take
advantage of involvement there, but observed that coal supply
and mine equipment are not secure at Hwange.
6. (C) COMMENT: Paton opined that Implats faces surprisingly
similar challenges operating in South Africa, with obvious
differences in scale and risk: questions about power
infrastructure and government take (royalties in play and a
comment by the ANC Secretary-General about the goal of 51
percent SAG "control" of mines, later pulled back to some
extent.) He was bullish on business in both countries given
record platinum prices, but he said that costs and capital
expansion were difficult to manage. Paton was cautiously
optimistic about political change in Zimbabwe, noting more
willingness to dissent and advocate change by the "guy on the
ground" and in rural areas.
BOST
SIPDIS
SIPDIS
STATE PLEASE PASS USAID
STATE PLEASE PASS USGS
STATE FOR AF/S, EEB/ESC, EEB CBA
DOE FOR SPERL, PERSON
DOC FOR ITA/DIEMOND
E.O. 12958: DECL: 03/18/2018
TAGS: EMIN ENRG EINV ETRD EPET PGOV ZI SF
SUBJECT: IMPALA PLATINUM ON DOING BUSINESS IN ZIMBABWE
REF: HARARE 215
Classified By: Economic Counselor Perry Ball for reasons 1.5 (b) and (d
)
1. (C) SUMMARY: Impala Platinum (Implats) Executive Director
Les Paton told Energy Officer and Specialist on March 18 that
Implats remains confident that they can continue successfully
mining platinum in the Great Dyke in Zimbabwe via Zimplats
(86.9 percent held by Implats, headquartered in
Johannesburg). He offered some insights on doing business in
Zimbabwe. Although he asserts the indigenization law was not
fully signed, Zimplats was seeking to meet the spirit of the
law. The company imports and/or provides all its own
services, such as power and fuel. End Summary.
--------------
INDIGENIZATION LAW
--------------
2. (C) Paton stated that Zimplats was operating under
business as usual. He asserted that President Mugabe had
"assented" to the controversial 51 percent local
indigenization law, but Mugabe had not signed it (reftel).
Paton maintained that the law was effectively an
electioneering tool, as well as a threat he was "holding in
his back pocket" to pressure mining companies not to cavort
with the political opposition. Paton emphasized that the
company was studiously apolitical. He noted that the law was
a legal "mish-mash" and had not been debated in parliament,
but he admitted that the company was seeking to broadly
comply, but without an explicit recognition of its
satisfaction of the law's requirements.
3. (C) Paton said the company had broadly complied with the
spirit of the indigenization in the law, particularly via its
May 2006 agreement with the Government of Zimbabwe to give
back 36 percent of its resource base, in exchange for renewal
of its license regime. Paton said Zimplats would gain
effective localization/empowerment credit of 29.5 percent,
assuming that the GOZ does not pay $51 million in cash owed
for part of the GOZ share. In addition, the GOZ recognizes a
7 percent share for Zimplats for sewage and other
infrastructure services the company provides instead of the
GOZ. Paton said Zimplats has been seeking, so far
unsuccessfully, to put 15 percent into local hands, and would
likely settle for a 10 percent employee share ownership plan.
4. (C) Paton noted that foreign mining companies are not
likely to accept minority control. He commented that Russian
and Chinese companies that had stepped into the ground ceded
by Zimplats would not be willing to accept minority control.
--------------
POWER
--------------
5. (C) Paton noted that Zimplats has to import and provide
the bulk of its services and supplies, including fuel and
power. He said the company is securing its power from the
Cahora Bassa hydroelectric station in Mozambique. Paton
expected that Zimplats would convert its one-year renewable
contract (at 4.5 U.S. cents per kwh) to a five-year contract.
He commented that the Zimbabwe grid is not reliable. Paton
noted that NamPower refurbished one coal-fired electricity
generation unit at Hwange, in exchange for provision of
Qgeneration unit at Hwange, in exchange for provision of
electricity to Namibia. He wondered why Eskom did not take
advantage of involvement there, but observed that coal supply
and mine equipment are not secure at Hwange.
6. (C) COMMENT: Paton opined that Implats faces surprisingly
similar challenges operating in South Africa, with obvious
differences in scale and risk: questions about power
infrastructure and government take (royalties in play and a
comment by the ANC Secretary-General about the goal of 51
percent SAG "control" of mines, later pulled back to some
extent.) He was bullish on business in both countries given
record platinum prices, but he said that costs and capital
expansion were difficult to manage. Paton was cautiously
optimistic about political change in Zimbabwe, noting more
willingness to dissent and advocate change by the "guy on the
ground" and in rural areas.
BOST