You’d think that with the current high price of metals, an impoverished country like Zimbabwe would be doing everything in its power to court foreign investors and others to invest and grow the economy. But you would be wrong.
In an unbelievable move last week, 84 year old President Robert Mugabe essentially nationalized all public companies by enacting a law which requires such companies to give up a 51% majority stake to indigeneous Zimbabweans according to this Mineweb article. The metals angle here? According to the article, Zimbabwe is second only to South Africa in world reserves of platinum and chrome.
The insanity of this law is proven out by taking a look at Zimbabwe’s history under the er ugh um leadership of Robert Mugabe. Under Mr. Mugabe, Zimbabwe has:
- Passed a land reform bill in 2000 effectively forcing whites to give up all of their farmland to less experienced indigenous people which resulted in shortages of basic commodities and a crippled economy (66% of the people are employed by farms); the move also made Zimbabwe, a net exporter of foods a net importer
- In 2007 he put in place price controls resulting in panic buying and empty store shelves
- From just a numbers perspective, GDP is now at -6%. Industrial production growth (including mining) was at .5% (you can see where Mugabe’s new law will take the numbers), unemployment is 80%, life expectancy is 39.5 years, and 24.6% of the population has HIV/AIDS
The list of Mugabe Ã‹Å“accomplishments’ goes on and on ” an unsustainable fiscal deficit, the philosophy of printing money to pay for the deficit, an overvalued exchange rate, and GDP per capita of $500 per year.
The new law, which will affect mining giant Rio Tinto, Impala Platinum Holdings Ltd and Aquarius Platinum Ltd will likely speed up the country’s decline ¦further increasing its inflation rate, already the world’s highest at 100,000% (no that isn’t a typo).
What a shame with world record pricing for gold, coal, platinum, chromium and iron ore and historically high pricing for nickel, copper and tin Mugabe couldn’t leave well enough alone. We’ll continue to see high prices for platinum and chrome as Zimbabwean exports fall off the map. But sadder still is the fate of the 12 million citizens subject to Mugabe’s hair brained policies.