The Zimbabwe government says it is determined to nationalize the mining sector, which now generates most of the nation's foreign income. Mining companies oppose the plan, because they say it will destroy the most productive mines.
Mining Minister Amos Midzi says Zimbabwe wants to nationalize 51 percent of all mines, with nearly half of that to be taken by the government without any payment. Some compensation to mining companies could be paid for the remaining 26 percent.
He said the cabinet, which includes Finance Minister Herbert Murerwa, who was in Washington this week at the International Monetery Fund (IMF), has endorsed the plan, but it has not yet become law. Expansion projects in Zimbabwe's mining sector have been immediately frozen.
Mining has become the biggest foreign exchange earner in Zimbabwe, replacing agriculture, which used to account for 40 percent of the country's foreign exchange. The agriculture industry collapsed in the wake of President Robert Mugabe's decision to begin confiscating white-owned farms in the year 2000.
Zimbabwe's Chamber of Mines has drawn up a comprehensive set of alternative proposals for the government to provide for Black economic empowerment in the mining sector.
Chamber of Mines president David Murangari said the proposals are similar to Black economic empowerment deals in neighboring South Africa. The deals, he said, could provide financial mechanisms to assist new shareholders in buying stakes in established companies. He said he hoped the proposals would be considered by the government on Monday.
The Chamber of Mines estimates that at least 35,000 people are employed in the mining sector and that it earns Zimbabwe about $500 million a year from exports.
Meanwhile in Washington, the International Monetary Fund says it decided not to restore Zimbabwe's voting rights in the organization or lend any more money because Zimbabwe still owes $119 million to the Poverty Reduction and Growth Facility Fund.
Economists say Zimbabwe's proposed new mining laws would not have helped the IMF view favorably requests for restoration of facilities including balance of payments support.
According to several mining companies, who asked not to be identified, several groups of local businessmen and politicians have regularly approached them seeking free shares and then dividends in companies which have cost hundreds of millions of dollars to establish.
Economist John Robertson said no mining company could afford to give away shares for nothing. He said several new projects proposed for start-up had already stopped.
He said Zimbabwe's terrible reputation as an investment destination would mean existing foreign mining companies may want to withdraw from Zimbabwe in the short to medium term, or at least curtail their involvement.
Robertson said the mining sector would begin to contract dramatically within a year if the government's proposal became law.