In a move which is likely to provide further re-assurance to the African resource sector, global consulting firm Stratfor is reporting that Zimbabwe has dropped its highly contentious Indigenization Law.

Stratfor reports that a spokesman for Zimbabwean Prime Minister Morgan Tsvangirai said April 13 that the Indigenization and Empowerment Act has been rendered null and void following a cabinet meeting.

This is potentially a critical development for Zimbabwe, South Africa and the African continent as a whole following economic collapse in Zimbabwe. This has had a significant knock-on effect to neighbouring countries which have been forced to absorb refugees from this region and has deterred foreign investment as government officials have attempted to enforce a law which threatened to force all foreign companies in Zimbabwe with assets worth more than $500,000 to sell a majority ownership stake to black Zimbabweans by 2015.

In December 2009, geo-political analysts had suggested to Ferronews.com that president Mugabe’s grip on power in Zimbabwe was coming to an end with the more aggressive expecting him to relinquish power before the end of 2010.

With the Indigenization Law being a corner-stone of president Mugabe’s rein in power, this would appear to put these predictions on target despite some bickering between the Tsvangarai and Mugabe power-sharing agreement.

Although the speed and extent of the global economic recovery remain uncertain, commodity prices are likely to put up a strong performance in 2010. This will boost the worldwide mining industry, although challenges particular to South Africa may dampen local prospects.

“The global mining industry is likely to be buoyed by growing physical demand for commodities, the strong possibility of speculative buying and rising prices,” says Frost & Sullivan metals & mining analyst Wonder Nyanjowa. “This is likely to encourage miners to expand production capacity.”

However, Nyanjowa warns that South Africa may not reap the full benefits of this rebound.

“Many of the local challenges that adversely impacted on production in 2009, such as electricity supply shortages, a lack of skills and safety concerns, are likely to continue affecting the performance of the mining industry in 2010,” he says. “In addition, the prospect of higher commodity prices, particularly in the gold, platinum and coal sectors, is likely to lead to tough wage demands from unions.”

Nyanjowa believes that growing inflation fears in the developed world, particularly the United States, an unstable US Dollar, threats of another recession from expansionary fiscal and monetary policies and negative real interest rates point towards strengthening investment demand for gold.

“A price range of $1300 to $1500 per ounce in 2010 looks likely, supported by gold demand and supply fundamentals,” he says. “Investors are likely to continue turning to gold as a hedge against uncertainties in the global economy.”

However, South Africa’s gold production is likely to slip further this year, to around 200 tonnes. This will see it drop to fourth place amongst the world’s gold producers, behind China, the USA and Australia.

While platinum was one of the biggest casualties of the global recession, Nyanjowa expects things to be much rosier in 2010.

“Frost & Sullivan anticipates that the platinum industry will recover this year on the back of stronger prospects of recovery in the global automotive sector, particularly in China and India. The launch of two new platinum-based Exchange Traded Funds in the USA will also lead to strong investment demand.”

Local coal miners, who escaped from the global slowdown with relatively minor bruises, should also remain robust.

“The bulk of the country’s coal production is consumed in the electricity generation and synthetic fuel manufacturing industries, with only a third being exported to Europe and Asia,” explains Nyanjowa. “The domestic demand for coal is set to continue growing in 2010, following expansion programmes at Eskom and Sasol that will require an additional 75 million tones of coal.”

However, South Africa’s production is likely to remain stagnant at around 240 million tonnes this year as the industry waits for new coal fields to be opened in the Waterberg basin.

Resources group Xstrata PLC has responded to the offer made by Anglo American for a potential merger.

The company released the following announcement on Sunday:

Xstrata plc notes the announcement made by Anglo American plc (“Anglo American”) today.  Xstrata confirms that it recently sent a written proposal to the Board of Anglo American seeking their consideration of a merger of equals of the two companies.

Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.  The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth.  Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone.  In addition, Xstrata believes the optimisation and reprioritisation of the combined company’s organic growth pipelines would significantly enhance shareholder returns.

Xstrata is seeking to engage with the Board of Anglo American regarding a merger of equals that would realise significant value for both companies’ shareholders.  There is, however, no assurance that any transaction will be forthcoming from Xstrata’s proposal. Any further announcement will be made if and when appropriate.

The Industrial Development Corporation of South Africa Limited (IDC) has received a EUR 60 million credit line from the European Investment Bank (EIB) to finance private sector small and medium sized enterprises. The funds will support viable projects undertaken by small and medium enterprises businesses in the industrial, resources and services sectors.

The agreement was signed in March 2009.

EIB Vice President Plutarchos Sakellaris, who is responsible for lending operations in South Africa, said: “This loan is a strong signal of the EIB’s commitment to supporting the private sector and encouraging the creation of employment in South Africa. Moreover, the Bank is confident that by working in partnership with the Industrial Development Corporation we can help to stimulate the South African financial markets by diversifying IDC’s funding base and enhancing the provision of finance to SMEs.”
 
Commenting about the loan, Qhena said the line of credit will improve access to funding SMEs in the country.  “This credit could not have come at a more opportune time when the cost of raising funds is extremely high given the market volatility and the liquidity crisis,” Qhena said.

“We are particularly pleased that this loan will further enhance our commitment to development finance and addressing market failures.”

“IDC’s expertise in project evaluation ensures that the EIB funds are directed towards projects which promote economic growth and job creation, as well as being environmentally and socially sustainable.”
 
The IDC’s relationship with the EIB dates back to the mid ‘90s and over the years provided four credit lines totalling about EUR 165 million to IDC for private sector small businesses in South Africa.