Platinum - Zimbabwe - Send not to see for whom the bell tolls, it tolls for thee!

By: Julian D. W. Phillips | Fri, Jul 20, 2007
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Gold Forecaster - Global Watch
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By far the greatest majority of you who read this article live in well-ordered societies, where the bulk of your problems can be contained within the good order of the rest of your life. Indeed, from this position it seems easy to couch your views and criticisms of others, from within this secure framework.

Now look away from the civilized parts of the earth to those where there appears to be a veneer of civilization such as Zimbabwe. A despot rules but he is old and no doubt once he offends the people sufficiently the Democratic process will enable the voters to replace him and his party with a reasonable opposition who will no doubt repair any damage done. Such is the faith in Democracy and decency and the decency of neighbors, isn't it?

Oh were that true, even to a small extent. The truth of the matter is that it is possible to watch a nation decay beyond basic human decency.

We write this in the context of the Platinum mines and their future because the events in Zimbabwe have decidedly affected the future of the South African owned Platinum mines of Anglo Platinum and Impala Platinum [Zimplats], already facing the potential appropriation of 51% of their shares.

The author began visiting Zimbabwe in 1981 when the U.S.$ fetched Z$1. This was when there was a semblance of good order and morality, despite the growing greed of President Mugabe. The beauty of this country is intoxicating, while it was then the bread basket of Africa. In the previous 30 years it had been developed from bush to a wealthy nation, prior to it being handed over to Zanu-PF by the British government.

Today, after more than 2 decades of rapacious assault on and the collapse of the economy, of the remaining businessmen, more than 1,300 shop owners and business managers were arrested there as part of a crackdown on firms accused of flouting government-imposed price controls. The inflation rate in April was 3,714% and is now believed to be well beyond 5,000% and headed towards 1.5 million%. The real exchange rate to the US$ is currently running at about 250,000, though it has gone higher, much higher.

Mugabe had earlier ordered companies to restore prices to their June 18th levels after a sudden surge of inflation trebled or quadrupled prices within a week. This has already created a serious shortage of goods on shelves and forced some businesses to close rather than continue operating at a loss.

Zimbabwe's Industry Minister Obert Mpofu ordered businesses a fortnight ago to halve the prices of all goods and services in a bid to curb spiraling inflation but the edict has been widely ignored. Many manufacturers say the government-set prices mean they cannot cover their costs and have stopped production, leading to widespread shortages of basics such as cooking oil and salt. President Robert Mugabe, unable to stem the rise of what is the world's highest rate of inflation, warned last week that his government would seize and nationalize firms found to be profiteering. In imposing the order, shops sold their goods at these low prices, to the police and to those who could afford them, emptying the shops of stock, which then found its way onto the black market where they are sold at the far higher [more than double] ‘black market' prices. Of course nationalizing companies doesn't give them money to buy goods to fill the shelves, particularly a government that cannot afford to import fuel and soon electricity.

It is thought that this potential shutdown of the economy may force Mugabe and his henchmen to step down from power and their source of wealth.

The Southern African Development Community (SADC) is preparing a dramatic plan to rescue the shattered Zimbabwean economy by extending the Rand monetary area into Zimbabwe. Tomaz Salamao [late the Prime Minister of Mozambique], the SADC executive secretary, is drafting the plan, which would also include the South African and Botswana reserve banks pumping millions into the Zimbabwe reserve bank. The aim of these measures would be to stabilize the exchange rate of the Zimbabwe $ and curb inflation so that the country could buy foreign exchange and continue importing essential goods.

But to get the rescue package, President Robert Mugabe would first have to agree to fundamental political reforms in the negotiations with the opposition Movement for Democratic Change (MDC), which were snubbed by Mugabe this week. A superficial knowledge f Mugabe's history affirm that such plans are doomed to failure, because he would have to sacrifice his present [5000 strong at lest] closest supporters sources of wealth and therefore his own position of strength. Despite the fact that it is a last desperate plan, Mugabe lacks the concern for his people tat would be required for this solution to work. Recent history and the collapse of the economy and the suffering this is causing testifies to this.

With his henchmen able to buy the U.S.$100 for Z$25,000 and sell it for Z$3 million [1200% profit – no risk], their source of revenue would disappear immediately such a plan were implemented. With it would go Mugabe's power.

With this in mind we as writer on precious metals look at the remaining economic crown jewels, the Platinum mines [particularly Zimplats of Impala and Angloplat's new mine set to provide huge future sources of income for the mining companies. With the recent law past that requires these companies to pass ownership of 51% of their Zimbabwean subsidiaries to Zimbabwean ownership it is only a matter of time before they are lost to the companies as a source of future income, despite the Mugabe promise of being able to avoid such loss of control if infrastructural developments were undertaken by the mines.

With the moral capacity to keep such promises gone from the Zimbabwean government and the presence of a willing Chinese government investor, the mechanics of taking the deposits and the mines away from the South African mining companies is simple.

We therefore suggest that any Investors in Anglo Platinum or Impala Platinum, write off the contribution their Zimbabwe investments may have now or in the future on the companies balance sheets, when assessing the shares values.

As we can see such hyperinflation is usually accompanied by moral turpitude.

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.
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