This is line with several mining policy interventions having recently been made and several more in the pipeline aimed at ensuring clarity and consistency within the country’s mining sector – the heartbeat of the country’s open for business mantra. CHANTELLE KOTZE writes.
Speaking at the Spotlight on Zimbabwe panel discussion co-hosted by Africa-focused strategic advisory firm africapractice and law firm Webber Wentzel on the sidelines of the Investing in African Mining Indaba, Chitando said that the government understands the impact that the country’s mining legislation has on attracting and maintaining foreign investment and is committed to achieving the policy certainty required to foster investment attraction and retention, which will not only benefit the mining industry, but the country as a whole.
“We have already made a few policy interventions over the past few months,” said Chitando.
For instance, the country has relaxed its 2008 indigenisation policy, which required foreign-owned companies to sell a 51% controlling stake to the government in a bid to empower historically disadvantaged indigenous Zimbabweans.
In a move to attract foreign direct investment, the government of Zimbabwe has confined the 51:49 indigenisation ownership ratio to only two minerals that the government has deemed ‘strategic’, namely diamonds and platinum.
This ownership ratio will not apply to the rest of the extractives sector, nor will it apply to any other economic sector in Zimbabwe – which will be open to any investor, Chitando explained.
The government is also in the process of creating mineral-specific development policies, Chitando said, the first of which, unveiled towards the end of 2018, is a diamond policy – which to some extent regulates how players in the diamond industry must operate.
The main thrust behind the policy is that foreign diamond miners are allowed to own a larger than 49% stake on condition that rough stones produced from the country are submitted to a beneficiation centre to be operated by the Zimbabwe Consolidated Diamond Company.
As per the policy, only four foreign diamond mining companies are being allowed to mine in the country, namely Murowa Diamonds; AIM-listed Vast Resources; Russian diamond giant Alrosa and Chinese-owned Anjin.
In terms of creating development policies for other minerals, Chitando has called on chrome and lithium industry players to make policy recommendation that they believe may help stimulate their particular sectors.
This will be used as a framework to enable the attraction of capital for that particular mineral sector.
These policies will be developed in mineral sub-committees within the Zimbabwe Chamber of Mines, Chitando further explains.
Overall, there has been a recommendation by the Chamber of Mines to develop a simpler fiscal policy framework and government is therefore looking at developing a consolidated fiscal regime by the end of 2019.
The elephant in the room
One of the key challenges currently being faced is the availability of foreign currency to Zimbabwe’s mining companies who are not being allowed to keep enough of their hard currency earnings.
Instead, the mining companies were being paid the bulk of their earnings in bond notes or Zimbabwean dollars.
According to Chitando, the Reserve Bank governor will soon reveal a monetary policy intervention to address this issue and the Minister of Finance has hinted at the possible introduction of a new currency.
“We are fully aware that the issue of foreign currency retention has to be addressed,” Chitando said.
Developing the sector
The government has already identified six state-owned mining assets for privatisation currently owned by the Zimbabwe Mining Development Corporation.
“We received 151 bids for these asset, but a formal announcement on the privatisation process will be made in due course,” Chitando noted.
While the exploitation of the country’s mineral wealth is the ultimate driver expected to bring about the much need regeneration and development of Zimbabwe and its economy, africapractice mining sector lead Rishon Chimboza cautions that long-term, rather than short-term interventions are required to revive and reinvigorate the country’s historic mining sector.
One of the long-term interventions that must be considered is how much is known about the quality and quantity of natural resources within Zimbabwe.
“While Zimbabwe needs to attract more exploration capital within the country, before we can invite investors into Zimbabwe, we must focus on improving the country’s geological data as a means to de-risk investments and lower the cost of doing business in the country.”
Panel member, Joseph Mankelow, team leader for mineral resources and policy at the British Geological Society, iterated Chimboza’s view that countries need to conduct exploration to identify the resource potential of the country as a means to attract investment.
Mankelow advocates for the geological survey of the country to identify what they have before they start deciding what they need to do with the minerals.
“This will help in understanding the mineral data of the country,” he said.
A way in which new entrants into Zimbabwe’s mining industry can better prepare themselves is to understand the processes and protocols that are in place, Chimboza urges.
“There are processes in place to guide companies on how to move through the various stages of a project – and the Ministry of Mines and Mines Development is also very clear on the types of licenses required throughout the mine lifecycle,” Chimboza added, noting that the temptation with these types of jurisdiction is to use brokers – a method that can be mitigated against through dialogue and understanding the correct process.
This was reiterated by Colin Chibafa, the CFO for Anglo American’s Unki platinum mine, which has been in operation since 2011.
He notes that the best approach to engage with government has been to communicate one’s views openly, yet privately rather than trying to raise them in public.
This, according to Chibafa, was one of the ways in which Anglo American successfully managed to the operating environment in Zimbabwe and remain in operation.
Panel member Sheila Khama, lead mining specialist for energy and extractives at the World Bank, emphasised the vital need for transparent business practices in Zimbabwe for investors, financiers and citizens.
Zimbabwe has announced its intention to become a member of the Extractive Industries Transparency Initiative – a global standard for the good governance of oil, gas and mineral resources.
This we believe is a powerful statement to the world that “Zimbabwe is open for open business,” she said.
Post published in: Business