Zimbabwe: opening up to foreign investments
- Investment Support
Africa Riskwatch - Issue 11 - May 2018
New Mines and Minerals Amendment Bill promises regulatory certainty in mining sector
Zimbabwe’s mining sector suffered from significant regulatory uncertainty in the past. This uncertainty included frequent changes in how indigenisation requirements were implemented. However, since entering office in December 2017, Mines and Mining Development Minister Winston Chitando has clarified indigenisation requirements and attempted to fast-track the passage of the Mines and Minerals Amendment Bill, which has been under discussion since 2015. This bill is likely to be passed in the coming months. Combined with Zimbabwe’s largely underdeveloped mineral potential, this growing legislative certainty has prompted a sharp rise in mining sector investment: The government claims that mining companies have committed to USD 6bn in investment since November 2017.
Listening to concerns
The initial draft of the Mines and Minerals Development Amendment Bill stated that “no mining right or title shall be granted or issued to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe”. Listing on the ZSE would likely have imposed stringent new financial transparency requirements and administrative burdens on mine operators, with little apparent benefit in return.
The Chamber of Mines and other commentators had raised concerns that the ZSE was not sufficiently large or liquid for companies to raise any meaningful capital on it. Minister of Foreign Affairs and International Trade Sibusiso Moyo on 25 April announced that the requirement would be dropped. This removal less than a month after it was first revealed suggests that the government took these concerns into account.
Although developments in the mining sector demonstrate the broadly pro-business stance adopted by the administration of President Emmerson Mnangagwa, this will vary across different sectors.
The Mnangagwa administration has explicitly stated its intention to attract foreign investment, and there has been significant progress towards clarifying regulations in the mining sector in particular. However, not all sectors have ministers as pragmatic and pro-business as Chitando, who had a long history in the private sector before entering government.
In addition, the government is not keen to completely open up all sectors, despite its broadly pro-business stance. The government has stated that its economic policy “will incorporate elements of market economy”, falling short of a commitment to a fully liberalised economy, and in some sectors there is a clear desire to maintain high levels of state involvement. For example, Mnangagwa has reiterated his support for “Command Agriculture”, a centralised system of farm subsidies and production targets overseen by the Zimbabwe Defence Force (ZDF). Pro-business reforms are therefore unlikely to be progressed across all sectors.
However, for mining companies, the likely passage of the Mines and Minerals Amendment Bill in the coming months will ease the regulatory uncertainty that has hindered development of the sector.