The Sunday Mail
Golden Sibanda and Ishemunyoro Chingwere
The Chamber of Mines of Zimbabwe (CoMZ) says while Government’s decision to scrap the 51/49 indigenisation law requirement for most minerals is plausible, repealing the legislation in the extraction of diamonds and platinum is critical in luring global capital given that the sub-sectors are capital intensive.
Government is already working on a new diamond and platinum mining policy to replace the 51-49 percent shareholding requirement that regulates the two minerals.
Speaking to investors in Anhui, China during a State visit in April, President Mnangagwa acknowledged that the old policy is impacting negatively on diamond and platinum performance, hence the need for an urgent review.
“This will help create a win-win situation in the lucrative mining sub-sectors. Very soon we should be able to come up with a new policy to govern these two,” President Mnangagwa said.
Last week, Mines and Mining Development Minister Winston Chitando told The Sunday Mail Business that the diamond policy is being finalised and will be published next month.
Government amended the Indigenisation and Economic Empowerment Act in March through Section 42 of the Finance Act, a policy position Finance and Economic Planning Minister had announced when he presented the 2018 National Budget in December last year.
On Thursday last week, CoMZ president Mr Batirai Manhando said the Chamber welcomes the amendments to the Act but is engaging Government over the remaining two strategic precious metals.
President Mnangagwa has reiterated on several occasions that Government has taken the position to preserve the local equity holding policy, which compels foreign miners to hold a maximum 49 percent stake in indigenous firms, on platinum and diamonds, while crafting a beneficiation policy.
The bulk of the country’s mineral exports of more than 60 different occurrences, including platinum, diamond, gold, lithium, emerald, copper and nickel, are shipped out in raw form, a situation the Government has said results in significant loss of value and exportation of jobs.
A similar predicament is also prevailing in the agricultural sector where the bulk of major foreign currency earning crops, tobacco and cotton, are shipped out in raw form.
The CoMZ, however, stressed that it is engaging the Government to consider opening up the platinum and diamond sub-sectors to cash-rich global investors to ensure that the industries recover and reach their full potential.
Mining, designated by Government as the anchor for recovery of the domestic economy, generates an average of 60 percent of the country’s annual export earnings with platinum and gold accounting for more than half of the foreign currency.
It is estimated the sector accounts for as much as 12 percent to 16 percent of gross domestic product, at least according to the miners, although the threshold has been a subject of contestation by the Ministry of Finance and Economic Planning.
“We do welcome the Government position to take away the 51-49 percent from the rest of the minerals except platinum and diamond,” said Mr Manhando.
The CoMZ president was responding to questions by The Sunday Mail Business following a briefing for the media on the chamber’s Annual General Meeting which is set for Victoria Falls from 17 to 19 May, 2018.
“With regards to platinum and diamond, we are engaging Government. Our view is that these are capital intensive industries and by their nature they require lots of money and for us to then to leave platinum and diamonds on the 51-49 percent framework at this juncture, we think this should be revised in line with other metals for some time until that industry has actually been invested into and can grow.
“We think that we should not have the 51/49 percent (local to foreign equity holding framework) on platinum and diamonds because of the nature of the industry, it requires lots of capital,” he said.
The country’s equity law has largely been blamed for scaring away foreign investors, at a time Zimbabwe desperately needs large inflows of FDI to leapfrog its economy and catch up with other developing nations after decades of stagnation.
Zimbabwe has in the last half decade only averaged FDI of about $500 million, while its regional counterparts attracted annual inflows of between $3 billion and $12 billion. However, since November last year, investor interest has ballooned amid revelations that FDI commitments have scaled past $11 billion so far.
The Zimbabwe Investment Authority has corroborated this, saying in the first quarter of this year, it had already approved nearly a billion dollars worth of investment proposals, compared to $150 million prior year comparative, and is now targeting to eclipse the $1,2 billion value of total project proposals it approved for the entire 2017 period, by August this year.
However, while Government has scrapped indigenisation shareholding thresholds for most minerals, Government has maintained its policy position on reserved sectors, including retail, transport, barber shops, beauty salons and the bakery sector. These have remained a preserve for locals.
Meanwhile, ahead of the 2018 CoMZ Annual General Meeting, Mr Manhando said issues that will come up for discussion include perennial economic and regulatory challenges constraining investment into the country, affordability of capital, fiscal issues (taxation, royalties and deductibility), funding for exploration and the foreign currency crisis and its impact on the mining industry.
Speaking on the debilitating effect of hard currency shortages, Mr Manhando said the issue is constraining operations in terms of recapitalisation, procurement of key inputs and repatriation of dividends to shareholders.
However, he said they are receiving assistance from the central bank, although delays in settling accounts and obligations is inevitable.
“In terms of the foreign currency shortages, as you are aware, in the latest policy statement by the Governor (Dr John Mangudya), they revised the threshold, which is retained by the different mineral sectors, but as we speak, gold is still 100 percent taken by the RBZ and companies are allocated forex by the RBZ.
“We experience problems here and there, but we are getting assistance as and when we need it. Dividends are on the priority list and I think by and large, dividends are being paid,” Mr Manhando said.