Indigenisation laws worry investors

DESPITE the scrapping of Zimbabwe’s indigenisation equity thresholds on diamonds and platinum, investors remain sceptical as the policy is yet to be regularised into the law, the Chamber of Mines has said.

President Mnangagwa’s administration is stepping up efforts to exploit the country’s mineral resources to help revive the economy currently chocked by high inflation, shortages of foreign currency, devastating effects of the global Covid-19 pandemic, and high levels of unemployment.

The Government initially removed laws limiting foreign ownership of mining firms, except for diamond and platinum sectors to 49 percent.

While the policy was later extended to platinum and diamond, it is yet to be regularised into the law.

“In 2019, Government announced the removal indigenisation equity thresholds on platinum and diamond as is the case with other minerals,” the Chamber of Mines said in a recent petition to Government.

Notwithstanding this policy position, investors have remained sceptical as the policy is yet to be regularised into law.

“It is against this background that we appeal to the Government to urgently finalise the amendment of the indigenisation law to bring certainty to investors in the platinum and diamond sectors.”

The law, known as the Indigenisation and Economic Empowerment Act, was enacted during the era of late former President Mugabe and was meant to increase local ownership in the mining sector.

It was heavily criticised for denting investor confidence.

President Mnangagwa’s administration is hoping the removal of the laws would improve investment into the sector.

Last year, the Government unveiled an ambitious plan to increase investment in mining and raise the sector’s export earnings to US$12 billion by 2023. Some critics say the target was unrealistic.

Last week, the President launched the reopening of Anjin Diamonds in Chiadzwa where the company has so far invested US$38 million in reviving the mine.

The mine stopped operations in 2016, alongside other miners including Mbada Diamonds after the Government cancelled their licences.

President Mnangagwa said the level of investment in the mining sector would ensure the country would meet the US$12 billion target in the next two years.

In the past few weeks, the President toured coal mining firms in Hwange were considerable amounts of investment have been made.

In the petition, mining firms also appealed to have the foreign currency retention threshold from exports raised to least 80 percent and allowed to keep their excess nostro balances beyond a stipulated 30-day period.

The Chamber of Mines noted the current foreign exchange framework for the industry was characterised by inadequate foreign exchange retentions, uncompetitive price for the surrendered portion and the short 30-day compulsory liquidation of unutilised nostro balances.

Mining firms are allowed to keep up to 70 percent of their foreign currency earnings and the remainder is liquidated in local currency at the official rate.

It also warned that some mining firms had halted expansion project as they can’t raise funding due to high country risk profile.

“To sum up as the mining industry is set to increase capacity utilisation and gain momentum towards the US$12 billion mining sector by 2023, it is imperative for the government to address the challenges.

“Critical to this are policy consistency and predictability that promotes certainty and investor confidence,” said the Chamber of Mines.