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AMN - Zimbabwe is “open for business” – comment by Yolanda Torrisi

Yol headshot May 2011

Every so often a reversal in government policy ensures a country can move forward with planned developments to benefit both industry and community. Take Zimbabwe, where the government wants to abolish the last of the Mugabe era’s mine ownership rules.

Rather than continue to enforce former president Robert Mugabe’s 51% local ownership mandate for the country’s platinum and diamond mines, the southern African nation wants to permit up to 100% foreign ownership. The planned policy reversal for the last two mining sectors not eligible for full foreign ownership takes the policy a step further than the “case-by-case” exemptions put forward previously.

Zimbabwean Finance Minister Mthuli Ncube acknowledged the planned reform for the country’s platinum mining sector, arguing the country was “open for business” and hoped to revive investment. Speaking from Washington, Ncube said “We are removing that indigenisation rule which is discouraging foreign direct investment.”

Mines Minister Winston Chitando has also acknowledged that reforms could apply to diamond mining.

Ownership restriction reform could have a real effect on stimulating the country’s economy. As Africapractice mining sector lead Rishon Chimboza has presented, “Mining is a crucial industry in Zimbabwe but (it) has potential to be so much bigger than it currently is.”

Local ownership rules have a considerable impact on the development of mining projects on the continent, with the question of how much control of natural resources should stay in-country being a sometimes controversial issue.

In countries such as South Africa, empowerment transactions can support industry and bring certainty and funds for project advancement. But in other places such as the Democratic Republic of Congo (DRC) pushes for local control can advance resource nationalist agendas and see project-blocking measures erode previous sovereign risk assessments.

The direction a nation chooses to take with policy and ownership matters, and we as an industry, must encourage reforms that enable win-win outcomes for all parties. After all, well-funded new projects that involve the community create jobs and bring wealth to communities so they can both flourish and thrive. It’s an approach for Zimbabwe that’s attracting support.

Relaxation to Zimbabwe’s local ownership laws are expected to be welcomed by a number of players in the industry, including African platinum producer Anglo American, Russia’s global diamond-mining leader Alrosa group and mining investor Impala Platinum Holdings. The industry, including Anglo American and Impala, is already under pressure, facing fuel shortages blamed on a currency crisis and loss of life to artisanal mining disasters. It is time to turn around this negative direction.

Zimbabwe’s Chamber of Mines has thrown its weight behind an official scrapping of ownership restrictions on platinum group metals (PGM) and diamond operations. Chamber president Batirai Manhando has fairly highlighted: “The indigenisation regulations have been scrapped except for platinum and diamonds (and) we would also want this law scrapped officially so we can get industry players coming in. These are areas that require huge capital, and if you put restrictions, I don’t think you would be able to attract a lot of capital.”

Capital helps would-be producers become miners in any jurisdiction seen as a welcome home for investment. Zimbabwe’s leaders and Chamber of Mines are on the right track here. Vital investment could indeed come from a relaxation of the country’s legacy ownership restrictions. Let’s we as industry back their efforts to move things forward by lending our support.

-       Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact: yolanda@yolandatorrisi.com