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Zimbabwe Mining Report Q2 2010
Business Monitor International, April 2010, Pages: 48
The Zimbabwe Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Zimbabwe's mining industry.
Confusion Over New Ownership Laws
In February 2010, the Zimbabwean government published a law that calls for 51% stakes in all Zimbabwe-based businesses to be sold to domestic investors. This was in line with a previous Zanu-PF policy on this topic, which had been rejected by mining companies, who had argued for a maximum domestic ownership ceiling of 40%, according to local media reports. As it stands now, foreign-owned firms that are worth more than US$500,000 have five years to sell these majority stakes or risk imprisonment, according to a BBC report. Already, Prime Minister Morgan Tsvangirai has complained that these regulations have been drafted and passed without his approval, and other government ministers, including industry minister Welshman Ncube, have said that this law has been published ‘prematurely’. For its part, the Confederation of Zimbabwe Industries has stated that ‘indigenisation… must be done in a manner which brings investment’.
Certainly, it is hard to think of a worse development for the mining sector, which was only starting to emerge from years of underinvestment. It is to be hoped that the law can now come under proper cabinet scrutiny and appropriate changes be made to reflect the concerns of mining companies. Even at present, the regulations provide for a level of indigenisation lower than 51% to be assigned to a foreign-owned company if there are ‘socially and economically desirable objectives’ in favour of this lower level. If the law remains as is, it is hard to see any other outcome than certain foreign investors looking to quit Zimbabwe if they cannot keep majority control of their mining operations. BMI will monitor developments on this topic as they occur. We reiterate our long-held view that there is a pressing need to negotiate with mining companies and resolve the issue of mining ownership, so foreign investors can work within a clear legal framework.
New Data
For 2010, BMI has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensuring that we can spot likely future changes and anomalous data that a purely mechanical model would not.
Country Overview
The geology of Zimbabwe is very richly endowed. Of the 40 known metals and minerals that it is home to: gold, platinum and chrome form the principal endowments. The country’s gold reserves are among the largest in Africa, while it hosts the second largest platinum reserves in the world. Another segment that has caught the attention of miners in Zimbabwe, is diamonds after the discovery of a number of significant kimberlites.
Industry Forecast
Zimbabwe’s mining sector has experienced a traumatic series of years over the past decade. However, there are reasons for guarded optimism as we enter 2010. Investment is returning to the sector, following the establishment of a national unity government. The 2009 liberalisation of the gold sector was a further positive.
Consequently, we believe the scene is set for a period of strong growth for the Zimbabwean mining sector, although we would stress that this remains dependent on a continuation of the relative political stability that has endured in recent months. In this context, the developing furore over domestic ownership of mining assets could well become a more serious issue in the months ahead.
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