Zimbabwe’s domestic mining regulatory environment remains one of the most restrictive in the region and needs to change to attract investment, a leading information group Fitch Solutions says in its latest report.
Fitch Solutions is part of the Fitch Group, a global leader in financial information services with operations in more than 30 countries.
In a recent analysis of the mining regulatory framework, Fitch Solutions said issues around high local ownership requirements, royalty rates and government intervention were restrictive.
“Despite these positive signals, we do not expect radical policy change in a domestic mining regulatory environment that remains one of the most restrictive in the region through high local ownership requirements, royalty rates and government intervention,” it said.
“For instance, (President Emmerson) Mnangagwa’s decision in March of this year to largely repeal the country’s indigenisation law that limits foreign ownership of local companies to 49%, does not apply to the strategic diamond and platinum mining sectors, which will continue to be 51% owned by the government.”
However, Fitch Solutions said it still held a core view that Zimbabwe was now politically well set-up for positive economic reforms that would benefit the mining industry over the coming years.
In terms of high local ownership requirements, currently investors need to apply for claims/special blocks, special grants, mining leases and special mining leases whereas in neighbouring countries the processes were now simpler, it added.
Government last year was mulling an increase of between 10% and 15%, which investors thought was too high, considering current royalties were already costly.
For example, royalties on diamonds attract 15%, platinum 10% and gold 5%. The royalties on gold is for anything more than 500 grammes.
In South Africa, royalties are capped and cannot exceed 5% for refined mineral resources and 7% for unrefined mineral resources. For Botswana, precious stones have a 10% royalty, precious metals 5% and other minerals or mining products 3%.
To that effect, Zimbabwe generally is more expensive compared to other countries in the region.
On the Fitch Solutions Mining Risk/Reward Index, which scores 100 as being more attractive in terms of the mining regulatory environment, Zimbabwe scored zero.
This was preceded by Mozambique, Angola, South Africa, Namibia, Zambia and Botswana in that order.
Botswana was the only country to be ranked over 90% on the index with Zambia the closest at 50%.
“As such, a significant section of the country’s mining sector will remain largely restricted to foreign investment. As a result, we are maintaining our modest production forecasts for Zimbabwe’s mining industry over the coming years and expect the country’s mining industry value to average 2,4% y-o-y [year-on-year] growth from 2018-2027,” Fitch Solutions said.
According to the Chamber of Mines of Zimbabwe, the local mining capital requirement from 2018 to 2020 is $7 billion, showing the need for foreign investment.