How serious is Zimbabwe about attracting mining investment?

On Monday it was widely reported that Aliko Dangote was in Zimbabwe and eager to invest. Judging by conversations on social media that day and subsequently, it became clearer that many viewed the news with scepticism.

To put the scepticism into perspective, late last year, a huge government delegation including the President visited China. During that visit, a series of ‘mega deals’ were signed between the two countries. If we rewind to several years ago, we discovered diamond deposits in the eastern part of Zimbabwe. Various politicians made claims that our economic woes would now be addressed and Zimbabwe would flourish. To date, the economic challenges continue as we patiently wait for the realisation of those Chinese ‘mega deals’. This may explain the scepticism witnessed this week.

Turning to the on-going Africa DownUnder Conference; there are 15 African government ministers and other officials in attendance. There are opportunities for these same officials to present and effectively market their countries as ideal destinations for investment in the African mining sector. According to the Zimbabwean 2015 National Budget, the mining sector contributes approximately 5%. According to the Zimbabwean Mining Taxation pamphlet collected at the COMESA stand at the conference, there are several mineral royalties which are ‘calculated as a percentage of the gross fair market value of minerals produced’.

Some of the royalties are charged as follows:

• Diamonds – 15%
• Other precious stones – 10%
• Platinum – 10%
• Gold (> 0.5) – 5%
• Small Scale Miners (<0.5%) – 3%
• Coal – 1%

Several conversations with various mining consultants and industry players indicated that the top 3 key concerns when investing in Africa included:

• Political stability
• Favourable tax regime
• Mining sector legislation

South Africa

Deputy Minister of Mineral Resources Hon. Godfrey Oliphant delivered his presentation yesterday.

The South Africa mining sector contributes 19% of Gross Domestic Product (GDP). The mining sector earns South Africa 50% of its foreign currency. Mining accounts for 12% of the total investment in the South African economy. The top 4 contributors per province in South Africa are as follows:

• North West – 26.1%
• Limpopo – 23.5%
• Mpumalanga – 21.5%
• Gauteng – 11.5%

South Africa is the largest producer of platinum in the world. Mining in South Africa dates back to 1867. South Africa has ‘an estimated value of in-situ mineral resources of $2.5 trillion’. According subsections (1) and (2) of section 4 of the Mineral and Petroleum Resources Royalties Act, 2008, the rates for these royalties are:

• Refined mineral resources: the minimum of 0.5% to a maximum of 5%
• Unrefined mineral resources: the minimum of 0.5% to a maximum of 7%

According to the World Bank, South Africa’s GDP is $350 billion and the population is 54 million.

Senegal

Hon. Aly Ngouille Ndiaye, the Minister of Industry and Mines delivered his presentation yesterday

Senegal has between 15 and 20 million tons of iron ore, 2.5 million tons of phosphates, 3 million tons of phosphoric acid, 17 tons of gold and 90,000 tons of zircon. The Honourable Minister pointed out the political stability that exists in their country – ‘3 presidents have been elected since 1960’. According to the World Bank, Senegal’s GDP is $15.58 billion and the population is approximately 14 million. Minemakers Limited, listed on both the Australian and Toronto Stock Exchange, has invested in Senegal in a project called Baobab Rock Phosphate with initial production due in the first half of 2016.

What is apparent given the presentations and meetings over the last 2 days is the importance of mining to other African countries. David Nancarrow from the global law firm, DLA Piper pointed out that other African countries such as Guinea, Mali, Kenya, Democratic of Congo (DRC), Ethiopia, Burkina Faso, Gabon, Togo, Cote d’Ivoire and Tanzania have been undergoing extensive legislative reform in their mining sector. Nancarrow pointed out that many African countries are streamlining the processes to avoid delays for investors.

The Australia-Africa Mining Industry Group (AAMIG) is an organisation that supports and assists Australian companies to partner with ideal African mining organisations. Trish O’Reilly, the Chief Executive Officer (CEO) pointed out that the Australian mining industry is experiencing some challenges in accessing funding due in part to the low mineral market prices. The Premier of Western Australia, Hon Colin Barnett also pointed out the same thing during the Opening Address on the first day of the conference. However his view was that prices had finally ‘bottomed out’ and that this was cyclical. The market would effectively sort itself out. O’Reilly seemed to suggest the same thing.

When 263Chat probed further regarding the prospect of Australian mining companies investing in Zimbabwe, the general sentiment was positive. However, O’Reilly confirmed that when her clients look for an investment destination, they consider political stability and good governance as important factors to consider. Whilst she pointed out that Zimbabwe has the ideal minerals and a highly skilled workforce, there was work that needed to be done in clarifying the direction the Zimbabwean Government wanted to take regarding the Indigenisation Law.

The absence of the Zimbabwe Investment Authority and the Zimbabwe Chamber of Mines was notable. However the Hon. Deputy Minister Fred Moyo attended the conference and was scheduled to speak in one of the last sessions on Friday. Hon Moyo on the side-lines of the conference acknowledged that engagement at this time is crucial.

If Zimbabwe is truly serious about attracting mining investment, some honest introspection is needed at this time. Clarification of indigenisation is of the utmost importance especially in the immediate future. The shifting of goal posts tends to scare investment away. The African destination that ends up receiving this very investment is often listening attentively to what investors need before committing and ultimately both parties find a way to create a win-win situation.