Mining sectoris Zimbabwe'sgreatest hope

The optimism following the ousting of former Zimbabwean President Robert Mugabe was short-lived, with the realisation that it would not result in substantial change in the short term, or immediate return of foreign investment to Zimbabwe. This also came with the realisation that the once-healthy economy of the country would not be immediately revitalised, says legal service provider Eversheds Sutherland partner and mining and infrastructure head Warren Beech.

“Mugabe’s removal does not detract from the significant challenges and realities that the country still faces.”

Key challenges include poorly maintained infrastructure, which has not been maintained for decades, an unstable and unreliable power generation and transmission system, as well as currency fluctuations, particularly following the announcement that Zimbabwe would revert to the Zimbabwean dollar for trading, Beech elaborates.

Additional challenges include concerns regarding the ability to import goods and services, and pay for them based on certain exchange rates, the repatriation of funds out of Zimbabwe when appropriate, a potentially unstable political environment and an uncertain regulatory system.

In 2018, a large number of investors, financial institutions, service providers and conference organisers set their sights on investing in Zimbabwe. However, as the optimism and enthusiasm waned, so did the interest in Zimbabwe. Only the most resilient investors are seriously considering increasing existing investment or making new investments, adds Beech.

“Nevertheless, the vast natural resources of Zimbabwe retain investment focus. The mining and natural resources sector is viewed as a sector that can reinvigorate the economy, particularly given its vastness and potential contribution to significant growth and development in the country. The mining sector in any mineral-resource-rich country is the engine room of the economy.”

Investors and the Zimbabwean government are also mindful of the ancillary benefits of the mining sector, including revenue and taxes, infrastructure development, an extensive network of services and goods suppliers and providers, as well as the multiplier effect, which is the general principle that for each person working at a mine, up to ten other people are supported, Beech adds.

The mining sector landscape in Zimbabwe presents an interesting scenario, owing to the large- and small-scale mining operations and opportunities. The extraction of certain minerals, such as platinum-group metals, is ideally suited to large-scale mining, while other minerals, such as gold, can be more suited small-scale mining.

“Both large- and small-scale mining will play an important role in Zimbabwe going forward and it will be necessary for all stakeholders to work together to ensure that large- and small-scale miners can work side by side.

“There is a critical role to be played by small-scale miners in support of growth, development and transformation provided that small-scale mining is regulated in such a way that it encourages small-scale miners to mine lawfully and makes it easy for them to do so. In other jurisdictions, where small-scale mining is not regulated appropriately, small-scale miners often resort to illegal mining with all of the consequences that flow from this, including environmental impacts, socioeconomic-related impacts and losses to the fiscus,” Beech states.

It will, therefore, be necessary for Zimbabwe to radically change and upgrade its mining laws to facilitate the success of both small-scale and large-scale miners, he adds. “Historically, Zimbabwe has separated its diamond laws from its other mineral laws, and shortly after Mugabe’s removal from office, various stakeholders including legal groupings, started working towards changes in the minerals policy and the historical mining laws.

“This process is ongoing, and it is hoped that there will be radical overall change of the mining laws in Zimbabwe to facilitate a thriving mining sector,” heconcludes.