Zim mining sector least attractive –– new survey

ZIMBABWE mining industry ranked as one of the least attractive for investment in the world, a survey published by a leading think tank says.

Carlos Vieira

The report, published by the Fraser Institute, an independent Canadian public policy research organisation, showed Zimbabwe sitting ingloriously in the list’s bottom 10 countries, ranking 91st out of 96, between Kyrgyzstan and Bolivia.

The report is used “to assess how mineral endowments and public policy factors such as taxation and regulation affect exploration investment.

The survey responses have been tallied to rank provinces, states, and countries according to the extent that public policy factors encourage or discourage investment.”

Zimbabwe, by virtue of its low ranking, seems to be doing much more of the latter.

The report uses what it calls a Policy Potential Index (PPI) to rank the jurisdictions by measuring their overall policy attractiveness.

In this year’s survey, Zimbabwe was only able to amass a PPI of 13,4 out of 100, representing a significant drop from the previous year’s survey when it scored 21,8 and ranked 74th out of 93 jurisdictions.
This comes in conjunction with a drop in PPI of the entire African
continent for the fifth straight year as African nations try and figure out how to reform their mining industries.

Zimbabwe struggled in nearly all of the 17 policy questions, leading to its low ranking, but struggled mightily in terms of its legal system, uncertainty concerning the administration of regulations, overall corruption and general growing uncertainty.
When asked about Zimbabwe’s legal system and how it affected their investment forecasts, 63 % of the 742 respondent companies acknowledged they would absolutely not pursue investment within Zimbabwe’s borders because of it.

A total of 53 % of them claimed they would also not pursue investment because of the overwhelming uncertainty concerning the administration, interpretation and enforcement of existing regulations.

Strong concerns among the respondents over high levels of general corruption in Zimbabwe led 48% to list that aspect as another factor that would cause them to not pursue investment in Zimbabwe’s mines.

A general growing uncertainty over Zimbabwe also caused 48 % of companies to say they would not pursue investment opportunities in the country, although the survey was conducted from October 9, 2012, to January 6, 2013, a time of elections preparation in Zimbabwe when uncertainty was high.

With the recent conclusion of the general elections, this number could change in next year’s survey.

The survey also examined policy factors touching on environmental regulations, regulatory duplication, the taxation regime, uncertainty concerning protected areas and disputed land claims, infrastructure, socio economic and community development conditions, trade barriers, political stability, labour regulations, quality of geological database, security, labour and skills supply.

As mining continues to grow as a percentage of Zimbabwe’s GDP, the poor performance in this year’s survey does not bode particularly well.

Out of all the respondents, only two claimed Zimbabwe had the most favourable policies towards mining while a sobering 89 claimed it had the worst. Only California and Venezuela received more negative votes.

One company president quoted in the study said of Zimbabwe: “Unofficial government policy is you will never expatriate profits.

Black empowerment and political uncertainty make large or long-term investment impossible; no rights of ownership, no rights to enter required professionals, corruption is high, border restrictions –– unstable future.”

Although this year’s survey paints a bleak picture, numbers of previous years, even though not particularly high, were much better.
This may offer some hope for Zimbabwe to return to a more investment conducive environment.

Although, with the new government’s indigenisation programme and inward looking policies, there might not be a turnaround in the survey results any time soon.

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