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Investors demand policy reforms

THE Zimbabwe government, in desperate need of investment to halt economic collapse, must put its house in order and stop shifting goal posts through toxic policies like indigenisation as it risks losing out more on limited foreign direct investment (FDI), Australian mining executives have said.

Faith Zaba in Perth, Australia

In separate briefings with the Zimbabwe Independent on the sidelines of the Paydirt Africa Down Under conference in Perth on Thursday, Australian mining executives said the business environment has to be attractive enough for risk-averse investors to pour in money.

The conference, which started on Wednesday and ends today, is being attended by mining executives, investors, bankers, fund managers and government officials, including ministers.

Australia Africa Mining Industry Group (AAMIG) CEO Trish O’Reilly said: “Business is business; the business environment has to be attractive for companies to invest in a country. One of the things I have said before is that you have to have sustainability, good governance; you have to have good tax systems. For people to come to your country, they have to know there is predictable regulation and good governance.

“If it is not there, why would they come in and do business if there are serious risks? If you open your country up to investment, if you want to generate wealth but don’t have the internal mechanisms to do so, then you need to have in place good structures so that you invite the right sort of investment partners.”

Zimbabwe is considered a risky investment destination due to lack of policy clarity and consistency, especially exemplified by the indigenisation laws. Because of the global market slump in the mining industry characterised by a fall in commodity prices, executives say they are now going for the most stable countries with clear legislative frameworks, attractive incentives and good tax systems — pull factors which Zimbabwe currently lacks.

As several Australian mining executives made their presentations at the conference on their companies’ multi-million dollar projects and new investments in Africa, it was patently clear that Zimbabwe is not on their plans.

Zimbabwe’s 2014 FDI inflows marginally grew from US$400 million in 2013 to US$545 million compared to Zambia’s US$2,4 billion, Mozambique US$4,9 billion, and South Africa’s US$5,7 billion, a strong indicator of the country’s hostile investment climate which needs urgent reforms.

Instructively, the miners who made presentations at the three-day conference spoke about ongoing projects and prospects in Africa, without mentioning Zimbabwe.

AAMIG project manager Liam Foran said while Zimbabwe is resource-rich, the business climate is hostile.
“Zimbabwe is quite an attractive destination,” he said. “You have a highly qualified workforce, you have fantastic minerals but you need a clear taxation system and a stable investment climate.”

There are more than 200 Australian resource companies and 700 service and supply firms involved in mining activities in Africa. The companies are involved in more than 1 100 projects which are at various stages of development across 38 countries in Africa. However, Australian companies are not in Zimbabwe.

Only recently Rio Tinto Plc, a British-Australian metals and mining multinational headquartered in London, United Kingdom, withdrew from Zimbabwe in a major vote-of-no-confidence in the country as an investment destination.

According to O’Reilly, in-ground discoveries in Africa made by Australian companies amount to A$687 billion (US$482 billion). It is estimated that Australian mining companies have invested more than A$30 billion (US$21 billion) in Africa, besides Zimbabwe, to date.

A top Australian lawyer David Nancarrow said clear and stable legislative frameworks were critical to investment.
“A large number of African countries are undergoing extensive legislative reform in the mining sector. The objective of those governments is to increase revenues for their countries from the mining sector, as well as provide an attractive environments for foreign direct investment,” he said.

Foreign investors have raised concerns regarding Zimbabwe’s indigenisation laws, which compel foreign-owned firms in key sectors of the economy such as mining to cede majority stakes, at least 51%, to locals. This law has spooked foreign investors over the past few years, with the country losing billions.

Mines deputy minister Fred Moyo, representing Zimbabwe at the conference being attended by more than 1 000 delegates, will have a tough time today trying to convince investors to come to Zimbabwe.

Moyo told the Independent there is need for consistency and clarity on indigenisation. “It’s an issue investors continue to feel they are not clear enough on. Maybe that issue needs attention so that we speak with one voice, we are clear and we are consistent on it,” he said.

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