ZIMBABWE’S capital-intensive mining sector requires a raft of reforms to unlock foreign direct investment and quicken economic growth, a prominent commercial law expert said on Wednesday, warning that resource nationalisation could scare investors.
In March Mines minister Walter Chidhakwa announced that government would bring all diamond mining operations in the country under one firm in which the state will have a 50% shareholding. This came after it emerged that alluvial diamond deposits were running out forcing miners to invest more in underground operations.
Scanlen and Holderness senior partner Sternford Moyo told delegates attending the ongoing mining conference that an overhaul of the country’s mining tax regime among other reforms could improve the sector’s contribution to the economy.
Moyo said the tax regime should be flexible enough to allow mining companies to operate efficiently when global mineral prices fluctuate.
“Resource nationalism frightens investors. They have seen its impact in countries such as Venezuela. It adds nothing to our understanding of what is needed for us to leverage our minerals for growth and development,” said Moyo.
“The State already has custody of all minerals under the laws of Zimbabwe. It is the one that issues mining rights and mining permits . Again, this slogan is entirely empty.”
Falling commodities prices on the global market has hit hard local mining firms prompting experts to lower economic growth projections.
Zimbabwe’s gross domestic product is this year seen growing by a modest 1,5% from an initial projection of 3,2%.
Zimbabwe mining sector has since 2012 overtaken agriculture as the key economic driver, accounting for more than 50% of total exports. The sector, according to the Chamber of Mines of Zimbabwe requires over US$5 billion to recapitalise.
Experts say huge capital investments are required to improve infrastructure including power and accessibility of mines and to purchase new equipment. Investments in technology and infrastructure, they say, will reduce cost, improve efficiencies and make our country globally competitive.
“To ensure security of tenure, all provisions in the (Mining) Act threatening the tenure of mining companies which adhere to the provisions of the Act and the mining development agreement, should be repealed,” Moyo said.-Staff Writer