ZIMBABWE this week held a mining conference in Harare which was well-subscribed. Serious mining executives, investors, professionals, analysts, fund managers, investment specialists and government representatives attended as they sought to listen to policy-makers and identify opportunities in the mineral-rich country.
It was a great event. The conference came at a time when the country is trying to change its status as a poor mining destination. Zimbabwe remains lowly ranked as a mining investment jurisdiction in the world despite an aggressive drive to open up for more capital inflows, according to the Annual Survey of Mining Companies released last Thursday by the Fraser Institute, an independent, non-partisan Canadian policy think-tank. The survey singled out unfavourable tax regime, policy inconsistencies and bottlenecks in setting up a business as issues that investors mostly complain about.
This shows there is still a lot that must be done to convince investors to come in with a critical mass of investment to change the face of the mining sector and the economy. Zimbabwe needs a cocktail of measures which include policy and legislative reforms, incentives for investors, intensified investment drive and enhanced exploitation of the country’s vast natural resources to position mining as the engine of growth. Investors want a progressive mining jurisdiction to bring capital and create jobs, while contributing to the fiscus, as well as fulfilling corporate social responsibilities. While the existence and extractability of minerals is the most important determinant of where mining companies invest in exploration and extraction, it is not a sufficient condition on its own. Despite high geological potential and abundance of minerals, a combination of various challenges often puts resource-rich jurisdictions in an unfavourable position in the global market for investment. As a result, many countries, including Zimbabwe, endowed with resources have been unable to attract and retain foreign direct investment in sufficient quanta to make a huge difference. Government must be aware that mining companies are selective and that in order to attract investors it needs to implement reforms to establish a more friendly jurisdiction, adopt welcoming policies and effective regulatory structures. This means Zimbabwe must amend its mining and related laws, rules and regulations, as well as policies and systems. This does not automatically lead to a reduction in risks for investors, but it creates an improved environment which makes it easier to attract capital. Stumbling blocks to investors usually come in the form of inconsistent and unclear policies, inadequate and ineffective fiscal, regulatory, and environmental regimes. Other problems entail lack of geological data, political risk, unresolved social issues, stringent licensing requirements and poor infrastructure.
If Zimbabwe wants to increase the inflow of foreign capital into the mining sector, its regulatory regimes governing foreign mining investment must change. Attracting investment requires favourable and consistent policies and effective regulatory and fiscal systems. This needs to be bolstered with active investment promotion programmes and holistic engagement processes that assure investors, local communities, and other stakeholders that mining activities can be sustainable and mutually beneficial.