TWO important events took place at the Ministry of Mines in the past two weeks.
Last week, the ministry rolled out broad changes to mining fees paid by companies for various purposes, such as prospecting and special mining leases.
The changes involved the switch from payment of these fees in Zimbabwean dollars to payment in foreign currency. But within a week after the new fees came into effect, the government reverted back to Zimbabwean dollars after an outcry from the Zimbabwe Miners Federation, which complained that its members were poorly capitalised to afford the fees.
Whereas Zimbabweans must benefit from their resources, steep increases in fees of up to 800% were heavy. The first thing to note is that this exerts pressure on miners who are already operating under high costs of doing business, compared to other regional destinations.
Secondly, these high fees would shut out domestic investors who face big challenges in raising capital due to a high country risk and a weak domestic financial system. The general argument is that miners export their minerals and they earn foreign currency.
Yes, some big miners may afford these high fees, but the majority have been affected by the economic crisis, including the effects of Covid-19.
They need government’s support to help them while the economy returns to normal. In fact, out of the foreign currency that lands in their banks, they are asked to surrender 40% to the Reserve Bank of Zimbabwe, which pays them in the local currency at the ruling official exchange rate.
As Anglo American Platinum, which operates Unki Mine in Zimbabwe says elsewhere in this edition, this policy takes off miners’ capacity to settle many of their commitments, which are paid in United States dollars.What is important for investors is that these policies are consistent to give them room to plan.
This consistency has been lacking for some time, and this is bad for investment. If such policy changes continue investors will be discouraged and look for opportunities elsewhere.
The longer the government takes to address critical issues, the longer it takes for Zimbabwe to achieve its full potential as a destination for FDI, and the target to build a US$12 billion mining sector by 2023 could remain a pipedream.
Government’s role must be to come up with and stick to policies that encourage investors.
It is important to note that most of the concerns that investors bring out won’t cost money to fix.
They only require political will.
During the inclusive government between 2008 and 2013, friendly policies demonstrated how easy it could be to attract investment.
The government should immediately review policies and attend to investors’ concerns. This should immediately be followed by clear and demonstrable policy reforms that will give them the confidence that their interests are safe.
They can then think of scouting for more sectors to invest in for the benefit of the economy.