ZIMBABWE is the least lucrative investment jurisdiction in Africa based on the attractiveness of the government’s mining policies, the latest research conducted by the Fraser Institute reveals. The survey assesses how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.
A key contributor to Zimbabwe’s perceived status quo is the economic policy consistency deficit that has dogged the country over the past decade. The results of this survey sound an alarm to the dire need for the employment of unswerving economic policies that foster investment.
The findings of Fraser Institute’s “2020 Annual Survey of Mining Companies” were premised on a survey that polled nearly 2 200 mining and mining-related individuals involved in mineral exploration and development around the world. The companies that participated in the survey reported an aggregate mineral exploration expenditure of US$3,4 billion between 2019 and 2020. The annual research tracks two indicators: the Policy Perception Index (PPI) and the Investment Attractiveness Index (IAI).
In the PPI which assesses provinces and countries on the grounds of policy factors that affect investment decisions, Zimbabwe ranked least in Africa and the 4th least globally out of 77 evaluated mining jurisdictions. Comparatively, Sadc counterparts Tanzania and the DRC ranked 8th and 10th globally as well as 2nd and 3rd least attractive investment destinations in Africa respectively. According to the report, while geological and economic factors are vital for mineral exploration, a region’s policy environment is key for investment deliberation.
The report gave pointers for the tabled considerations: “Policy factors examined include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system and taxation regime, uncertainty concerning protected areas and disputed land claims, infrastructure, socioeconomic and community development conditions, trade barriers, political stability, labour regulations, quality of the geological database, security, and labor and skills availability”.
For the Investment Attractiveness Index which assesses jurisdictions based on policy factors such as onerous regulations, taxation levels, and the quality of infrastructure; Tanzania was regarded as the worst jurisdiction in Africa and the third-worst investment destination globally, behind Venezuela and Argentine’s Chubut province. Zimbabwe was rated the second least attractive in Africa and the 8th worst globally. Are these ratings justifiable and can anything be gleaned from them? A bird’s eye’s view of Zimbabwe’s economic and mining policies exhibits a flip-flop trajectory that has been marred by haphazard decisions, a trend that has also affected investment flows to Zimbabwe.
Some of the illustrations of Zimbabwe’s policy changeability include the heavy-handed enactment of indigenisation policy on designated business organisations in 2008 and its overhaul in November 2018, the obliteration of the multi-currency regime in June 2018, only to reintroduce multi-currencies in May of 2020.
In a fresh bout this March, the Ministry of Mines and Mining Development flickered a hullabaloo when it increased mining and registration fees by over 800% after fixing them in United States dollars. The Zimbabwe Miners Federation (ZMF) contended the initiative was going to amputate their operations and shut out new entrants. The government made a historic U-turn decision on mining fees as it reverted to old mining and registration fees.
In an isolated development this January, the government granted Great Dyke Investments a five-year tax exemption. Earlier this year, the government “deleted” a modification to the Finance Act, which had given it the latitude to own 51% of mining firms. A new Mining policy framework is the pipeline, which according to the government will straighten out unresolved issues in Zimbabwe’s mining sector- a document that has been brewing for 13 years.
Foreign Direct Investment (FDI) Inflows to Zimbabwe doubled to US$745 million in 2018 from just US$345 million in 2017 before plummeting 62% to a paltry US$280 million in 2019. The first six months of 2020 show a further decline to US$71,2 million from US$111 million in the comparative period of 2019 as the pandemic took its toll on business.
Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.