THE Southern African Resource Watch (SARW) recently launched a Zimbabwe Fiscal Regime for Platinum report at an event where the Zimbabwe Coalition for Debt and Development (Zimcodd) also launched its National Development Strategy 1 monitoring report. Our Senior Business Reporter Melody Chikono (MC) spoke to SARW executive director Claude Kabemba (CK), who warned that the current regime did not give Zimbabwe, like other African countries, sufficient room to maximise benefits from their minerals. Below is the interview:
MC: You have launched the Zimbabwe Fiscal Regime for Platinum. Tell us more about this report
CK: We know that the government of Zimbabwe has a plan to raise US$12 billion from the mining sector. That is easier said than done because you need a fiscal regime that provides that space to collect that money. We sense that Zimbabwe struggles with its fiscal regime to set it at a level that strikes a balance between country interest and company interest. But it seems as if the interest is more leaning towards companies. What we have done is to discuss what could be the best fiscal regime for the platinum sector for Zimbabwe to draw maximum benefits.
Because when you do not have a fiscal regime set correctly, you tend to be all over and miss out especially now when we have got so much increase in terms of different commodities. You need your fiscal regime to be set and even do a projection of exactly what you are getting from different projects. When you have a fiscal regime that is set, you can project for 10 to 15 years what you can get. You do the predictions and everyone in the country knows how much you will get.
Fact file: Claude Kabemba
- A political economy expert with 23 years direct experience working in research and policy on democratic governance and development fields in Africa.
- Areas of expertise include democratisation, natural resource governance, African state, civil society engagement and conflict resolution, election politics with field experience in Southern and Central Africa.
- Holds a PhD in International Relations from the University of the Witwatersrand, South Africa
MC: What are the current platinum fiscal regime shortcomings?
CK: I think they are focusing on royalties much more than on the other pillars of the fiscal regime. Secondly, we think that the 2% on royalties is quite low. We need to increase it, but not to the extent of 10% like in other countries. That will also be extreme. The issue is on the predictability of the fiscal regime because there is always talk of changes. The predictability of the fiscal regime is what is key. You cannot have a fiscal regime where you always have a discussion around changes. You do not guarantee investment.
There are investors who like Zimbabwe because of the grade of its platinum which they cannot find anywhere else and have been here for some time. But we are not seeing strong investors coming in besides the Chinese. We are not saying they are not investors, but there are bigger investors who could come on board attracted by the type of Zimbabwe’s minerals. We are not seeing those that have a lot of experience coming. It is because they are not very sure. For me it is that issue of predictability. We need to work around predictability to attract good investors. What we have realised is mining companies are not afraid of paying taxes but what they are afraid of is unpredictability. Zimbabwe needs to be confident of its tax system and sell it to whoever wants it but be predictable.
MC: Recently Implats said Zimbabwe was a very conducive environment for its operations. Is it the reason why you are saying the regime seems to benefit companies more than the country?
CK: What we are simply saying is that Zimbabwe is not alone. This is an African problem. We have seen that most benefits go to foreign mining companies. When a mining company says this is a conducive environment, we must ask the company what it means. Another CEO of a uranium mining company in Malawi, at some stage, said exactly the same thing. He explained that it was the only place where the government does not know or follow on what you are doing and you maximise benefits. That was his reasoning.
But I am not saying it is the same situation with Implats here. But we need to ask them what they meant by conducive environment because a conducive environment would mean a few things: Your system is transparent, predictable and the fiscal regime is as equitable as possible. That is a conducive environment where investors know what to expect and do everything for the government.
I heard that but it would have been interesting to ask him and find out what he meant. It can be a conducive environment where benefits are shared equally between states and companies and where communities benefit. It cannot be a conducive environment when the sector is not benefiting the people and is not dealing with poverty and equality. A conducive sector is one which promotes development and growth.
MC: What are some of the key recommendations that you have presented?
CK: Well, the Zimbabwean government should look at all areas of the fiscal regime and not focus on one or two. Most African governments have been focusing on royalties. But there are many other areas besides royalties, which include bonuses, exports and import tax and so on. You need to look at all of that and balance them out because when you focus on one thing, sometimes you increase that tax creating problems for investors.
But it will be key for Zimbabwe to balance all the five in a way that the country benefits from each one of them. Secondly, avoid too many exemptions. If you look at platinum, it is a critical mineral that is needed for energy transition. Why would you give exemptions for a mineral which is needed too much? We think at 2,5% royalties are quite low. We have seen other countries going up to 10% and we think it is quite high. Zimbabwe could come in-between to find a balance percentage. Those are the types of things we are recommending.
More critical is predictability of the system but also a system that guarantees maximum benefit for the country and also good returns for investors.
MC: From your experience, how does Zimbabwe fare in the region?
CK: Zimbabwe is not very different from other countries but when you look at projects, there are big projects in this country. When you look at what the government is drawing as benefits, my sense is that the country is not drawing sufficiently from the mining sector and there is room to increase the benefits. But that cannot be done unilaterally. It has to be done in dialogue, in consultation so that it is fair and that the fiscal regime is put in place. Currently we do not think that Zimbabwe is benefiting from its minerals.
MC: You have indicated that most countries do not know the exact size of their minerals. Tell us more about this
CK: My general thinking is that we need to invest in exploration. Not just exploration because we want to sell our minerals to foreign companies. We want exploration where our state companies will also have minerals that can be exploited as a country. Right now we have sold all mineral rights for all minerals. You cannot control minerals that do not belong to you because you have given away your rights. So you need exploration investment and exploration where the government invests is far better because now you have the information and you have an opportunity to negotiate on an informed basis.
When it is the private sector funding exploration, they keep that information and sometimes they do not give you the correct information and when you negotiate, you negotiate from a weaker position. You must have public exploration companies not just for the sake of it but to control the minerals.
MC: What then becomes the long-term impact of selling these mineral rights?
CK: When you sell mineral rights it means you have no capacity to beneficiate easily.
But you only have to collect taxes and we know that the fiscal regime space is narrow to produce the type of development we want. Development will come when we start to add value to our minerals because that is when we start building on industrialisation capacity and creating jobs. Right now mining is not creating jobs because we are exporting the minerals and the mechanisation of the mining sector does not allow the sector to produce more jobs. One of the biggest challenges we have is to create jobs for young people.
One way we can start creating jobs is when we start to add value to our minerals and adding value means industrialisation. Industrialisation means producing goods that we can sell in the region and international markets. The fiscal regime, while it is important, does not give African countries sufficient room to maximise benefits from their minerals.