HARARE – A new policy that came into force last week allowing foreign investors into Zimbabwe’s diamond and platinum sectors to negotiate shareholding thresholds on a case by case basis requires serious checks and balances to prevent corruption, according to a report by Econometer Global Capital.
It said while the policy would be key to unlocking foreign direct investment inflows to the mining industry, there were chances that Zimbabwe’s well connected will buy concessions for speculative purposes.
Under the policy shift announced by Zimbabwe’s Finance Minister, Mthuli Ncube during a supplementary budget, empowerment deals in platinum and diamonds will not be restricted to a maximum of 49 percent shareholding for foreigners.
“More so government should ensure that this “case by case” basis of dealing with investors has checks and balances that mitigate corruption especially among members of the elite who are privileged to interface with investors,” Econometer said.
“The relaxation of the indigenisation regulations may also prompt some people to start acquiring mining concessions for speculative purposes which in a way may also discourage investors from investing,” said the noted.
In an attempt to drive FDI into the key minerals, Ncube said the controversial Indigenisation and Economic Empowerment Act would be replaced by a more liberal Economic Empowerment Act.
“Government through the 2018 Finance Amendment Bill amended the Indigenisation and Empowerment Act and platinum and diamonds are now removed from the reserved list and shareholding will depend on negotiations with investors. Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act,” said Ncube.
The Indigenisation and Economic Empowerment Act was blamed for discouraging FDI into the country, which has been averaging about US$400 million a year, against its neighbours’ US$2 billion.
When President Emmerson Mnangagwa came into office through a coup in November 2017, he quickly reviewed the tough empowerment law.
But platinum and diamonds remained under the previous arrangement where locals would take 51 percent shareholding, with foreigner tied down to a maximum of 49 percent.
“The major policy shift was meant to complement President Emmerson Mnangagwa’s liberal policy on investment after the 2008 Indigenisation Act was widely criticised for spooking investors,” Econometer said.
“While this policy shift is one of the major steps taken by government to attract FDIs, which have been averaging $500 million over the last decade, matters relating to the ease of doing business are vital in making Zimbabwe a preferred investment destination,” the report said.