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Does the mining industry have a future in Zimbabwe?

  • South Africa
  • Energy and infrastructure - Mining

03-12-2019

The announcement of the intention to repeal the Indigenisation and Economic Empowerment Act by the Zimbabwe government in March 2019 was driven by various factors, including investor, political and legal motivations.

The Act, implemented by former Zimbabwe President Robert Mugabe in 2008, states that 51% of mines must be black Zimbabwean-owned, thereby limiting foreign ownership. Since Zimbabwe President Emerson Mnangagwa has come in to power in July 2018, there have been calls for this law to be repealed.

The primary driver behind the amendment to the Act was the feedback received from investors and how this law impacted on their investment decisions. Although this was the primary motivation to amend the law, it was not the only factor.

There was also a political driver whereby, after the regime change, President Mnangagwa publicly announced that the country was “open for business”, and that the indigenisation law could impact negatively on investment decisions.

A further factor was the legal and political groupings in Zimbabwe that are motivating for legislative and policy change. There has been extensive policy development, particularly in relation to Zimbabwe’s diamond mining subsector, as well as good policy development in relation to other minerals.

These groupings, which have been supported by international organisations, such as international financial institution World Bank Group, have been working on redrafting Zimbabwe’s laws pertaining to diamonds and minerals.

The motivation has been to facilitate investor-friendly policy and regulatory framework and regime in Zimbabwe, which also acknowledges that its mining sector can contribute meaningfully to growth and development.

Various presentations are being made to parliament in support of policy and regulatory change. It is hoped that this momentum will be maintained, and that the policy and regulatory framework achieves the balance between investor friendliness and truly benefiting the Zimbabwean people.

Impact on Commodities

The Act also has a direct effect on commodities; however, the amendment of the law does not apply to diamonds and platinum.

Zimbabwe’s primary commodities are platinum-group metals, coal, gold and diamonds. Government has recognised the investment in the platinum mining subsector. Existing platinum mines will lead to benefits in the Zimbabwe government and will benefit those who own part of the platinum mines.

Additionally, as diamonds are typically regarded as good revenue generators, the Zimbabwe government has decided to retain the indigenisation requirements for diamonds and platinum.

It is unlikely that the indigenisation law will be lifted for diamonds and platinum in the near future, and in the case of other commodities, the indigenisation requirements will be addressed on a case-by-case basis as licences are issued to investors.

This, however, has been criticised by some investors as being too uncertain, while other investors have welcomed the opportunity to engage with government on indigenisation requirements.

Nevertheless, investors in the country’s platinum and diamond subsectors generally acknowledge the indigenisation requirements and make their investment decisions taking this law into account.

If this law was not applicable to diamonds and platinum, investors would need to renegotiate their indigenisation requirements, which becomes a lengthy procedure and results in uncertainty, affecting investment decision-making.

South Africa’s broad-based black economic-empowerment ownership in the mining sector can be a practical example for Zimbabwe’s indigenisation programmes.

South Africa’s experience could be a useful starting point, as Zimbabwe grapples with the need for extensive investment in not only the mining sector but also the associated sectors, particularly infrastructure such as roads, rail, ports, and power.

There is also an opportunity for the so-called ‘open source’ arrangements where, for example, a railway network is built for the mining sector to transport its product to market, but the infrastructure can be developed in such a way that it also benefits the agriculture sector.


The optimism following the ousting of former Zimbabwean President Robert Mugabe was short-lived, with the realisation that it would not result in substantial change in the short term, or immediate return of foreign investment to Zimbabwe. This also came with the realisation that the once-healthy economy of the country would not be immediately revitalised.

Former President Mugabe’s removal does not detract from the significant challenges and realities that the country still faces.

Key challenges include poorly maintained infrastructure, which had not been maintained for decades, an unstable and unreliable power generation and transmission system, as well as currency fluctuations, particularly following the announcement that Zimbabwe would revert to the Zimbabwean dollar for trading.

Additional challenges include concerns regarding the ability to import goods and services, and pay for them based on certain exchange rates, the repatriation of funds out of Zimbabwe when appropriate, a potentially unstable political environment and an uncertain regulatory system.

In 2018, a large number of investors, financial institutions, service providers and conference organisers set their sights on investing in Zimbabwe. However, as the optimism and enthusiasm waned, so did the interest in Zimbabwe. Only the most resilient investors are seriously considering increasing existing investment or making new investments.

Nevertheless, the vast natural resources of Zimbabwe retains investment focus. The mining and natural resources sector is viewed as a sector that can re-invigorate the economy, particularly given its vastness and potential contribution to significant growth and development in the country. The mining sector in any mineral resource-rich country is the engine room of the economy.

Investors and the Zimbabwean government, are also mindful of the ancillary benefits of the mining sector, including revenue and taxes, infrastructure development, an extensive network of services and goods suppliers and providers, as well as the multiplier effect, which is the general principle that for each person working at a mine, up to ten other people are supported.

The mining sector landscape in Zimbabwe presents an interesting scenario, owing to the large- and small-scale mining operations and opportunities. The extraction of minerals, such as platinum-group metals, is ideally suited to large-scale mining, while other minerals, such as gold, can be more suited small-scale mining.

Both large and small-scale mining will play an important role in Zimbabwe going forward and it will be necessary for all stakeholders to work together to ensure that large- and small-scale miners can work side by side. There is a critical role to be played by small scale miners in support of growth, development and transformation, provided that small scale mining is regulated in such a way that it encourages small scale miners to mine lawfully, and makes it easy for them to do so. In other jurisdictions, where small scale mining is not regulated appropriately, small scale miners often resort to illegal mining, with all of the consequences that flow from this, including environmental impacts, social and socio-economic and related impacts, and losses to the fiscus.

It will therefore be necessary for Zimbabwe to radically change and upgrade its mining laws to achieve the success of both the small scale and large scale miners. Historically, Zimbabwe has separated its diamond laws from its other mineral laws, and shortly after former President Mugabe’s removal from office, various stakeholders including legal groupings, started working towards changes in the minerals policy and the historical mining laws.

This process is ongoing, and it is hoped that there will be radical overall change of the mining laws in Zimbabwe to facilitate a thriving mining sector.

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