As the government pushes for a 26% stake in mining projects, investors face a delicate balancing act between resource nationalism and investment certainty. Zimbabwe wants a piece of its mining pie, not just through taxes, royalties, and beneficiation conditions, but an actual stake, a seat at the table.
By Rudairo Mapuranga
The government has signalled its intention to hold a 26% free-carry stake in new mining projects and is preparing to negotiate with existing operators to acquire a similar shareholding. The policy, first floated in late 2024, is expected to be introduced in 2026, and it has set the industry abuzz with equal parts curiosity and concern.
But here is the question that nobody has answered satisfactorily: Will miners who were promised 100% ownership be willing to give up a chunk of their projects? And what does this mean for Zimbabwe as a destination for investment?
What Is a Free Carry?
Let us start with clarity.
A free-carry stake means the government receives an equity interest in a mining project without contributing capital to exploration, development, or construction costs. The government’s carry is essentially free. It does not pay for its shares. Instead, it receives them as a condition of the mining licence.
The government then receives dividends proportionate to its shareholding once the project becomes profitable. It bears no risk during the exploration and development phases. It contributes no capital during construction. It simply waits for the project to succeed and then collects.
From a government perspective, this is an attractive model. From an investor’s perspective, it is a direct transfer of value from the company to the state.
What the Government Is Saying
Mines Secretary Pfungwa Kunaka has been open about the government’s ambitions.
“We need to move to a level where we reach 26% shareholding in most of the big projects,” Kunaka told Bloomberg. “A lot of these things would take negotiations with the investors that are on the ground.”
He acknowledged that changing the rules mid-game is delicate.
“Obviously, when you have decisions which were made some years back, and decisions were made on the basis of a certain framework, you cannot just willy-nilly go and change that. It takes negotiations.”
The government already holds a 15% free-carry stake in platinum miner Karo Resources, providing a precedent for the model. The question is whether that precedent can be extended across the sector.
The Investor’s Dilemma
Now, let me take you inside the mind of an investor.
You are a mining company. You have invested hundreds of millions of dollars in exploration, feasibility studies, and construction. You have taken all the risk. You have spent years navigating regulatory hurdles, infrastructure deficits, and commodity price volatility. You were promised 100% ownership. Your financial models were built on that promise.
Now, the government wants 26%.
Not as a loan. Not as a partnership where they contribute capital. As a free carry. They want equity without investment. They want dividends without risk.
What should be done?
The answer is not simple. Some investors may accept it as the cost of doing business in Zimbabwe. Others may reconsider their commitments. And for projects that have not yet broken ground, the calculus changes entirely.
The Production Sharing Alternative
Here is where the conversation becomes more interesting.
A production sharing model might be a more elegant solution than a free-carry equity stake.
Under a production sharing agreement, the government does not take an equity stake. Instead, it takes a share of the actual minerals produced. The company recovers its costs from a portion of production, and the remaining profit from minerals are split between the company and the government according to an agreed formula.
The advantages are clear:
- No dilution of ownership. The company retains 100% equity but shares production.
- Alignment of interests. Both parties benefit when production increases.
- Flexibility. The share can be adjusted based on profitability, commodity prices, or investment levels.
- No valuation disputes. There is no argument about what the company is worth or what 26% should cost.
For Zimbabwe, a production sharing model could deliver the same economic benefits, government participation in mineral wealth, without the investor hostility that comes with expropriating equity.
The Lithium Sector Test Case
Consider Zimbabwe’s lithium sector.
Large-scale producers, Sinomine’s Bikita Minerals, Chengxin Lithium’s Sabi Star Mine, Yahua Group’s Kamativi Lithium Company, Huayou Cobalt’s Prospect Lithium Zimbabwe, Tsingshan’s Gwanda Lithium Mine, have already invested billions of dollars under the 100% ownership promise.
These companies are currently building lithium sulphate plants to comply with the government’s beneficiation deadline of January 2027. They are spending hundreds of millions more on processing infrastructure. They are employing thousands of Zimbabweans.
If the government now demands a 26% free-carry stake, what happens?
Will the companies accept it? Will they negotiate? Or will they recalculate their returns and conclude that Zimbabwe is no longer worth the risk?
The government’s argument is that the free-carry stake represents the value of the mineral resource itself, the ore in the ground belongs to the people of Zimbabwe, and the free carry is a way of recognising that ownership. It is a compelling argument, but it does not change the arithmetic for the investor.
The Tax Question
If the government takes a 26% free-carry stake, what happens to taxes?
Currently, mining companies pay royalties ranging from 1% to 10%, depending on the mineral, corporate income tax of 24.72% for mining operations, and various levies, including the Community Development Levy.
If the government is now also receiving dividends from its 26% stake, should taxes be reduced? The argument is simple: the government is now both a shareholder and a tax collector. If it is benefiting directly from profits through dividends, perhaps the tax burden on the remaining 74% should be adjusted.
The counterargument is equally simple: taxes are the price of operating in Zimbabwe. Dividends are a separate return on equity. The two are not interchangeable.
This is a conversation that needs to happen before the policy is implemented, not after.
The Dividend Declaration Problem
Here is a practical concern that is rarely discussed.
If the government holds a 26% free-carry stake, it is entitled to 26% of declared dividends. But what if the company does not declare dividends? What if it reinvests profits into expansion, or uses them to service debt, or simply accumulates them as retained earnings?
In many jurisdictions, mining companies are notorious for not paying dividends, preferring to reinvest cash flow into new projects or acquisitions. The government’s free-carry stake could end up being worth very little if dividends are never declared.
The solution is to negotiate dividend policies as part of the free-carry agreement. Minimum payout ratios. Time bound distribution requirements. Mechanisms to ensure that the government’s participation is not rendered worthless by corporate financial engineering.
The Broader Context: Resource Nationalism in Africa
Zimbabwe is not alone in pursuing greater value from its mineral wealth.
Across Africa, countries are tightening their grip on natural resources. Tanzania renegotiated its mining contracts. The Democratic Republic of Congo increased state ownership in mining projects. Namibia banned the export of unprocessed critical minerals. Ghana revised its fiscal terms.
Zimbabwe’s 26% free-carry proposal fits within this broader trend. The question is whether Zimbabwe can execute it in a way that does not trigger capital flight.
Finance Permanent Secretary George Guvamanga recently told investors at the Investing in Africa Mining Indaba that Zimbabwe offers “world-class geology, competitive operating costs, and a legislated, transparent fiscal regime”. He warned that Zimbabwe is “not seeking speculative capital” but “long-term, technically competent, and well capitalised investors”.
The free-carry policy will test whether that message holds. If investors perceive the policy as opportunistic expropriation, Zimbabwe’s safe haven narrative will collapse. If it is negotiated fairly, transparently, and predictably, it could become a model for resource nationalism done right.
The Verdict: Production Sharing Over Free Carry
Here is my view.
Free carry is a blunt instrument. It takes equity without contribution. It changes the rules mid-game. It creates winners and losers based on negotiation skill rather than economic merit.
A production sharing model is more elegant. It aligns interests. It avoids valuation disputes. It gives the government a share of production without diluting ownership.
If Zimbabwe wants to participate in mining profits without scaring away investment, it should look to production sharing, not free carry. The government should take a share of what comes out of the ground, not a share of the company that digs it up.
The difference may seem technical. But for investors, it is the difference between partnership and expropriation.
What Comes Next
The policy is expected to be introduced in 2026. Negotiations with existing operators will follow. The details, which projects are affected, how the 26% is valued, what dividend policies apply, will determine whether this policy unlocks value or destroys it.
The lithium sector will be the test case. If the government can negotiate fairly with the six large-scale producers, acknowledging their existing investments while securing a fair share of future returns, the policy could succeed. If it demands 26% without compromise, the investment climate will suffer.
The government’s argument is compelling: the mineral wealth belongs to the people of Zimbabwe, and the people deserve a direct stake in its extraction. But the manner of that stake matters as much as the principle.
A production sharing model would achieve the same goal without the investor hostility. It is not too late to pivot.
The clock is ticking. The investors are watching. And Zimbabwe’s reputation as a destination for mining capital hangs in the balance.
