Policies standing in the way of mining investment
World over, Zimbabwe is regarded as one of the countries with rich mineral wealth that can sustain its economy into one of the finest.
Rudairo Mapuranga
Like many African countries, Zimbabwe is no exception in failing to attract Foreign Direct Invest (FDI) due to various factors. It is Mining Zimbabwe’s view that Zimbabwe can soar to greater heights by pushing its mining industry alone without inviting external firms as this is exporting the much-needed jobs locally.
Without a doubt, the economic resuscitation rests in the mining sector. The failure by the government to put to life the open for business mantra outside Zimbabwe is an open cheque that the push should be focused on local firms and individuals to invest in the mining sector.
Mining experts believe that it was not the government’s duty in the first place to go around looking for investors, they could have simply opened up policies so that businesses can invest.
According to renowned Geologist, Kennedy Mtetwa for the country to attract both local and foreign investors there are a lot of policies that need to be adjusted for the investor to see the value of his/her investment.
Mtetwa said, investors are not persuaded to invest but are attracted to invest because what’s important is for one to get profit after investing.
For the government to attract local investment in the mining sector monetary fiscal policies should be transparent to the miner.
“First no government goes to look for investors. Only our lot tried that and now they are surprised that they were not taken seriously. Investors simply read about the country’s mining policies and also the monetary and fiscal policies to decide whether to go and invest in a particular country. They don’t need a minister or president to tell
them to come and invest. Investors by their nature get into business to make money right across the globe. If as you say no investors came it’s up to the government to simply align our policies from mining to monetary to fiscal with those countries where these same investors go to invest” said Mtetwa.
This means that for the government to attract local investment, it has to relax issues to do with the monetary policy as a major issue. The current forex retention threshold of 50 percent for other minerals and 55 percent for gold is an elephant in the room. The retention threshold among other factors is believed to be the main push factor that led to the closure of African Chrome Fields and the partial closure of Metalon Gold mines. Zimbabwe at the moment is
producing zero consumables used in the mining industry thus, everything used should be imported yet the forex paid to the miners does not sustain its imports, this, therefore, means that companies would be operating at a loss.
The monetary policies again that are very tight when it comes to a company withdrawing money from the bank are also questionable and should be addressed for local firms to consider mining business.
The government in order to attract local investors should also not try to liquidate foreign currency in-corporate banks due to the instability of the local currency.
Some small scale or medium scale mining firms might want to save to buy expensive mining machines like dump trucks, liquidating of their forex reserves would put them out of business.
Takaedza said there is uncertainty concerning the administration, interpretation, or enforcement of existing regulations and uncertainty concerning environmental regulations, the stability of regulations, consistency and timeliness of regulatory process, regulations not based on science. Takaedza said, there are a lot of grey areas when it comes to the issue of Exclusive Prospecting Orders EPOs.
Application for an EPO takes up to 5 years before they are gazetted. This drains investment because the country is then left without clear geological data.
“At the international level, if a policy does not support exploration (e.g EPOs) then we cannot attract any foreign investment. We have EPOs that we applied for in 2008 and were gazetted in 2013 but they haven’t been issued. So imagine we are a local company being frustrated, what more of a foreign investor” said Takaedza.
There are a lot of inconsistencies when it comes to the enforcement of laws and regulations in the mining sector. There is what can be called the selective application of policy concerning environmental regulations for example most small scale miners are left to mine without complying with full regulations. However, those who would
want to invest as medium scale mining firms or large scale are forced to permit and comply even before they start any operation.
Regulatory duplication inconsistencies can also strain or frustrate investors from in the Mining sector, therefore, should be addressed. It is largely bureaucracy. The office of the District Administrator or local governance would come with their own regulations, while the Ministry of lands would also want to have a say, the Ministry of Agriculture also is sometimes very much involved in the mining business and the traditional leaders also would come with the same laws but different certificates. This can frustrate investors not to invest in the sector.
Investment avenues should be in a One-Stop-Shop to minimize overlaps, bureaucracy, permitting times, and corruption.
For example, RioZim had claims in Devuli which was later turned into the Save Valley Conservancy that keeps wild animals. The company is of late being denied entry and permission to work in the claims even though they are prior peggers and the Ministry of Mines has not intervened as of late.
Takaedza also said that the taxation regime in the country is also another course of concern when it comes to investing in the mining sector in Zimbabwe. The forex retention threshold is another form of taxation which is very painful.
“Our tax is a bit on the high side to attract investment. For example, gold which is partly paid in forex then rest in RTGS. That’s a heavy tax to attract investment. On top of that, there are other taxes in the industry. What we need is to increase the forex allocation to the investor. What we need are exemptions to attract investment” said Takaedza.
The government needs to look at how an investor would gain profit legally without going the way of smuggling minerals out of the country to survive in business. The government should consider the fact that all machinery and other consumables in the mining sector are imported that’s it is cheaper for a mining firm to buy them directly from South Africa than to buy loyally. This is, therefore, a clear indication that the government should relax its taxes, especially on forex retention in order to allow local firms to grow.
The quality of the geological database is also of importance for investors to have easy access to information. The country needs a proper cadastral system. At the click of a button, one should be able to get Geology and Tenure info. This will reduce corruption and the illegal disappearance of geological data or maps.