In a bid to attract Foreign Direct Investment (FDI), Zimbabwe’s government has amended its Indigenisation and Economic Empowerment Act, which controls the diamond and platinum mining sectors. Previously, foreign investors were not allowed to own more than 49% of company shares in these two sectors but now local shareholding will be negotiated while foreign investors are also allowed to own up to 100%.
Addressing a business forum in the capital Harare, President Mnangagwa said, "Under my administration, Zimbabwe has liberalised investment conditions by repealing the Indigenisation and Economic Empowerment Act. This now allows for greater investment in all sectors."
Economic analyst Brains Muchemwa told 7dnews that, “Repealing of the Indigenisation and Economic Empowerment Act was to pacify sentiments that viewed the act as an impediment to FDI at a time when the country desperately needed foreign capital to industrialise and grow its infrastructure base.”
Last year, while addressing delegates in Davos, Switzerland at the World Economic Forum (WEF), President Mnangagwa told the gathering that Zimbabwe was ‘open for business’ but that his country’s diamond and platinum sectors would remain under Indigenisation laws. This meant any investor in these critical sectors was by law mandated to surrender 51% of their equity at zero cost to indigenous Zimbabweans.
However, the government decided to review its earlier position on the Indigenisation and Economic Empowerment Act when Minister for Finance and Economic Development, Mthuli Ncube, announced his Mid-term Fiscal Policy Review in the capital recently.
“Government, through the 2018 Finance Amendment Bill, amended the Indigenisation and Empowerment Act and platinum and diamonds are now removed from the reserve list and shareholding will depend on negotiations with investors,” said Ncube
“Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act”, he explained.
Ncube went on to say that, “The attainment of this milestone is not an event but a process, which is well underway with concrete start-ups and expansion of projects in a number of minerals, which include platinum, gold, ferrochrome, coal and hydrocarbons, lithium, diamonds, iron ore, among others.”
The changes to the Indigenisation law came in the annual Finance Act, which is only supposed to deal with fiscal issues. However, the amendments were carried out through Parliament and are now gazetted as law.
Previously the Indigenisation Act reserved sectors were for “indigenous Zimbabweans” but the new law states that these reserved sectors are now for “Zimbabwean citizens”. This means any race, as long as they hold Zimbabwean citizenship, is allowed to access the privilege.
The new and more investor-friendly Economic Empowerment Act guides interested local entities and individuals to negotiate shareholding terms with prospective investors.
Section 3 of the amended Act ensures that in the course of time at least 51% of equity will be owned through an appropriate designated entity, like the Zimbabwe Mining Development Corporation, the Zimbabwe Consolidated Mining Company and the National Indigenisation and Empowerment Fund.
The diamond and platinum sectors have been removed from the reserve list as full enactment of the new Economic Empowerment Act governing the sector is in process. Zimbabwe is determined to change its stance in a bid to enhance the attractiveness of its minerals sector in line with the country’s ‘open for business’ programme.
Recently, the government secured a number of mining investment deals, the latest being a joint venture agreement between Russian company Alrosa and state-owned diamond miner, Zimbabwe Consolidated Diamond Company.
Zimbabwe’s diamonds have previously drawn negative scrutiny from the Kimberly process due to the many allegations of military-instituted deaths involving artisanal miners. The country is home to the world’s second largest known platinum deposits after South Africa, while diamond reserves are also estimated to be the second largest after Russia.