Nairobi/Harare — While Zimbabwe’s leadership change has sparked a race for the nation’s mineral riches among entrepreneurs and tiny explorers, big-name mining companies are taking a wait-and-see approach.
President Emmerson Mnangagwa has a lot to prove as he seeks to revive the economy and attract mining investment that shrivelled under his predecessor, Robert Mugabe.
So far, Mnangagwa has pledged investor-friendly policy changes and partially rolled back a law requiring mining companies to be locally owned.
It seems to be working, at least in some quarters.
The government says mining commitments have reached as much as $6bn since Mnangagwa’s appointment, including a record $4.2bn pledge from a company linked to mining entrepreneur Loucas Pouroulis for a platinum mine and associated infrastructure.
Others looking to invest include industry veteran Andrew Groves and his business partner and former England cricketer, Phil Edmonds.
SA’s Moti Group is preparing to double its investments in the country to $500m, including in projects ranging from chrome-ore mining to fertilisers and diamond polishing.
For now though, large producers including Anglo American have said more needs to be done on policy before they’ll make big decisions.
Elections later this year will also be a big test for Mnangagwa and his government.
"It’s going to take a lot more confidence building before you get majors investing big monies," says Ben Davis, a London-based analyst at Liberum Capital.
"They need a bit more certainty, and that can’t just happen with words."
Zimbabwe has the world’s second-largest platinum reserves after SA, as well as large deposits of lithium, coal, gold, diamonds, chrome and nickel.
A lot of the resources are at shallower depths than in SA, where easily accessible ore has been mined out.
"This is yesterday, that’s tomorrow," Moti chairman Zunaid Moti said in an interview last month, comparing mining potential in his home base of SA with that of Zimbabwe. "It’s virgin."
Investment slowed as tough local-ownership laws combined with Mugabe’s threats to nationalise mines and seize the land they owned, while compelling operators to build pricey refineries.
Mines faced perennial power outages because the state utility wasn’t paying debts to foreign suppliers, and a weaker platinum price in recent years reduced the incentive for investment.
Mines Minister Winston Chitando said at a Johannesburg conference last week that changes to the mining laws should be passed before the end of May.
The new administration has changed local ownership rules so that only platinum and diamond mines must be 51% locally owned.
A high-risk, high-reward frontier mind-set — for at least the near term — will be the order of the day
Bigger investors will be watching Zimbabwe’s elections later this year and will probably adopt a "wait-and-see attitude" until regulatory guarantees are in place, says Jee-A Van der Linde, a mining analyst at NKC African Economics.
"It is difficult to simply forget the chronicles of the Mugabe era," Van der Linde says.
"The new administration will be better off scrapping regulations that are discouraging to investors, instead of boasting about the country’s potential at investment conferences."
Anglo American Platinum (Amplats), which owns the Unki mine and is building a smelter in Zimbabwe, needs to see "more colour" before taking further steps, Mark Cutifani, CEO of controlling shareholder Anglo American, told analysts in February. An Amplats spokeswoman declined to comment further last week.
Impala Platinum saw the new government’s attitude as "very positive", but would not be investing in a platinum refinery despite government pressure, CEO Nico Muller said in early March.
Zimbabwe needs to make sure the overhaul of the mining law is thorough, as investors will be suspicious of superficial changes, says Charles Laurie, director and head of politics at UK-based risk-advisory company Verisk Maplecroft.
"A high-risk, high-reward frontier mind-set — for at least the near term — will be the order of the day for all investors considering Zimbabwe," Laurie said.
Bloomberg
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