Financial Gazette (Harare)
Dumisani Ndlela
13 June 2007
Harare — GOVERNMENT'S plan to lure foreign direct investment in the country's resources sector appears to have been derailed by apprehension over its indistinct ambitions of empowerment in the sector as well as acute foreign currency shortages.
Mining industry players said several mining operations had put on hold planned expansion programmes, suggesting that international financiers, previously keen on underwriting projects in the sector, had become tight-fisted due to increasing risk and security concerns.
Several mining houses pledged to pour in millions of dollars in the sector after the Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono unveiled in 2004 a cocktail of proposals he said were meant to trigger growth in the mining sector through fresh investments.
Gono had proposed to allow mining companies with foreign shareholders easy access to foreign currency for the repatriation of dividends, as well as a guarantee to pay back investors their capital if they decided to pull out of the country.
The RBZ had also pledged to liase with the Ministry of Mines to explore the best way of ensuring that mining companies could be protected from forcible seizures.
South Africa's Mzi Khumalo's Metallon Corporation had submitted its investment proposals amounting to US$100 million after assurances that the guarantees were likely to be in place before 2005.
Metallon anticipated floating its Zimbabwean and South African gold assets on the London stock market and use the proceeds from the float to augment its asset base, which is currently too dependent on Zimbabwean mines.
Khumalo's proposal was to invest close to US$15 million in the acquisition and expansion of Metallon's Zimbabwean mines.
Impala Platinum pledged about US$700 million to develop its platinum mines in Zimbabwe over a five-year period.
Additionally, its Zimbabwe subsidiary, Zimbabwe Platinum (Zimplats), in which it holds
an 87 percent stake, also sought to spend US$2 billion over 20 years to exploit its platinum deposits on the great dyke belt.
Zimplats' ambitious project -- which would be the biggest ever in Zimbabwe -- involved the construction of a thermal power station at its current operations in Selous, that would help alleviate Zimbabwe's power crisis.
The government was going to be offered surplus power, and even a stake, in the power plant.
The US$2 billion project also involved expansion over 20 years, which would boost platinum output to well over one million ounces per annum, from current levels of around 85 000 ounces per year.
Eight new underground mines would be opened during the first phase of the expansion covering the area at the Ngezi Complex, according to details of the project, whose approvals have also not yet been granted by the government.
But besides government approvals, sources said the ambitious projects had delayed taking off because of concerns over government's targets for empowerment as well as the failure by Zimbabwe to sign a bilateral accord with South Africa that would protect the rights of South African investments.
The accord has not yet been signed although reports suggest it was ready to be signed two years ago.
Industry players said several projects were grounded because of increasing investor concern over government's planned legislation on mining sector empowerment.
Gono indicated in January that successful attraction of regional and intercontinental capital required "freeing the economy of any apprehensions on the security of private and foreign investments".
"The progress on the implementation of bilateral investment protection agreements has not been encouraging, notwithstanding the explicit aspirations and directions long given to the relevant authorities in government by the country's leadership," Gono said.
He has repeatedly called for the enactment of legislation related to empowerment in the mining sector to create certainty among investors and unlock investment currently held because of lack of clarity on mining sector empowerment.
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