Vengai Madzima (VM) is a Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal) and has weekly discussions with NewZimbabwe.com on legal issues that affect Zimbabweans living in the diaspora. These discussions are of a general nature and those seeking specific legal advice should contact their lawyer.
Reporter: Welcome back Mr. Madzima, this week we want to discuss on the acquisition of mining rights by foreign investors. Is it safe to do so?
VM: That is the million-dollar question that will be on the investors' minds.
Our current investment laws were specifically crafted to answer that question by putting in place safeguards that secure or ensure the safety of foreign investments in Zimbabwe. A foreign investor must get an investment licence to protect their investments against expropriation or nationalization. The foreign investor upon acquiring such licence will enjoy the same benefits and protections a local investor enjoys in Zimbabwe. These protections are added to the normal legal recourse the investor enjoys through access to our legal institutions.
Having said that, the investor will also enjoy on registered investments the ability to repatriate total profits, dividends and capital to their home country.
Reporter: What is the government's position regarding the indigenization of mining rights?
VM: All minerals are open to 100% foreign or local ownership.
Our laws have evolved from the previous position where a foreign investor could own only 49% shares in mining titles to the current position where the Minister of Mines in consultation with the Minister of Finance is empowered to designate which minerals can be subject to indigenization. At present, there are no minerals that have been designated for indigenization.
The only potential limitation may be with strategic minerals. The government's thrust at the moment is towards the beneficiation of the minerals as opposed to indigenization in its strictest sense. Recent policy is aimed at incentivizing mining companies to improve and develop the minerals within Zimbabwe as opposed to the export of raw mineral ore.
Reporter: What mining titles are available for investment?
VM: There are a variety of titles and stages an investor can opt to invest in. Generally speaking, there are prospecting licences, registered claims either held as single claims or contiguous blocks, special grants, mining leases and special mining leases. Each will require its own type of due diligence and different considerations before investment.
Reporter: When conducting a due diligence exercise before investing in a mining title, what are the general considerations?
VM: The issues to consider when conducting due diligence on a mining title vary depending on whether it is a brownfield or a greenfield. Generally, the prospective buyer or investor has to verify ownership of the title and whether or not the seller can dispose of the whole or portion of the title without requiring approvals.
As a mining claim is mainly about the minerals within it as opposed to the size of the surface land, a geological report confirming that the targeted mineral is available in the specific location is necessary. It is therefore preferable that the geological report is concluded on the instruction of the investor and not the Seller's report, if there is one, as this should only be used for guidance.
There is a need to review documentation relating to the mining location, this may include previous agreements entered into by the current holder which relates to the mining location, environmental impact assessment reports affecting the mining location, court judgments or decisions by the provisional offices, tribunals on issues to do with the mining location example boundary disputes etcetera.
A mining production due diligence is necessary on brownfields to measure projected output against actual output and determine the reasons for the variance if any. This should be accompanied by a financial due diligence.
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Reporter: Are there any incentives available for foreign investors in the mining industry?
VM: There are a variety of incentives available to foreign investors in the mining industry. This includes various tax incentives from reduced taxes to exemption on certain import duties for mining equipment. We already discussed the current waiver of the application of indigenization laws in this sector which is an incentive on its own and protections that accrue from holding investment licences.
On capital-intensive mining projects, the investor and government can negotiate specific incentives relating to or unique to that particular investment.
Reporter: Thank you, Mr. Madzima we have to end here because of our time.
VM: Thank you.
Vengai Madzima can be reached at vengai@mcmlegal.co.zw or www.mcmlegal.co.zw.
