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.
New President Emmerson Mnangagwa has a lot to prove as he seeks to revive the economy and attract mining investment that shriveled 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 reached as much as $6 billion since Mnangagwa’s appointment, including a record $4.2 billion pledge from a company linked to mining entrepreneur Loucas Pouroulis for a platinum mine and associated infrastructure.
“It’s going to take a lot more confidence building before you get majors investing big monies,” said Ben Davis, a London-based analyst at Liberum Capital Ltd. “They need a bit more certainty, and that can’t just happen with words.” Zimbabwe has the world’s second-largest platinum reserves after South Africa, as well as large deposits of lithium, coal, gold, diamonds, chrome and nickel. A lot of the resources are at shallower depths compared with South Africa, where the easily-accessible ore has been mined out.
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 percent locally owned. 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, said 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 said. “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 Ltd., which owns the Unki mine and is building a smelter in Zimbabwe, needs to see “more color” before taking further steps, Mark Cutifani, the chief executive officer of controlling shareholder Anglo American Plc, told analysts in February. An Anglo Platinum spokeswoman declined to comment further last week. Impala Platinum Holdings Ltd. sees the new government’s attitude as “very positive,” but won’t be investing in a platinum refinery despite government pressure, CEO Nico Muller said in early March.
Zimbabwe needs to make sure that the mining-law overhaul is thorough, as investors will be suspicious of superficial changes, said Charles Laurie, director and head of politics at U.K.-based risk-advisory company Verisk Maplecroft. “A high-risk, high-reward frontier mindset — for at least the near-term — will be the order of the day for all investors considering Zimbabwe,” Laurie said.
Sources and photo-credits: Bloomberg with assistance by Paul Burkhardt