admin
Zimbabwe has built itself up as the world’s third largest platinum producer with three operational mines plus three more in various stages of development and a seventh still in the feasibility stage by its investors.
Up to now the large investment required has come from outside Zimbabwe, a factor that caused a hiatus in investment at one stage when ambiguous policies made new investors hesitate and caused established investors to be more wary of expansion.
But the Second Republic quickly put that right as it came into office, making it clear that external investment that was fair to Zimbabwe, the labour forces employed by the mines and the mining companies themselves was seen as desirable with the legal and administrative changes then introduced converting the pro-investment policy into a pro-investment administrative programme.
The four new companies who came in to set up four new mines showed the effectiveness of the new programme with their response.
All four at the beginning were driven by foreign investment, as could be expected in a capital poor country like Zimbabwe.
But since then geo-political events have seen one external investor pull out, a Russian company keen on the Great Dyke Investments Mine in Darwendale.
This was not because Zimbabwe was seen as a risk, or that the investment was dubious or that there was any Zimbabwean pressure on the Russian investor.
The problem was solely in light of the capital available to sections of the Russian industrial bases in light of the conflict in Ukraine, and the fact that the Russian investor was as a consequence squeezed and wanted to pull out, which is allowed, but Zimbabwe’s detractors should note it was the investor pulling out under its own national circumstances, and no one in Zimbabwe pushing out the investor or making life difficult for those willing to invest.
However, a rather remarkable second event has now occurred, arising from another Second Republic measure, the creation in partnership with our own private sector of Kuvimba Mining House.
This was originally established to help resuscitate viable mines that had been run down or abandoned, and then once the cash flows from these certainties started being available to move into excellent new investment.
By the look of things the expansion in the assets and financing of Kuvimba came just in time so that the company could make a serious bid for the remaining shareholding when the Russian company said it needed to pull out, rather than kick start the process of finding another external investor at short notice who could take over the Russian share. While Zimbabwe is an attractive investment destination, especially in the mining industry, it is now so large that those who are keen on new investment are already in the stages of commitment or construction.
One factor that would have made the takeover easy was the fact that almost all mining companies and mining investors operating in Zimbabwe use local skills and talent, with only small teams of external engineers, geologists and technicians needed to pad out the development teams at the beginning, and even these tiger teams are these days on the small side.
This huge build up in employment in the mining sector is one of the first three major benefits of the solid investment policy into mining.
All established mines and most of those still being developed use local staff almost exclusively, so the gains are very early. This large and growing pool of top-notch mining skills is one of the reasons for the both the increase of investment, once the Government made investment a relatively open and simple process, and the speed of development.
While external investors have to be careful not to underpay Zimbabweans, the costs are always lower for local staff.
For a start they do not need expensive home leave, do not need special arrangements to have their children sent to expensive schools back in the “home country”, and do not need to be continuously cycled and replaced as they come to the end of their short term expatriate contracts.
The second and third advantages are more general. The expansion of mining sees the expansion of the economy, and in particular the expansion of exports.
This has seen Zimbabwe move into the position where net inflows of foreign currency are greater than net outflows, meaning that the fundamentals are in place.
The mining tax structure these days is largely built on royalties, a modest percentage of the gross output, and these days some of that needs to be paid in processed metals to build up reserves.
Zimbabwe has followed most other countries where the State owns the mineral rights in charging fixed royalties as these can be collected easily, openly and without disputes.
Mining companies are also expected to pay taxes on profits, but there are a number of policies that reduce these, from funding investment onwards. But royalties take care of any problems.
Zimbabwe’s royalty percentages are roughly in line with other major mining countries, so this is a neutral factor when investors are making their feasibility studies.
The actual fact that a lot of mining is owned by foreign investors, although there is a growing percentage of local ownership, is not a major division in the industry.
There is an additional profit, or a new source of future investment, when a local production house is involved, but this is picking up the profit on the actual investment money. One interesting new idea in the Kuvimba investment at Darwendale is the decision to use general housing and mortgage finance to build the initial mining town.
This may be part of the need to assemble the very large investment sums required from multiple sources, but also as Kuvimba notes will allow the miners at Darwendale to own their own homes.
This is possible at that site anyway, since Darwendale is on the main north-south corridor and is close to the huge metropolitan region of Harare, so even if the platinum in the area is mined out in 50 years the houses will still be a good investment for the children and grandchildren of the first generation of miners as industrial workers seek somewhere to live.
This sort of innovative financing should be pushed, at least where the circumstances make it a good idea.
While we welcome incoming investment, it is also pleasant to be able to build up our own pools of assets as we learn to mobilise our own money.
Online Reporter