Investor-friendly policies needed: Moyo

via Investor-friendly policies needed: Moyo – The Zimbabwe Independent September 11, 2015

AUSTRALIAN mining investors made it patently clear at the Paydirt Africa Down Under mining conference last week in Perth that Zimbabwe is not on their investment plans, saying it was a risky investment destination due to lack of policy clarity and consistency as typified by the indigenisation laws. Zimbabwe Independent news editor, Faith Zaba (FZ) spoke with Mines and Mining Development deputy minister Fred Moyo (FM) at the conference on various issues, including the indigenisation policy blamed for repelling investors. Find below excerpts of the interview:

FZ: Zimbabwe was not mentioned even once in all presentations made by mining executives at the mining conference. What are you going to tell the mining investors to convince them to invest in Zimbabwe when you engage them?
FM: The first thing that we need to do is to deal with strategic areas that government is currently addressing. I think it’s important in that it will give context within which we have to develop our resources. Areas are also captured by our new bill (Mines and Minerals Amendment bill). If we don’t do that, then it is going to become a challenge because all investment will be in that context.

FZ: It’s going to be an amendment bill?
FM: It may be viewed as amending or total repealing, depending on the impact the changes it will have. Broadly we needed to re-emphasise, like all other countries do, that ownership of minerals is vested in the state and that minerals must be developed equitably — equity, obviously to the developer, to the environment, to the community and to government. So it must be equitable to all these interest groups.

We need to ensure that tight tenement is managed through cadastern (a public register showing details of ownership and value of land for the purpose of taxation). We also need to make sure that the minerals are effectively defined in order for us to exploit them well. So that brings in the issue of exploration. We formed the exploration company as you know, which behoves us to repeal the MMCZ Act in order to make sure that MMCZ is also focused not only on marketing the mined minerals, but also the resources in the ground.

We need to effectively account for revenues from minerals. This must be done transparently. Our tax system must also be clear, consistent as much as possible and also simple. Simplicity is important for administration of the resources.

FZ: There has been growing concern from potential investors from many countries over the indigenisation policy. What needs to be done?
FM: People have not understood why the 51% (equity that must be ceded to locals). I think what is at stake is not so much the capital that is invested, but I think it’s the control that the investor is worried about. Let us say the 51% is made up of part government, part local entrepreneurs, part the community, part the employees, the investor who is at 49% would probably be the single main shareholder. Putting that aside, we also have agreements that are separate from the equity structure, and most critical agreements are shareholder agreements.

You have commercial agreements, I think these are critical. In other words, you may be the main shareholder, but if there is someone who has put money in there and if they are going to get the money in 20 years, you may have an agreement with the partners on how they are protected, how they will operate.

You have an equity structure, but that equity structure is implemented by the shareholders’ agreement which could still say if one has 49%, it could say you chair the board, you have the finance director. It’s quite a flexible policy.

FZ: Is this what is there, or it’s something you are looking at?
FM: Look at the diamond mines as an example; you find that all the chairpersons of the boards are in fact external companies. If you look at the management, it is actually the external companies. It is already in practice. We have not heard from one person who has felt that the 49% stake has been used unfairly on them.

FZ: But investors are still raising issues around the 51% as they would have risked huge amounts in capital.
FM: We are saying after drilling, we find that there is US$3 trillion worth of minerals, but to mine you need US$200 million capital. Why is the US$200 million more important than the US$3 trillion in the ground? Naturally you are buying into this thing. Their argument is that while you are buying into a non-bankable resource, you are taking a risk. It’s an issue I guess, if investors continue to feel they are not too clear enough on the requirement. I think one of the issues is clarity, explanation, our own ability as various ministers to explain; maybe that issue needs attention so that we speak with one voice, we are clear and we are consistent.

FZ: Should we not be addressing investor concerns over the Indigenisation Act as a matter of urgency given our desperation for foreign direct investment and the country’s economic meltdown?
FM: I don’t know whether in effect the authorising minister is not listening to proposals. The destination has always been 51/49%, but there are other ways of doing it. If you listened to (Indigenisation) minister (Chris) Mushohwe, he said in all other spheres except the extractive industry and land, are subject to exemptions, so the Act is flexible. Maybe this whole thing should be reduced from that legal language as it is now to implementation language, so that we can all read and say this is how it is going to be done.

FZ: Why is our foreign direct investment so low compared to other countries in the region?
FM: We had these socio-political problems with the West. I think that is clear, nobody was visiting us, no money, no interest, semi-blockade. I think instead of dwelling on the past, we need to move forward.

FZ: What do we need to do to prove Zimbabwe is the place to invest?
FM: I think what we are doing right now, to sell our story. But when we have sold our story, people must feel what we have said. We don’t want to say this is what we are going to do, and then fail to do that. In other words we must craft friendly policies for internal and external investors. When people show interest, we must be consistent and have clear policies.