Monday, March 21, 2011

Zimbabwe sends mixed messages over mining

As usual, it seems the Zimbabwean government isn’t singing from the same hymnbook, as the saying goes.

During a conference in Harare set up to try to encourage “investment in Zimbabwe,” a slew of mixed messages emerged that cannot have done much to change perceptions that Zimbabwe is a “business unfriendly” destination.

The investment conference attracted hundreds of delegates, among them business people, policy makers, financiers and key overseas players keen to explore business opportunities in the troubled nation.

However, instead of placating international investors, conflicting comments from the two factions in the Zimbabwean government have managed to highlight exactly why it is still deeply risky to invest in Zimbabwe.

On day one, a cabinet minister appointed by President Robert Mugabe’s ZANU-PF party said the power-sharing government resolved to form a “sovereign wealth fund” by nationalizing the majority of the mining sector to raise funds for development.

He said: “We have been careful to implement this. This Friday we are gazetting the minimum threshold for the mining sector. We need the 51% (equity) to come into our sovereign wealth fund. We are all agreed as a government.” On day two of the conference, Prime Minister Morgan Tsvangirai – his party the MDC is a joint member of the “unity government” with Robert Mugabe’s ZANU-PF – quashed any talk of the imminent implementation of the controversial Indigenization Bill, in which foreign-owned companies will be expected to hand over some control to black Zimbabweans.

Underpinning the divisions in the government, Tsvangirai contradicted the comments of the cabinet minister. According to Reuters, he said Zimbabwe's cabinet had not yet decided minimum ownership thresholds for foreign companies. He also apparently said that the government had not yet drawn up detailed plans on a proposed sovereign wealth fund to buy majority stakes in foreign mining firms.

It is virtually impossible for the Zimbabwean government to speak with one voice about the country’s investment future.

The reasons are complicated – however, much of this division is down to internal politicking.

Zanu-PF is pushing for an early election and is trying to entice voters by playing up “empowerment” policies. Also, constantly second-guessing MDC efforts to encourage investment makes Tsvangirai and his party look ineffectual and unable to deliver economic stability for local Zimbabweans.

Does all this mis-talk matter? Will the big mining companies continue as usual? For example, a company like Rio Tinto is well schooled in managing political risk. Just how much of a deterrent is this instability to investors?

And what if a certain type of international investor doesn’t really care what either MDC or Zanu says publicly? Newsday, a Zimbabwean daily, is reporting that the United States has warned the Zimbabwean government over doing any uranium deals with Iran after another cabinet minister allegedly said about Iran: “If we can work together on uranium mining, it will improve the economic situation of both countries.”

Zimbabwe mining

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