THE protracted dispute between RioZim and the military, as well as a company owned by Pakistani nationals Falcon Resources over chrome mining claims in Darwendale, Mashonaland West province is a blow to President Emmerson Mnangagwa’s drive to lure investment into the country and stem the rapid fall in foreign direct investment.
RioZim won its protracted dispute with the military and Falcon Resources in a recent ruling by the Supreme Court.
The dispute started sometime in August 2018 when Defence and War Veterans Affairs minister Oppah Muchinguri declared RioZim’s mining claims a cantonment area and offered them to Falcon Resource, which was a violation of the law.
The grab of the mining claims by Muchinguri is a violation of property rights. This has been a major factor in the country’s dismal performance on the investment front.
Since Mnangagwa won the disputed elections in 2018, FDI has plummeted from US$717,1 million in that year to US$259 million in 2019.
In his mid-term budget statement in July, Finance minister Mthuli Ncube projected that FDI would plunge further to US$150 million this year.
The nosedive in investment figures is occurring at a time Mnangagwa’s government has set up the Zimbabwe Investment and Development Agency (Zida) following the signing into law of the Zida Act (2020). The Act deals with the promotion, entry, facilitation and protection of investment in Zimbabwe
The RioZim dispute, however, will only result in investors giving the country a wide berth according to business consultant Simon Kayereka.
“Disputes like the one involving RioZim and the military stinks to high heaven and will almost certainly result in investors scurrying away,” Kayereka said.
“RioZim is an established mining house and has been around for a long time. How can the ministry declare the claims as being in a cantonment area and then redistribute the same to other players? The failure to respect the sanctity of private property goes to the core of our investment problems. The whole episode smacks of favouritism and cronyism. Kudos to the Supreme Court for scuppering the deal.”
Premier African Minerals has also expressed frustration over delays by government to grant it an exclusive prospecting order (EPO) for its Zulu Lithium and Tantalum project, dimming the country’s prospects of being deemed a safe and viable investment option.
In a statement accompanying the company’s annual report for the year ended December 31, 2019, chief executive officer George Roach said they were frustrated by the government’s delay to grant it an EPO.
“There remains no doubt in my mind that Premier African Minerals Limited must diversify its exploration portfolio and identify revenue-generating assets that are actually in production and profitable now,” Roach said.”
“The initial part acquisition of MN Holdings Otjozondu Mine in Namibia was a significant first step in the midst of the ongoing and very disappointing delays in Zimbabwe.”
He said dependence on exploration activities based exclusively in Zimbabwe where country risk and delay deny the opportunity to add value, is clearly “flawed yet exploration remains the best opportunity for substantial value generation and recovery in our company”.
Red tape and corruption are the major obstacles to significant investment in the country according to analyst Dumisani Nkomo.
“Corruption, red tape and interference by bigwigs are a huge deterrent to FDI inflows in the country. These are the things that have always scared away investors,” Nkomo said.
“Investors want stability, respect of property rights without political interference.”
He said the Zida policy is like all the other policies that are “beautiful in structure but are never implemented”.
The abrupt suspension of the Zimbabwe Stock Exchange for more than a month on allegations of illicit activities, as well as halting the fungibility of three counters, namely Old Mutual, Seed Co and PPC, has further sapped investor confidence. This is evidenced by the bourse losing a massive ZW$42,5 billion (US$524,691 million) shortly after the suspension was lifted as investors abandoned the ZSE.
To compound the problem of policy inconsistency, the Zimbabwe government has been accused of gross human rights abuses, which include the arrests of political opponents and activists, who include Transform Zimbabwe leader Jacob Ngarivhume, journalist Hopewell Chin’ono and MDC Alliance deputy chairperson Job Sikhala, as well as alleged abductions of civil rights activists, opposition party members and even comedians.
This has prompted widespread condemnation from various quarters, which include the European Union, the United States and the United Nations, the African Union Commission and the church, further damaging the country’s chances of attracting significant levels of investment.
Concerns raised by investors on whether they will be allowed to repatriate their funds if they list on the Victoria Falls Stock Exchange (VFSE), is an indication that government has a long way to go in instilling confidence that will boost investment levels.
At a Zoom meeting held just before the launch of VFSE with Finance minister Mthuli Ncube, head of research for sub-Saharan Africa at the Russian headquartered Renaissance Capital, Yvonne Mhango, voiced the fears among investors of doing business in Zimbabwe.
“We are an investment bank targeting frontier and emerging markets and our current clients include institutional investors who have invested in these frontier markets, Zimbabwe being one of them. So, we have clients that have invested in Zimbabwe and the main concern has been the lack of ease in terms of repatriating capital and dividends as well as, of course, significant changes in foreign currency policy that has discouraged foreign investors,” Mhango said.
With the launch of the National Development Strategy 1 by Mnangagwa last week, which places emphasis on investment, it remains to be seen whether the economic blueprint will help bring about a much-needed boost to investment.