Soon after coming to power in 2017 one of the first major economic decisions President Emmerson Mnangagwa made was to announce he was ditching the 51% local ownership rule for foreign investors. Businesses could now own 100%, he said, as he drove his “Open for Business” campaign.
But now, as many African economies swing towards resource nationalism to get more from minerals, there is a gear shift – the Ministry of Mines now says it plans to hold 26% of future mining projects. According to Mines Secretary Pfungwa Kunaka, the government will also negotiate with current operators to acquire the shareholding.
“There is a general position which is there like in the case of mining we need to move to a level where we reach 26% shareholding in most of the big projects,” Kunaka told Bloomberg in an interview. “We have some situations where there are already some existing mines and new mines that we will come on board. A lot of these things would take negotiations with the investors that are on the ground.”
Government would negotiate with miners on how to structure the shareholdings, says Kunaka.
“Obviously when you have decisions which were made some years back and decisions were made on the basis of a certain framework you cannot just, willy nilly, go and change that it takes negotiations,” he added.
Previous attempts to force miners to sell stakes to locals under the “indigenisation law” largely failed. This was partly due to bureaucracy and corruption by senior officials trying to shake down investors in exchange for approval of indigenisation policies.
What’s happening in other countries?
Zimbabwe’s plan chimes with trends across the continent, where governments are demanding larger shares of resource projects. This year, Zambia announced a new strategy that would see a state-owned company control at least 30% of future critical minerals mines. While existing mines may be spared, Zambia’s Chamber of Mines is opposed to the move and says it “will seriously undermine property rights”.
In Tanzania, the government gets at least 16% in mines for free, with the option to acquire up to 50%. In 2021, Namibia announced that 15% of all new licences should be locally owned. Ghana sets aside 10% in mines for government; when it licensed its first lithium mine last year, it took a 13% free stake and an option to buy another 6%.
In Botswana, the law allows the government an option to buy 15% of mining projects. Last year, a new law was proposed that would compel mines to sell 24% to citizens if government does not take up its options.
What would the Govt stake look like?
A possible model could be in the way the government got a stake in Karo Platinum, which is building a US$391 million mine at Selous.
The Zimbabwe government has a free-carry 15% stake in the Karo project, through the sovereign wealth fund, Mutapa. Free carry means that the government doesn’t have to pay for the shares or contribute any equity capital. Government also has the option to buy another 11%. Had the government exercised that option in 2022, when development began, it would have had to pay US$84 million for the 11%.
Impact
While government stakes are no longer unusual on the continent, it is another policy shift to add to miners’ many worries about Zimbabwe’s investment climate. The Chamber of Mines was already concerned at how slow government has been in formalising the removal of the 51% from the law. The change would be happening just when investment in sectors such as lithium and platinum have slowed down due to commodity prices. Miners raise money through loans and from shareholders. For investors, a shareholder holding 26%, with no obligation to contribute money, will act as an extra cost, at a time capital is hard to find.
Karo, for example, has spent US$131 million on the project so far and expects to spend another US$180 million this year.
