The Zimbabwe government has “deleted” an amendment to the Finance Act which had given it the power to control at least 51% ownership in mining entities.
As reported by Fin24 last week, the Zimbabwe government had enacted under its laws a section that gave the minister of mines, in consultation with the minister of finance, powers to secure 51% in any chosen mine house through an appropriate designated entity (local shareholders).
The amendment was seen by many as a way of reintroducing the country’s controversial indigenisation laws on the mining sector.
However, following an outcry, the section will now be deleted, meaning foreign entities can now fully own mines in Zimbabwe, including diamond and platinum mines.
A joint statement released by the ministries of finance and mines on Tuesday evening claimed that last week’s notice “may have caused some misconception to some investors and other stakeholders in the mining sector”.
It said the gazetted notice was meant to announce the policy position to remove the requirement for 51% of the shareholding of businesses involved in the extraction of platinum and diamonds to be owned through a designated entity.
“There are no minerals the extraction of which require a business extracting same to have 51% of its shareholding being owned by a designated entity,” the statement said.
But since the notice was interpreted by some to represent a departure from government’s stated position to open the mining sector to investment without the requirement for 51% of the shareholding being held by a designated entity, the Zimbabwe government has decided to completely delete the section.
“To enhance certainty in relation to investments in the mining sector, and consistent with government policy, this insertion will be deleted,” reads part of the joint statement.
Policy inconsistency has been blamed for Zimbabwe’s low levels of foreign direct investments which reached a low of US$259 million (R3.87 billion) in 2019.
Meanwhile, Zimbabwe has granted mining entity Great Dyke Investments (GDI), which counts Russia’s Vi Holdings as one of its major shareholders, a five-year tax exemption.
According to a Government Gazette Extraordinary dated January 27, Finance and Economic Development Minister Professor Mthuli Ncube granted the exemption in terms of the Income Tax Act (Chapter 23:06).
The notice is deemed to have come into effect from 1 January 2020.
“The receipts and accruals of Great Dyke Investments (Private) Limited, as per the Special Mining Lease Agreement signed between the Government of Zimbabwe and Great Dyke Investments (Private) Limited are approved,” reads part of the notice.
Under the first phase, GDI is expected to develop two mines, a concentrator, engineering workshops, storerooms, staff change rooms, portal offices and fuel storage.