The mining sector, along with every other key economic sector in Zimbabwe, was affected by the international condemnation of 2008’s disputed general election, which was eventually won by President Robert Mugabe. However, the fact that opposition leader Morgan Tsvangirai chose not to fight a second round run-off election, citing fears for his supporters’ lives, means that Mugabe’s continued hold on power is by no means assured. When this report went to press, there were ongoing discussions between the government and opposition, Movement for Democratic Change (MDC) as to how a possible future transfer of power could be achieved. In this regard, Mining Weekly quoted exiled MDC treasurer, Roy Bennett, as saying that business deals agreed with the Mugabe government over recent years will be ‘scrutinised and dealt with accordingly’ if the MDC comes to power.

Speaking in late June, Bennett said scrutiny would be aimed at identifying companies that have ‘aided and abetted’ Mugabe, although other companies that have ‘followed good business ethics’ would be left alone. One mining concern potentially in the firing line is the AIM-listed Central African Mining & Exploration Company CAMEC (see Latest Developments section on page 9 of this report for more information). That said, Bennett was upbeat on the longer-term outlook for the nation’s mining industry, should the MDC come to power any time soon. Anglo American Under Fire UK-based miner Anglo American continues to come under fire from some quarters for its continued commercial presence in Zimbabwe. The company is developing a US$400mn platinum mine in Unki district, in what would be the country’s largest single foreign investment to date. However, the company remains defiant in the face of criticism, saying that it has been a long-term investor in the nation, and that it remains in compliance with international laws in its dealings with the Mugabe regime.

Some industry observers believe that Zimbabwe’s potential platinum wealth more than outweighs the short-term damage to institutional reputation suffered by companies continuing to operate in Zimbabwe. With Mugabe already 84, there will clearly be a finite end to his rule over the country sooner or later. Given that reality, the longer-term gains from maintaining a commercial presence in the country are clear, especially as a new government will likely want to be on good terms with the existing investors in the nation. The geology of Zimbabwe is very richly endowed. Of the 40 known metals and minerals that it is home to – gold, platinum and chrome form the principal endowments. The country’s gold reserves are among the largest in the African region, while it hosts the second-largest platinum reserves in the world. Another segment that has caught the attention of miners in Zimbabwe is diamonds, after the discovery of a number of significant kimberlites.

For a country long saddled with severe economic problems, the mining industry underscores its importance by earning over 40% of the total export revenues for the nation. Like its African peers, Zimbabwe has not been able to derive the full benefits of its myriad resource base. Chiefly responsible for this is the business-incompatible environment that the country harbours. Persistent hyperinflation, ineffective fiscal policies, and lax regulations characterise the Zimbabwean economy, as a result of which the country is viewed as a high-risk destination. Illegal smuggling of gold and diamonds also translates into revenue losses of millions of US dollars. All these factors indicate the need for the government of Zimbabwe to adopt a progressive outlook for the country’s future, and to align its laws and regulations to complement the economy. The Ministry of Mines and the Zimbabwean Chamber of Mines are the regulatory bodies governing the mining industry, while it is the Environmental Management Agency that deals with environmental issues in mineral exploitation at the project inception and development stages. A new mining empowerment legislation is on the horizon, and will permit Zimbabwean nationals to claim majority stake in foreign companies. However, the impending legislation is not finding favour with the majority of players as it is perceived to be another blow to the already frail investment environment of the country. Industry Forecast The recent surge in metal prices – especially of gold and platinum – has been a boon for the mining industry of Zimbabwe. However, even if the political regime changes, the investor-unfriendly policies of recent years will cast a long shadow over the performance of the mining industry this forecast period. According to this report, the industry is forecast to register an average annual contraction of 1.5% during 2008-2012.