New Legal Developments On The Horizon For Foreign Mining Companies In Zimbabwe

In recent weeks, reports have emerged of two proposed legal developments in Zimbabwe that may raise concerns for foreign investors in the country's mining industry.

On April 23, 2013, news agency Reuters reported that Zimbabwean President Robert Mugabe's political party, Zanu-PF, had proposed a new law that would amend Zimbabwe's Indigenisation and Economic Empowerment Act (the "Indigenisation Law")1 to permit the uncompensated expropriation of foreign-owned companies in the country's mining sector.2 The Zimbabwe government quickly denied that the amendment had been published.3

The reported amendment, if approved by Zimbabwe's Parliament, would constitute the latest development in the country's indigenisation policy, which under the Indigenisation Law and its implementing regulations requires foreign-owned companies to offer majority shareholdings to indigenous Zimbabweans.4 Implementation of Zimbabwe's Indigenisation Law has reportedly proved difficult due to both a lack of clarity in the law and the state's apparent inability to finance the transfers of share ownership.5

Despite these challenges, segments of Zimbabwe's mining industry experienced a strong recovery last year, with production increasing at a number of mines.6 Mining companies have expressed concerns that the amendment would affect deals already reached with the Zimbabwe government and limit foreign miners' capacity to invest in the further expansion of mine production.7

More recently, during the week of May 5, 2013, several news sources reported that Zimbabwe's Ministry of Mines and Mining Development had circulated a draft minerals policy document and initiated consultations with foreign mining companies.8 The new policy would reportedly subject foreign mining companies to significant new regulations and higher taxes.9

As reported, there are several significant aspects to the new minerals policy. First, Zimbabwe would award mining licenses on the basis of mineral deposit auctions and could restrict the output and prices of minerals identified as strategic.10 Second, Zimbabwe would have marketing authority for the mineral output and could vest companies with exclusive marketing rights for certain types of minerals.11 Third, the current mining tax regime would be scrapped—the Additional Profits Tax would be replaced by a Resource Rents Tax, while existing fees and royalties would be subject to review.12

It is uncertain whether the Zimbabwe government will implement either...

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