By:Africanmining

Vengai Madzima (LLb, LLM – Comparative Business Law) is the senior partner at Madzima Chidyausiku Museta Legal (MCM Legal) responsible for the Mining, Property and Estates Division. He has in-depth experience in mining law having lectured on the subject at a local college and with practical experience in the sector, including being a CEO of an international ferrochrome producing company.

AM: What practical insights did attendees at the Africa Influence Exchange Zimbabwe Mining Masterclass benefit from?

VM: Attendees received an in-depth tutorial on the mineral geology of Zimbabwe, including the exciting discoveries of previously unmined minerals in the country and their significance to the global and Zimbabwean economic growth projections. In addition, the regulatory framework governing the mining industry was analysed, together with the recent statutory amendments and case law affecting mining and the industry. The presentations on the back of recent legal developments gave the attendees insights on anticipated policy changes and the likely direction the Zimbabwe mining industry is heading, providing attendees a useful advantage when considering projections for long term mining projects. Attendees also benefitted from a detailed breakdown of the changes in Zimbabwe’s investment laws and step by step guidance on the investment process for foreign investors wishing to invest in Zimbabwe. The masterclass was all encompassing, as it also discussed post investment regulatory issues that may affect the mining investment, including but to limited to, Zimbabwean environmental laws and policy issues around them, community engagement and employment law, which are critical from a compliance perspective to ensure a successful venture.

AM: Could you summarise the regulatory framework applicable to the mining industry in Zimbabwe for us?

VM: The Mines and Minerals Act [chapter 21:05] is currently regulating the industry. The industry is expecting the adoption of a new Mines and Minerals Bill that will be more aligned to the progress and socio-economic development of the industry while containing in the same document, enacted and projected amendments to the current Act. There are also regulations that emanate from this Act which must be considered together with the Act. These include the Mining (General) Regulations, the Mining (Health and Sanitation) Regulations, the Mining (Custom and Milling) Regulations and the Mining (Management and Safety) Regulations. Knowledge of how our courts have interpreted the Act in various circumstances is useful in understanding our regulatory framework. Since most mining is executed in areas under the jurisdiction of local chiefs, headmen and rural populations, an understanding of customary law and relations is useful to any mining operation.

AM: What recent revisions have been made to the Mines and Minerals Act that are of interest?

VM: The recent revisions or amendments to the Act have to be understood from the position that parliament and the government of Zimbabwe intend to have a wholesome overhaul of the current Act as it does not reflect the socio-economic evolution of the country, the industry and its people. The current Act was a response to the socio-economic factors affecting the country at the time of its promulgation in 1961. Successive parliaments since 2012 have been working on the Mines and Minerals Bill to make it more responsive to the calls of our times. The last proposed bill was gazetted in February 2013, however, some of its provisions where constitutionally offensive and the mandate for its review and finalisation was tasked to the current parliament.

Having said that, there are recent amendments to the Act of note which are now in force. These amendments were introduced through the Finance Act thereby amending the provisions of the Mines and Minerals Act. One of the notable amendments being amendment 13 of Finance Act 2013.

This amendment empowered the Minister of Mines and Mining Development to operationalise the collection of royalties in kind and appoint agents responsible to receive the royalties.  A good example of a royalty in kind is the royalty payment for gold, which is paid in actual gold, equivalent to the value of the royalty to Fidelity Printers, the agent will then remit the gold to the respective authorities as well as attend to the necessary accounting for the benefit of the revenue authorities.

The same amendment listed and identified minerals that are strategic to the economic, social, industrial and security interests of Zimbabwe. The initial list of minerals identified as strategic includes diamonds, rare earth minerals, lithium, nuclear energy source minerals, mineral oils, gaseous hydrocarbons, iron ore and nickel.

These minerals are to be mined through a special mining lease where the investor has demonstrated a willingness to invest about USD100-million into the project and is open to the government having a stake in the project. There are exceptions that may be considered to investing these amounts, examples include a confirmation by the director of geological survey that the area being mined or targeted for mining has few deposits which can only be exploited by a small-scale miner.

To promote general beneficiation on minerals, a tax on the export of unbeneficiated lithium and platinum was also imposed. The tax has a reducing scale aligned to the level of beneficiation of the mineral. In summary, the more the platinum or lithium under export is beneficiated, the less the tax on that mineral.  This was also borrowed from the proposed bill and incorporated through the Finance Act.

AM: What main elements are you expecting to remain in the bill that have not yet been introduced through the Finance Act or any other legislation?

VM: The bill is likely to address the issue of parties holding mining title speculatively and will incorporate more stringent provisions to motivate the use and exploitation of mineral locations. If we consider the government’s ambitious growth projections for the industry, it is not conjectural to suggest that the ‘use it or lose it’ provisions will remain in the final bill. Also, the introduction of the cadastre system aimed at recording all mining title and boundaries to curb disputes is almost a foregone conclusion. I say this because the government has already replaced administrative officers with cadastre officers in the various mining provincial offices, which demonstrates the permanency of this system. The bill is also likely to preserve provisions that minimise farmer and miner disputes as these disputes are very common at provincial office levels.

AM: To what extent have laws been amended aimed at boosting investor confidence in Zimbabwe?

VM: The current strategic thrust for the government is to create a USD12-billion mining industry which can only be achieved by maximising current production and creating an environment that is conducive for investment. To enable this, laws relaxing the application of the Indigenisation and Economic Empowerment Act provisions were introduced. Among those laws were specific amendments targeting the mining industry which include Amendment No 1 of section 42 of the  Finance Act, 2018 and the subsequent Amendment No.10 of section 36  of the Finance Act, 2020 which did away with strict application of the Act to all minerals and empowered the Minister of Mines and Mining Development, in consultation with the Minister of Finance, to prescribe which minerals will be subject to the Act. No minerals have been prescribed to date meaning that an investor is free to invest in any mineral without being subjected to mandatory indigenisation and is able to have unlimited shareholding in the mine.

Further, the Zimbabwe Investment and Development Act [Chapter 14:37] was enacted with the aim of easing the process of investment and to allow foreign investors to invest or reinvest in any sector of the economy under the same conditions in law as those imposed on Zimbabweans. It therefore follows that Investors are able to freely transfer capital and profits in and out of Zimbabwe. The creation of the Zimbabwe Investment Development Agency as a one stop shop has minimised the timeframe that an investor would normally take to get the necessary licenses and permits. The agency facilitates a quicker and more efficient investment process.

AM: Have the Exchange Control laws also been aligned to assist with ease of investment?

VM: That is an excellent question – ease of investment may only practically work when investors are able to freely invest and disinvest. Our exchange control laws have responded to this call, specifically Exchange Control circular No.3 of 2023 allows companies to keep 100% of foreign receipts for an indefinite period and Exchange Control (General) Order 1996 (S.I 110 of 1996) has permitted banks to remit dividends declared by Zimbabwean companies to foreign shareholders up to 100% of corporate net after tax profits. What is critical is that all investments have to be registered when first coming into the country including foreign loans, this allows for an easier transfer of dividends outside the country or disinvestment process once the project is completed.