Broad international investor participation in the Imara Group’s second annual Zimbabwe investment conference confirms the growing pull of Africa’s ‘frontier markets’, say the upbeat organisers.
Leading international fund managers have confirmed their attendance at the event in Harare on June 7 and 8, says Sean Gammon, MD of Harare-based Imara Capital Zimbabwe.
South Africa has slipped in a global mining industry survey and is now rated as the third worst mining country in Africa in which to do business.
Peter Leon law firm Webber Wentzel and chairman of the mining law committee of the International Bar Association comments:
The latest Fraser Institute’s Annual Survey of Mining Companies, which aims to establish how mineral endowment and public policy factors such as taxation and regulation affect exploration investment, shows South Africa has fallen 12 ranking positions in the 2009/2010 year to 61st out of 72 jurisdictions.
The Canadian based institute sends its survey to approximately 3 000 exploration, development and other mining companies around the world.
South Africa is now hovering just outside the ten worst ranked jurisdictions for mining investment globally and is the third worst ranked country in Africa, ahead of only the Democratic Republic of Congo and Zimbabwe.
Over the past decade South Africa has steadily fallen in the Survey’s policy potential index rankings from a position of 27 out of 47 ranked jurisdictions in the 2002/2003 survey to 61/72 in the 2009/2010 survey. In the 2008/2009 survey, SA ranked 49/71.
It is no coincidence that South Africa’s ongoing fall in the Fraser rankings has coincided with the reform of South Africa’s minerals ‘ legislation with the introduction of the Mineral and Petroleum Resources Development Act (MPRDA) in 2004, as much as how the Act has been implemented.
The main factors causing the fall in South Africa’s rankings between this and last is uncertainty concerning “native land claims” and the overall security situation. Other factors which have contributed to the fall, albeit less significant, include the taxation regime, political stability, and availability of labour and skills.
The ongoing debate about mine nationalisation has also been a factor. The uncertainty surrounding the MPRDA Amendment Act 2008, which, after being signed by then President Kgalema Motlanthe on 21 April 2009 still awaits the proclamation of a date upon which it will enter into force may well be another factor.
However, the outlook for the future is brighter.
The Department of Mineral Resources, under the leadership of Minister Susan Shabangu, has this year, shown a real commitment to turn around South Africa’s mining sector through a tripartite consultation process. This consultation has primarily taken place through the Mining Industry Growth, Development and Employment Task Team (MIGDETT), comprising mining companies, labour and government.
MIGDETT has met since December 2008 and recently made recommendations on how to create sustainable growth in, as well as transform, the mining sector at the Mining Summit organised by the DMR on 30 and 31 March 2010. A draft document entitled the “Strategy for the Sustainable Growth and Meaningful Transformation of South Africa’s Mining Industry” was adopted at the Summit and aims to provide the basis upon which the South African mining sector’s global competitiveness can be enhanced through, among other things, infrastructural development and regulatory reform.
Minister Shabangu has called for the country’s mining laws to be amended by early 2011, and if this process proceeds as envisaged, there is no reason to think that South Africa cannot improve substantially on its Fraser Institute score in 2011.
The Fraser Institutes Annual Survey of Mining Companies for 2009/2010 is available at: http://www.fraserinstitute.org/commerce.web/product_files/miningsurvey2009-2010.pdf.
In a move which is likely to provide further re-assurance to the African resource sector, global consulting firm Stratfor is reporting that Zimbabwe has dropped its highly contentious Indigenization Law.
Stratfor reports that a spokesman for Zimbabwean Prime Minister Morgan Tsvangirai said April 13 that the Indigenization and Empowerment Act has been rendered null and void following a cabinet meeting.
This is potentially a critical development for Zimbabwe, South Africa and the African continent as a whole following economic collapse in Zimbabwe. This has had a significant knock-on effect to neighbouring countries which have been forced to absorb refugees from this region and has deterred foreign investment as government officials have attempted to enforce a law which threatened to force all foreign companies in Zimbabwe with assets worth more than $500,000 to sell a majority ownership stake to black Zimbabweans by 2015.
In December 2009, geo-political analysts had suggested to Ferronews.com that president Mugabe’s grip on power in Zimbabwe was coming to an end with the more aggressive expecting him to relinquish power before the end of 2010.
With the Indigenization Law being a corner-stone of president Mugabe’s rein in power, this would appear to put these predictions on target despite some bickering between the Tsvangarai and Mugabe power-sharing agreement.
Earlier this week it was announced that the Zimbabwean Stock Exchange (ZSE) would be open for trade for the first time since November 2008. Does this provide a sign that this mineral and agriculture rich country may be reaching a point where firms should begin to give serious consideration to reinvesting in the troubled African country?
Information on the ZSE remains sketchy on the internet but according to media reports the only company that traded was Apex, an engineering and stationery firm. The company sold 3,026 shares, each for one US cent.
There are apparently 80 stocks listed on the ZSE at the moment and the stocks are trading in US dollars due to the hyperinflation that has destroyed the value of the Zimbabwe dollar.
Capital markets remain an integral part of “wealth” for both consumers and the corporate sector and for this reason it is vital for an economy to retain a fully functional stock market.
Many consumers or retail investors retain a big portion of their wealth, insurance or pension funds in the equity markets despite the recent turmoil. If the Zimbabwean stock market can begin functioning properly and provide opportunities for retail investors to grow their wealth, this begins to provide an underlying springboard for the economy.
Similarly, the country has been ravaged by nearly two decades of civil war and dictatorial rule, setting the country back a long way in terms of infrastructure. Providing a market place where firms can begin to raise capital is also a starting point in the rebuilding process.
Many blue-chip resource companies including Impala Platinum, Aquarius, Anglo American and Anglo Platinum have retained both precious and ferrous metal operations in Zimbabwe despite the political turmoil. Perhaps their patience will be rewarded in the next decade if business begins to find its feet.
Many sectors in Zimbabwe including tourism, mining, manufacturing, tobacco, farming and telecomms were extremely healthy and profitable for investors before political interference took its toll. Currency problems – Rand, Zimbabwe Dollar, US Dollar – are likely to weigh on an investors decision to put money into the system. Investors are unlikely to want to invest in something were inflation is simply pushing their investments backward.
The Johannesburg Stock Exchange (JSE) has recently launched its own Africa Board as a way to encourage the primary or secondary listings of other African businesses in South Africa. This week, Namibian financial services firm TrustCo launched on the JSE and there are apparently plans for other resource firms to list locally.
A functioning Zimbabwean exchange would help the flow of capital and wealth into the country.
While it may not constitute sound financial advice: Investors are regularly told that it is impossible to identify the “bottom” of an investment market, perhaps Zimbabwe is as near its “bottom” as it is likely to go?
Do Ferronews.com readers have thoughts on the Zimbabwean situation and whether or not there would be opportunities to invest in the country?