Zimbabwe is set to become the latest frontier destination for foreign investors following the government’s decision to reform its business laws.
The government has announced that it will scrap its controversial indigenisation laws, introduced by president Robert Mugabe and approved by parliament in 2007.
The law stated that foreign-owned companies and those owned by people not disadvantaged during colonial times must sell 51% of their shares to indigenous Zimbabweans.
The law has been widely blamed for foreign capital not reaching Zimbabwe’s rich gold, nickel, platinum and diamond deposits.
The move is designed to attract badly needed foreign investment into the country’s mining sector in order to rebuild the economy – decimated after years of President Mugabe’s dictatorship.
Zimbabwe’s prime minister, Richard Tsvangirai, who shares executive power with President Mugabe, has appealed for foreign investment in Zimbabwe’s mining sector as a means of economic recovery for the country.
Mr Tsvangirai is making regulation change and improving the business environment a priority by outlining a series of incentives that include reasonable royalty and corporate tax levels in the local mining industry.
Smaller companies able to sustain political risk more effectively than large multinationals have started to reinvest in Zimbabwe, such as Impala Platinum and the UK’s Mwana Africa.
Mwana Africa is investing $6m in the city of Bindura to restart operations at the Freda Rebecca mine in the next few months.
On a recent three-week US and European tour, Mr Tsvangirai said he had secured aid pledges of more than $500m and negotiated a possible credit line of $1bn from China.
According to greenfield investment monitor fDi Intelligence, Zimbabwe has only attracted four investment projects in 2009 – representing capital inflows of just $182m.
But according to an IMF team that spent 10 days in Zimbabwe, the country is experiencing a nascent economic recovery.
A more liberal economic environment, price stability, increased financial intermediation and greater access to foreign credit lines were said to be the cause.