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Zimbabwe mining sector needs $5bn to attract $12bn in investments

The World Bank says Zimbabwe’s mining industry has potential to attract $12 billion in investment over the next five years if the impoverished country gets $5 billion to recapitalise the sector.

In a report on trade and competitiveness, the multilateral lender said the southern African country’s mining sector registered a 30 percent growth in the value of exports from 2000 to 2009 with a 150 percent rise in exports in 2010.

This amount is less than half the potential of absorption of new investment by existing projects

However, the growth rate dropped to 30 percent in 2012.

The World Bank said investment levels remained very low outside the large-scale mining sector.

“This amount (US$5 billion) is less than half the potential of absorption of new investment by existing projects (US$12 billion),” the Breton Woods institution said in its 116 page report.

But the institution said high exploration and exploitation fees which are ranked among the highest in the world could stifle growth.

“While most of these fees are bearable for an operating mine, they are not for exploration companies where no income is forthcoming.

“These fees scare off what little investment in exploration there is,” the report says.

According to available statistics, royalties for gold have increased from 4,5 percent to seven percent, diamonds rose from 10 percent to 15 percent, platinum group metals doubled from five percent 10 percent .

Currently diamond miners pay $1 million as application fees, those seeking platinum group of minerals part with $500 000 for registration and $2,5 million application fees while coal miners fork out 500 000 application and $500 000 registration fees.

The World Bank also said apart from the large-scale exploitation of known deposits in mining, the country has virtually failed to attract foreign and domestic investors, to accelerate export growth.

“Current policies pose a hazard to FDI, at a global level countries are liberalising their regulatory frameworks to connect to the global value chains… Zimbabwe has however taken the opposite tact, subsequently scaring away any form of investment,” says the report.

Zimbabwe needs a much heavier dose of FDI across multiple sectors and industries to improve productivity.

Source – theafricareport