Zimbabwe to secure 26% free-carry stake in new mining projects

The government of Zimbabwe has announced plans to own 26% of equity in all new mining projects without financial investment. The move is aimed at increasing the government’s share in the mining industry and maximizing the economic benefits of its natural resources.

Negotiations are underway for similar stakes in existing mining projects, though these may be more complex due to pre-existing agreements. The government has not yet disclosed the minimum value of mining assets that would trigger this requirement.

Share of profits

The policy will begin next year, aligning with Zimbabwe’s broader strategy for its mining sector. By taking a free-carry stake, Zimbabwe aims to secure a direct share of profits from its mining wealth. The government seeks to drive value addition and local beneficiation of minerals. Recent measures, like ending tax relief for mining companies by January 2025, further this agenda.

Zimbabwe has the world’s third-largest platinum reserves and significant gold, lithium, and chrome deposits, making the mining sector a strategic pillar of its economy. The strategy reflects a growing trend in resource-rich nations to retain a greater share of mining profits and prioritize domestic value addition. While it has potential benefits for government revenue and local industry development, its success will depend on how effectively the policy is negotiated and implemented without discouraging foreign direct investment.

However, the strategy also comes with a number of challenges including a possible detering foreign investment due to increased state involvement and potential risks to project profitability. Mining companies may perceive the policy as a shift towards resource nationalism, especially when coupled with plans to renegotiate existing contracts. Securing stakes in ongoing projects will require renegotiation of contracts signed under different regulatory frameworks, which could lead to disputes.