A UNITED Nations trade agency has added its voice to growing disapproval of Zimbabwe’s planned nationalisation of foreign-owned mining companies, warning that the decision would deal a further blow to for
eign investment inflows into the country.
A United Nations Conference on Trade and Development (Unctad) report released this week said Zimbabwe and the Central African Republic’s “identical indigenisation policy frameworks” would discourage critical foreign direct investment (FDI) inflows into the two economies.
The agency’s comments came after Zimbabwe announced plans to force foreign-owned mining firms to dispose of 30% stakes to indigenous companies under a planned empowerment policy for the mining sector.
Government later indicated that the mining firms would be required to give up 51% shareholding to black-owned companies under the empowerment policy to be legislated through amendments to the country’s mining laws.
Unctad said Zimbabwe’s indigenisation requirements were part of policy changes made by several African countries which made foreign investments “less favourable”.
The report also took particularly sharp aim at the Central African Republic policy decision suspending the issuance of new gold and diamond mining permits and the banning of foreigners from mining zones.
Unctad’s statistics indicated that FDI inflows into Zimbabwe between 1990 and 2000 amounted to US$88 million.
The figures sharply dropped to US$26 million in 2002, US$4 million in 2003, US$9 million in 2004, before picking up to US$103 million in 2005.
This reflected the deteriorating macro-economic situation in the country which critics said was a factor of poor policy implementation by President Robert Mugabe’s government, in power since 1980.
Unctad said African countries concluded a total of 583 Bilateral Investment Treaties (BITs) in 2005.
Zimbabwe, Algeria, Egypt, Ethiopia, Ghana, Mauritius, Morocco, Mozambique, Nigeria, South Africa and Tunisia concluded more that 20 BITs each last year, Unctad said.
But the agency warned that a glut of BITs could duplicate other agreements made by the African countries, creating problems in the implementation of the investment treaties.
“However, caution is advisable against a proliferation of BITs, free trade and regional trade agreements. African countries have already subscribed to a large number of regional integration schemes that have created an overlapping multiplicity of agreements,” said Unctad.
Analysts said Zimbabwe’s mining sector had relied heavily on international mining companies for investment, but the planned policy changes could affect investment in the sector.
Government insists it will proceed with its empowerment plans for the mining sector.
A principal officer in the Ministry of Indigenisation said last month government was adding a new dimension to the empowerment agenda: it would legislate for the nationalisation of all foreign-owned companies besides those in the mining sector.