Zimbabwe indigenization legislation and opportunities in energy sector

Zimbabwe indigenization legislation and opportunities in energy sector

Many investors are waiting at the door mulling the direction in which the Zimbabwean legislation laws will follow. Initial dictates by the Ministry of Indigenisation under Saviour Kasukuwere (Zanu-Pf) required all firms with a capitalization of more than US$ 500,000 which are not indigenously owned to cede a 51% stake in the company. The initial deadline which had been placed by which companies had to provide plans for complying with the legislation, was 30 March 2010.

Industry participants in the capital-intensive mining sector, which overtook agriculture as the major contributor to Zimbabwe's GDP, have largely shelved expansion plans until clarity is provided with regard to the legislation. Amongst the points of contention with the legislation was the clause that firms would need to cede' the 51% stake, which gave the impression this would entail a below market value disposal' of the stake.

Despite some investors being wary, Implats has gone ahead with their $300 million capitalization of their Zimbabwean subsidiary (Zimplats) in which they own 87%. Zimbabwe's platinum reserves are estimated to be the second largest after South Africa, and thus there is great room for expansion of the sector.

Opportunities in energy sector: Coal bed methane gas

Zimbabwe is highly endowed with a number of natural resources. Even though the country had been characterized by an economic downturn over the past decade, dubbed the lost decade', there is room for the country to grow to greater levels of economic prowess than before the downturn.

Coal mining in Zimbabwe is mainly concentrated in Hwange, and is a significant input into the electricity generation for the country. Coal bed methane gas deposits in Zimbabwe abound, but there has not been any exploitation of this resource.

Although exact estimates of the size of the country's coal bed methane deposits are not known, initial indicators point to the deposits being the largest in sub-Saharan Africa, exceeding South Africa's 825 billion tonnes.

A number of corporations are said to have shown interest in developing these deposits. Entrance of investors into this sector will enable building of plants for the generation of electricity along with the manufacturing of synthetic fuels. Sub-Saharan Africa has a number of chemical corporations with an established presence in synthetic fuels production. Zimbabwe is therefore the next frontier in consolidation of the energy market in the region.

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