Zimbabwe looks to hike free carry stakes in 2025

Zimbabwe is joining the club of African states looking for a higher ownership stake in mines and mining projects. It plans to take a 26% free carry interest in new mining projects and negotiate a similar stake with existing operators, Bloomberg reported Dec. 12.

“Details on how the government would finance these acquisitions or the minimum value of mining assets were not mentioned, with the full policy set to be announced and introduced next year,” BMO Capital Markets said in a Dec. 13 research note.

In November the government said it would curtail tax relief to mining companies starting in January 2025. The move, first reported by Bloomberg, is designed to encourage miners to build in-country processing plants for raw materials.

Lithium ‘swing player’

The southern African nation, a former British colony, mines platinum, gold, chrome and more recently lithium. According to the United States’ Department of State, Zimbabwe has Africa’s largest lithium reserves and has received investments of more than US$1 billion from Chinese miners.

BMO notes that since Zimbabwe has become a “swing player” in the lithium market, the government’s decision could potentially chip away at the current supply overhang for the metal. 

“If such an action were to cause disruption to the lithium investment pipeline in Zimbabwe, then it could remove a moderate chunk of future supply from lithium’s current projected surplus.”

High-risk jurisdiction

In new research by global risk intelligence firm Verisk Maplecroft, Zimbabwe was listed along with Venezuela and Russia as among the top 10 highest risk jurisdictions.

The U.S.’ state department noted in its 2024 Investment Climate Statement: Zimbabwe section that the country “is endowed with large economic development potential, but it remains a challenging business environment.” These challenges include “dire power shortages characterized by rolling blackouts.”

“While the government commissioned an additional 600 megawatts (MW) at the Hwange power station in 2023,” it noted, “installed capacity is still insufficient to meet demand.”

“The government has made gradual progress in improving the business environment by reducing regulatory costs, but policy inconsistency and weak institutions have continued to frustrate businesses,” the investment climate statement read.

“Corruption remains rife and there is little protection of property rights, particularly with respect to agricultural land. Historically, the government has committed to protect property rights but also expropriated land without compensation.”