Zimbabwe Changing Law to Accommodate Russian, Chinese Investment in Diamonds, Platinum Assets

On August 1, Mthuli Ncube, the Finance Minister of Zimbabwe, announced that the country would repeal the Indigenization and Economic Empowerment Act, a law that prohibits foreign investors from holding majority stakes in companies in Zimbabwe’s platinum and diamond sectors. The law has been an impediment to President Mnangagwa’s efforts to attract foreign investment, particularly from Russia and China, as part of his post-Mugabe “opening” of the country.

This decision comes shortly after a joint venture was announced on June 20, 2019 between Alrosa, Russia’s leading state-owned diamond production company, and the state-run Zimbabwe Consolidated Diamond Company (ZCDC). The joint venture agreement grants a 70% stake for the development of new projects to Alrosa and a 30% stake to ZCDC. The decision is also expected to benefit Anjin Investments, a Chinese company that is reported to have resumed working with ZCDC on a diamond extraction project in July. 

The amendment may also benefit another Russian-Zimbabwean joint venture, Great Dyke Investments, which has invested in the $4 billion Darwendale Integrated Platinum Group Metals Project, for which construction was expected to begin in July. Vi Holding, a Russian investment group, owns 50% of Great Dyke Investments.

While the legislation was initially justified as a means to ensure money earned in Zimbabwe went to Zimbabweans, the loosening of the restrictions laid out in the law has been embraced by many in Zimbabwe. There is a perception that fewer restrictions will attract more foreign investment. Critics of the decision to repeal have highlighted harm that Anjin’s mining activities has allegedly caused to communities in Zimbabwe, including contamination of drinking water, degradation of farmland, and loss of cattle.