Industry Trend Analysis - Quick View: Zimbabwe Power Shift Offers Glimmer Of Hope Ahead - DEC 2017

The Latest: President Robert Mugabe faces imminent removal as leader of the Republic of Zimbabwe following a military takeover on November 15. The takeover came as a response to Mugabe's sacking of former vice-president, Emmerson Mnangagwa, who is now touted as the most likely next leader of the country.

Implications: Major mining operations in the country are some distance away from the capital, Harare, and thus far appear to be unaffected by the political upheaval, with the country's main platinum miner Zimplats' operations functioning normally. BMI's Country Risk teams believes that while Robert Mugabe's refusal to stand down may delay his removal, the situation is unlikely to turn violent due to Mugabe's waning support among both the population and the state infrastructure. Instead, the most plausible scenario remains a peaceful handover of power following impeachment proceedings in parliament, with Mnangagwa the likely successor. As such, we do not expect any immediate supply disruptions to the country's important mining assets, which comprises of vast deposits of platinum, palladium, diamonds and lithium, among others.

What's next: With a handover of power to Mnangagwa due in the coming days or weeks there is unlikely to be any short-term change to domestic mining sector policy. Zimbabwe's mining regulatory environment remains one of the most restrictive in the region through high local ownership requirements, royalty rates and government intervention. We expect this to continue as the military takeover is more the result of internal power struggles than policy disagreements. That being said, Mnangagwa is widely considered a more reform-minded leader and the ousting of Mugabe is a key step towards the country's re-engagement with international creditors, potentially leading to a longer-term uptick in foreign investment into the domestic mining sector. As a result, in the scenario of a peaceful handover of power, we envision upside risks to our currently bleak outlook for Zimbabwe's mining sector growth prospects over our five year forecast period.

Zimbabwe In Need Of Sector Improvements
Sub-Saharan Africa - Mining Risk/Reward Index
Scores out of 100, Higher score = more attractive market. Source: BMI Mining Risk/Reward Index

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