AMN - New era dawns for mining in Zimbabwe – comment by Yolanda Torrisi

The mineral resources of Zimbabwe have strong potential to drive the country's economy in the future, with lithium, gold and diamonds seen as leading the way by the new government. It is encouraging to see the government is actively seeking to drive the industry in a positive manner.

The government is trying to rebuild Zimbabwe’s economy. It was once one of the most promising in Africa but was brought to its knees during a downturn triggered at the start of the new millennium when former president Robert Mugabe clashed with key western donors over his human rights record and policies such as his controversial land reforms.

The country's new government, led by Emmerson Mnangagwa, who was sworn in last year after Mugabe relinquished his 37-year rule, has scaled back some ownership policies that had deterred foreign investors.

Foreign investors that had been limited to 49% ownership in mining projects are allowed to own 100% for all minerals except the so-called strategic minerals of diamonds and platinum, where the government or its entities must hold a majority stake.

Mines minister Winston Chitando told the recent Mining Indaba conference in South Africa: "Progressive policy reviews across the entire economy are ongoing. There is continuous review and improvement of ease of doing business."

He said now was a good time to revive the industry as there were sustained commodity price increases and reduced costs combined with new technology.

To facilitate this, the government is making policy and legislative reforms, is introducing incentives for investors and intensifying an investment drive.

“We are making amendments to the Mines and Minerals Act and ensuring the ministry itself and its bureaucracy become more efficient to bring more certainty and efficiency.

“We want to ensure mining becomes the engine of growth in our economy. At the moment mining is contributing about 15% to GDP and accounts for over 50% of the country’s export earnings, but we want to significantly improve that.

“We want to improve the ease of doing business in the sector and enhance the exploitation of our abundant resources,” he said. “As part of that, we have to revive, utilise and expand some of the existing mining assets.”

He said while there were opportunities in gold, diamonds and platinum, there were about four lithium projects in the pipeline, which may see Zimbabwe become a major lithium producer.

Zimbabwe's mining sector attracts more than half of the foreign direct investment into the country and employs more than 45,000 people directly. Other than gold, diamonds and lithium, Zimbabwe also boasts large reserves of both thermal and coking coal, the second largest platinum group metals resource in the world, as well as nickel and chrome.

Although the government enthusiasm and action is encouraging, there remains some challenges.

According to a survey on the state of the sector by the Chamber of Mines, the high cost of capital, as well as scarcity of hard currency, are the top factors undermining the viability of the sector.

The survey outlined that the mining sector required at least $392 million in working capital to sustain operations in 2018, up from the $211 million invested in 2017. It said the sector was expected to grow by 6.1% this year on higher output in most minerals, including diamonds, gold and coal.

The survey stated: “Survey findings reveal that average profitability in the mining industry declined in 2017, with 30% of respondents having made losses in 2017, compared to 15% in 2016. Of the 30% who made losses, 70% had made profits in 2016.”

All respondents indicated that power outages negatively impacted on their operations resulting in output losses.

The chamber, however, indicated that miners were optimistic that profitability would improve in 2018.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact:yolanda@yolandatorrisi.com