AMN - Government relief measures must include mining – comment by Yolanda Torrisi

All mining jurisdictions in Africa are being impacted by the COVID-19 pandemic and with hundreds of thousands of livelihoods taking a big hit directly and millions indirectly, it is vital that government relief efforts include mining-specific measures. As mines wind-back operations or close governments need to implement relief measures to support mine workers and their families as well as make every effort possible to ensure the survival of companies directly and indirectly involved in the industry.

As at March 23, more than 1,700 cases of coronavirus had been reported across Africa, according to a Reuters tally, and there are concerns that the continent will not be able to handle a surge in cases without the depth of medical facilities available in more developed economies.

In South Africa, the mining industry is in a 21-day lockdown with mines not operating and most processing facilities on care and maintenance in order to ensure they can begin operating as soon as the restrictions are lifted.

Namibia late last week followed suit by halting mining and quarrying operations for 21 days in an effort to curb the spread of the pandemic. The nation is the world’s top producer of marine diamonds and the fifth-biggest producer of uranium. Mining generates around 50% of the small nation’s export revenue, contributing 9.3% to GDP in 2019, and is seen as key to reversing a recent recession driven by a sharp decline in primary production.

While minimal operations and critical maintenance work will be allowed, employers should ensure that “preventative measures such as social distancing are observed at all times,” Mines and Energy Minister Tom Alweendo said in an emailed statement on March 28. Namibia has recorded eight cases of the coronavirus and has imposed a partial lockdown of the capital, Windhoek, and the coastal town of Walvis Bay to prevent further spread.

COVID-19 is likely to have an even bigger impact on economies that rely even further in mining, such as the Democratic Republic of Congo (DRC). The country is one of the largest contributors to global mining production when ranked by the monetary value of the mining sector, rather than the sector’s significance to the national economy.

In 2009, the DRC had an estimated $24 trillion in untapped mineral deposits and the country is a major player in global production of cobalt, copper, diamonds and gold. It also holds the world’s largest reserves of coltan, a source of the tantalum used in many electronic devices including mobile phones. In 2011 there were at least 5 international mining companies operating in the DRC.

On March 24, the country’s President Félix Tshisekedi imposed a state of emergency and closed the nation’s borders in response to COVID-19. Since the first confirmed patient on March 10, there have been 48 confirmed cases until March 23. On March 22, the Governor of Haut-Katanga province, a major copper and cobalt producing area, issued a lockdown order while other major companies operating in that region have sent their foreign workers home.

Head of Africa Research at global risk consultancy Verisk Maplecroft, Indigo Ellis, said she expected the lockdown and possible subsequent disruptions to weigh heavily on copper output. “Operators will likely place mines under care and maintenance for a minimum period of 14 days, as we’ve seen in comparable mines in Peru and Chile. The difference in DRC is that these companies will have to make the first move. Local and national governments will likely not mandate shutdowns to try and keep up resource rents.”

Zimbabwe is another nation increasingly reliant on mining and has been impacted by South Africa’s restrictions as much of the country’s needs are supplied from its neighbour. The mining sector, which generated more than US$4.9 billion last year, remains the lifeblood of the local economy and mining companies expect to take a US$400 million hit from April to June this year.

Last Friday the country announced a 21-day nationwide lockdown of all commercial activities other than “essential services”. At this stage, Caledonia Mining’s Blanket Gold Mine is permitted to continue as authorities have granted exemptions for businesses which demonstrate they can operate in a manner that contributes to the management of the spread of COVID-19 infections for which Caledonia has applied.

Companies in Zimbabwe have been lobbying government to scrap income taxes and cut duty on critical raw materials, among other relief measures. The Chamber of Mines of Zimbabwe believes the country is vulnerable to international shocks as “it has strong linkages to regional and global markets for the supply of mineral commodities and products as well for sourcing of inputs, equipment and machinery”.

The chamber said: “The combined effect of reduced access to markets for commodities and inputs have resulted in loss of revenue with most mines now failing to meet fixed costs including payroll costs.

“Meanwhile, it is estimated that mineral production for the second quarter of 2020 may decline by about 60 per cent compared to the first quarter, with revenue losses exceeding US$400 million. The revenue loss for the first 30 days arising from a total lockdown exceeds US$200 million, with estimated loss for gold and platinum of about US$160 million.”

The Chamber wants Government to waive payroll tax and consider a royalty holiday for the second quarter and to be allowed to pay taxes, electricity and utilities in local currency in order to allow them to use the foreign currency they have to stay in business. It also wants electricity tariffs for ferrochrome miners to be slashed in order to cushion them.

Nigeria has been hit with a double whammy through the coronavirus and the collapse in oil prices and the Governor of Katsina state, Aminu Bello Masari, has called for increased investment in the mining sub-sector as a way out in cushioning the impact. He also stressed the need for collaboration with the federal Ministry of Mines and Steel Development for investments in the sub-sector.

With Nigeria, DRC, Zimbabwe, Namibia and many other African countries facing the real likelihood of recession, governments at all levels must work closely with all mining industry participants – unions, industry bodies and mining companies – to ease the strain.

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