AnalysisLocal

ZW$293 million a drop in the ocean for mining sector requirements

By Features Writer – Thursday 21 November 2019

HARARE (Mining Index) – REALISATION of the US$12 billion mining target by 2023 has been hinged upon the 2020 national budget following allocation of ZWL$293.2 million to the Ministry of Mines and Mining Development towards capacitation of planning, exploration, data capture and automation, among other services in Zimbabwe’s extractive sector.

There is need for comprehensive resource evaluation that will pave the way for increased investment in the mining sector. The sector also needs to resuscitate and capacitate mining projects that have been defunct for years due to lack of capital. It is prudent for the mining industry to invest in alternative sources of energy such as establishment of solar farms to avoid downtimes during the mining processes.

The resuscitation of Zisco Steel alone needs at least $1billion to restart operations following its closure a decade ago. This is in addition to the $500 million debt government took over from Zisco to pay various local and foreign creditors. Known reserves of iron ore are estimated at 3 700 million tonnes found in Zvishavane, Kwekwe and Harare which needs to be exploited and contribute towards achieving the US$12 billion economy.

Limestone mining and processing needs to be capacitated and Zimbabwe is estimated to have about 200 million tonnes of the mineral.

Once the world’s sixth largest asbestos producer, Shabani Mashaba Mine (SMM) is believed to be sitting on one billion worth of reserves.

Copper mining is not being fully exploited as evidenced by a halt in production at the once prestigious Mhangura Copper Mine which closed in 2000.

Five years after discovery of coal bed methane in Matebeleland North province, not much commercial activity has happened to fully utilise the multi-billion dollar gas project as the country continue to import Liquefied Petroleum Gas (LPG) instead of tapping from its vast local methane reserves.

These are just a few examples of mines that could be contributing meaningfully to the economy, creating employment and generating foreign currency through exports.

Economist Persistence Gwanyanya last year said approximately US$900 million is required for Zimbabwe to reach the targeted yearly gold output of 100 tonnes.

The ZW$293 million, which equates to US$14.5 million is not enough for mining sector projects which include exploration, data capture and automation to a sector that has been positioned as a key growth restoration driver at 4.7 percent. Data capture is essential as the country moves towards digitalisation of the mining sector.

Although government is seeking venture capital to capacitate obsolete, ailing and start-up industries, investors have come and gone and unwilling to invest due to varied reasons.

For instance, in the case of Shabani Mine, several investors that had shown interest in the business were put off by the quantum of bailout cash required to resuscitate the mine, including antiquated technologies that require millions of dollars to upgrade.

Some analysts believe Zisco Steel is now a carcass after being stripped off important parts of the plant, must be razed to the ground and pave way for the construction of a new plant altogether. This is also coupled with aged equipment that may not be aligned to new automation methods in mining.

Value addition of all minerals needs to be given priority to curb exportation of minerals in raw form. This will in turn lead to job creation, infrastructural development and knowledge among Zimbabwe mining professionals.

In the budget presentation, government is aware of, and is reviewing challenges related to ring-fencing arrangements, retentions and gold deliveries to Fidelity Printers and Refiners (FPR).

Mineral exports have remained the major sources of foreign currency, especially gold.

With 13 million tonnes of proven gold reserves, economic analyst Eddie Cross believes Zimbabwe has potential to become the third largest gold producer in world after China and Australia.

Small-scale and artisanal miners are not happy with the current foreign currency retention thresholds which ware reviewed downwards this year in February where they retain 55:45 percent foreign currency and local currency respectively, from the previous70:30 for gold.

This has worsened leakages of the yellow metal across borders to South Africa and DRC where miners are wholly paid in foreign currency for their gold.

Government is faced with a mammoth task to curb mineral leakages which have deprived the country of foreign currency earnings, which the Zimbabwe Miners Federation (ZMF) last year estimated to be US$50 million per month.

There has been a call from various stakeholders for government to pay miners 100 percent in foreign currency to curb leakages.

While government is reviewing and tightening screws on the Gold Trade Act and capacitating the Gold Mobilisation Unit, it still needs to gain confidence from miners.

Gold Mobilisation Unit was introduced with the aim to improve gold deliveries to FPR.

In December 2018, Mines and Mining Development Ministry revealed 70 percent of gold buyers in Zimbabwe chose to remain anonymous and could not be located while over 90 percent neither kept records of their transactions nor submitted returns for analysis to FPR or the Ministry of Mines and Mining Development. Such gold barons and millers are targeting small-scale and artisanal miners.

Government said going forward, investment agreements in platinum, gold and chrome, which have been concluded, are expected to boost output in the sector, with capacitation programmes being managed by FPR, Ministry of Mines and Mining Development and other development partners expected to support small scale miners with appropriate skills, equipment and modern technologies in mineral recoveries from ores.

In 2018, government through the central bank injected US$150 million in the gold support scheme to small scale miners for equipment support. To keep improving the mining sector, the apex bank must ensure yearly allocations of such funding to the mining sector.

Minerals Marketing Corporation of Zimbabwe (MMCZ) will be supported through a credit guarantee scheme to provide funding and support to non-gold sector.

Various interventions on improving production and transparency in the mining sector include enforcement of the “use it or lose it” principle to prevent speculative hoarding of claims across all minerals, finalising the amendments to Mines and Minerals Act, operationalizing the automated mining cadastre information system, rolling out of gold service centres in all major production centres and full capacitation of Hwange Colliery Company to increase throughput from underground mine.

With increased call for transparency and accountability in Zimbabwe’s mining sector, the Extractive Industry Transparency Initiative (EITI) discussions are underway with various stakeholders on joining EITI, which will be pursued in 2020.

In October this year, Institute for Sustainability Africa (INSAF) in partnership with OXFAM launched a publication on EITI which featured a roadmap to implementing EITI in Zimbabwe including challenges and recommendations. ENDS//

 

 

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