Despite Revenue Growth, Miners Forecast Lower Profitability in 2025
According to the State of the Mining Industry Survey, Zimbabwean mining companies anticipate increased revenue in 2025 but remain pessimistic about profitability. Rising costs related to electricity and exchange rate losses are cited as major challenges.
By Ryan Chigoche
The survey data reveals that average mineral revenue is projected to increase by approximately 2% this year. Mining companies expect a further 10% rise in revenue, reaching around US$6 billion in 2025, driven by improved output and recovering commodity prices.
However, despite this optimistic revenue outlook, miners express concerns about the profitability of their operations. Nearly 40% of respondents predict a decline in profits due to escalating costs and uncertain commodity markets.
Electricity costs are expected to rise by an average of 8% next year. The current electricity tariff framework is deemed suboptimal, with many miners highlighting its unaffordability and lack of competitiveness at USc14.21/kWh. Zimbabwe’s electricity tariffs are among the highest in the region, exceeding those of neighbouring countries like Botswana and Zambia.
To address this issue, 93% of mining companies advocate for a tariff reduction to below USc13/kWh. Exchange rate losses also pose a significant threat to profitability, with miners losing nearly half of their mandatory 25% surrender portion of export proceeds due to the discrepancy between the official and parallel exchange rates.
In addition to these challenges, labour costs are expected to increase by 4% in 2025, primarily due to inflationary pressures and wage demands. Miners are also facing pressure from labour unions seeking full US dollar payments, which could further strain their foreign currency reserves.
To mitigate these challenges, mining executives are considering strategies such as deferring capital projects, improving operational efficiency, rationalizing procurement, optimizing labour, freezing hiring, and implementing multitasking where feasible.