Ten things that might hinder the performance of the mining sector in 2019
The mining sector in Zimbabwe has been predicted to be the economic resuscitator of the once giant economy in Africa.
By Rudairo Dickson Mapuranga
The president of Zimbabwe is optimistic that the mining sector will take a leading role in the economic revival of Zimbabwe .Through his famous slogan, “Zimbabwe is open for business” the president is very adamant that the reopening of the mining sector to both local and foreign investors is the way to go in making Zimbabwe a successful nation.
Having a rich mineral resource base in Zimbabwe, the Government has set a target of US$12 billion mining sector contribution to the economy by 2023.
The ministry of Mines has set 2019 targets for high-level minerals as it moves towards maximising production in the mining sector. The government expects 40 tonnes of gold from the gold sector, 10 million carats from the diamond sector and 50 tons of refined platinum.
However, last month at the Environmental Impact Assessment Launch in Kadoma, the Deputy minister Polite Kambamura was very skeptical towards the idea that Zimbabwe is capable of producing the target goal sighting different reasons.
The following are the possible factors that might hinder the performance of the mining sector in 2019.
1. Corruption
Authorities fail to acknowledge that corruption is very dominant in the mining industry, apparently it is too prevalent to the extent that if rationality is mislaid, the industry is deemed to collapse.
As the former United States Vice President Joe Biden said “Corruption is a cancer: a cancer that eats away at a citizen’s faith in democracy, diminishes the instinct for innovation and creativity; already-tight national budgets, crowding out important national investments. It wastes the talent of entire generations. It scares away investments and jobs.”
Corruption in the mining sector needs to be entirely cracked down in order to create a conducive environment for all miners to work without fear or favour. According to Biden, fighting corruption is not just good governance, it is self-defense and patriotism.
The president has called for transparency in the mining sector on many occasions declaring that his administration will not condone any acts of corruption or misappropriation of national resources .However, no strides have been taken by the president so far to prove to the nation and the world over that he is walking the talk.
Last month, the ministry of mines and mining development suspended Mashonaland Central Provincial Mining Director Mr Malcolm Mazemo and nine Ministry of Mines and Mining Development officials on allegations of corruption. Though the suspension of these executives is a commendable move, people feel that it’s not enough considering the fact that some top officials in the mining industry and the government have been involved in various cases of corruption but nothing has been done to them.
In order to save the Mining sector from this cancer, the government has to be patriotic in order to defend the nation from an unpredictable economic collapse through lack of transparency and dis order. Zimbabwe’s precious metals and minerals must be safeguarded from egocentric thieves who are negligent towards the survival of the next person or generation.
Corruption in the mining sector should therefore be curbed in order to improve the performance of the sector in 2019.
2 Lack of Exploration
The exploration work phase is defined as the search for, discovery, and first delimitation of a previously unknown mineral deposit or the re-evaluation of a sub marginal or neglected mineral deposits in order to enhance its potential economic interest based on delimited grade, tonnage, and other characteristics.
This stage is completed when a deposit has sufficient indicated mineral resources and has been the subject of a positive scoping study that justifies the decision to conduct additional, more detailed and costly deposit appraisal work. All mining investment professionals, large-scale miners and mining academics will testify to the fact that no activity adds value to mining than exploration.
According to mining experts, exploration phase is very vital for successful excavation in order to come up with a meaningful contribution towards economic growth and mineral production. High production of minerals in every country ensures profitable investments in exploration and that should be the country’s main priority. Investing in exploration is a key assert in mining development as well as mineral production.
No new deposits are being discovered because exploration orders have been granted.
Following the remarks by the Deputy Minister of Mines regarding his pessimistic interpretations concerning Zimbabwe achieving its mineral production target, one expert in the Mining sector has this to say ,“It’s more to do with no serious exploration having been carried out in the past two decades. Mines become old and eventually close down. South Africa’s gold production is also going down as we can see. Policies for serious exploration under exploration orders are long overdue. Small scale mining can’t increase our gold production significantly.”
Therefore, this means that Zimbabwe is following blind mining, subsequently it is being incompetent, no exploration, no idea or knowledge of accessible reserves, no calculation of capacity and required inputs. This is a cause for concern towards mineral production this year.
3. The current forex retention policy
Before the announcement of the new monetary policy by the Reserve bank Governor in February this year, miners were advocating for foreign currency retention increment from the 70 percent they were receiving to 100 percent. However, the new monetary policy brought in devastating results instead of increasing the retention, it managed to reduce it to 55 percent foreign currency retention, a cause for concern which might lead miners to either suspend operations or seek ways to sell their minerals outside Zimbabwe without the involvement of the government.
In 2018 Zimbabwe imported US$6.3 billion worth of goods from international suppliers, down to -1.9 per cent since 2014 but up to 26.1 per cent from 2017 with mining machinery such as bulldozers, excavators, road rollers munching US$76.9 million 106 per cent from 2017, mining machinery parts were at $43.4 million up 27.8 per cent from 2017. Since Zimbabwe is not producing any equipment, mining operations require foreign currency because most of the equipment used in the industry is sourced outside Zimbabwe. The operation of mines requires about 70-90 per cent foreign currency which means that at the moment in time miners should be paid in foreign currency to improve the industry.
Therefore the issue of foreign currency retention should be addressed if Zimbabwe aims to achieve its production target. There is inadequate forex to import consumables and other mining related apparatus at affordable prices.
Foreign currency exchange rate must fully be liberalized so that it panels inflation.
4. Unstable power supply
The mining sector in Zimbabwe is reckoned as the economic resuscitator of the nation, however with the continued power cuts and other economic problems facing the country, the industry’s predicted growth might be thrown into an abyss of no hope.
ZESA partly blames the current economic crisis in Zimbabwe for the unstable electricity supply which miners say is affecting their operations .Zimbabwe Electricity Supply Authority (ZESA) is reportedly facing serious operational challenges particularly power generation which has caused serious power deficits nationwide.
Mining operations particularly large scale mining require adequate power supply in order to carry out successful operations.
One of Zimbabwe’s highest producer gold Blanket Mine blamed unstable power supply for its immense failure to reach its intended production target in the first quarter of the year 2019.
The issue of power supply is very urgent and should be firmly addressed in order to facilitate the mining sector’s 2019 performances.
5. Awarding EPOS all over the country
Exclusive Prospecting Orders (EPO) is a large area of ground targeting the selected minerals for exploration. The maximum is 65,000 hectares in Zimbabwe. Minimum size is up to the company to choose. In Zimbabwe EPOs tenancy is up to 3 years with an option to renew for another 3 years.
Zimbabwe sits on one of the world’s greatest mineral deposits, having the second-largest known platinum deposits after South Africa and it is also believed that Zimbabwe will be the top lithium producer in the whole world.
Although the issue of EPOs is a great move that will encourage exploration, it has caused a situation where by large companies are holding up large pieces of land for speculative purposes thus reducing extraction of resources from the ground.
The president of Zimbabwe for quite some time has supported the notion that companies who are reserving mining land for speculative purposes should lose their concessions to indigenous small scale miners, the move which Zimbabwe Miners Federation, the largest body which represents small scale and artisanal miners in Zimbabwe agreed to.
Small scale and artisanal miners are of the view that, EPOs have stopped the growth of Small-scale mining in Zimbabwe, if EPOS where not awarded to these conglomerate companies the country could produce 50 tonnes this year.
ZMF president Ms Henrietta Rushwaya has this to say, “We have areas which have been held on for the past years for speculative purposes. If a conglomerate has been holding on to mining claims since 1930 for speculative purposes, let them be given to small scale miners, to our youth artisanal miners who do not have somewhere else to carry out activities. That way we would have eradicated unemployment, we would have eradicated illegal mining activities as well as promote safe mining methods.”
The government should therefore consider the way EPOs are granted and make sure that mining concessions should not be held for speculative purposes in order to achieve 2019 mineral production target.
6. Demonisation of artisanal miners
Last year the country’s gold production and delivery to Fidelity Printers and Refineries was at 33 tonnes with 22 tonnes coming from small-scale miners.
Small scale and artisanal miners according to mining experts hold the future of Zimbabwe’s mining industry and Africa as a whole.
Artisanal miners according to experts, usually mine in areas that are not economically viable for large scale mining companies to invest and mine . Since artisanal miners are sidelined in the peripheries of the sector ,they will sell their gold production on the black market.
Therefore, if artisanal miners are formalised, their operations will automatically make them grow hence becoming small scale miners proficient in selling their mineral production to either Fidelity Printers and Refineries or through Minerals Marketing Corporation of Zimbabwe.
7. Shortage of experienced technical skills in the industry.
The ministry of Mines and Mining development has been accused of being slow in terms of addressing the grievances of miners .Some have accused the ministry officials for their desire to be worshipped in order for them to do the work they are paid for by tax payers.
The ministry of mines technical departments are reportedly understaffed because of low salaries ,hereafter the experienced staff leave for the private sector. Consequentially , the ministry hires those that are unskilled or those without adequate experience. There are technical people in the ministry who have never worked on a mining project yet they make decisions concerning exploration and mining projects.
It is reported that, best technical skills left the country in the past 20 years and continue to leave for greener pastures.
The ministry must hire competent individuals in order to professionalise the mining sector ensuring that the industry will achieve its 2019 production target.
8. Fuel shortages
Small-scale miners’ operations have been reduced to the margins between 70 percent and 80 percent due to the prevailing fuel situation in the country.
The impacts of fuel shortages on small-scale miners is also evidenced by the gold output being produced by players in the sector. Gold production by small-scale miners has declined significantly in recent months.
Due to fuel shortage some small scale miners are delayed to run their operations as they spend their productive time queuing for the commodity, which if they get, it is also not sustaining the operations.
The government should therefore offer miners incentives and other deals like the Zimbabwe Miners Federation and Glow Petroleum partnership which prioritise fuel delivery by Glow to small scale miners under ZMF in order to relive the miners of the stress of spending time queuing for fuel.
Late payments from Fidelity
Many gold mines in Zimbabwe are shutting down operations due to various causes ,the chief reason being the late payments by the Reserve Bank of Zimbabwe.
Metallon Gold has been forced to put its mines on care and maintenance because of the unsustainable costs of running them without proper compensation for its proceeds from the Government of Zimbabwe. If payments were received, they would only amounted to a third of the total owed and between 2016 and 2019, Metallon lost US$82m and Metallon is claiming a giant sum of US$132m for the lack of profit and procurement, including interest.
To improve the performance of the Mining sector, the government must act on paying miners their due amount to ensure viable mining operations.
The government must assist distressed gold mines through Fidelity in order for the sector to reach its target yearly production.
10. Unclear policies
Zimbabwe’s mining policies have been blasted as unfriendly to foreign investors. Experts also highlighted that the “use it or lose it” policy is an error made by the government as it chases away foreign direct investment.
Sir Richard Heygate a British businessman, an admirer and friend of Zimbabwe as well as a representative of several investors who desire to invest in Zimbabwe, warned the president of Zimbabwe Emmerson Dambudzo Mnangagwa that investors will not spend even a dollar in Zimbabwe if the government is untrustworthy.
Foreign investors with deep pockets must be enticed with good mining and economic policies , realistic and sustainable laws that foster the protection of their assets for the country to achieve its production target.