Mining industry experts have warned that the sector will remain in the doldrums even after its executives gave it a clean bill of health in a Chamber of Mines of Zimbabwe (CoMZ) report released last week.
The CoMZ’s State of the Mining Industry survey said the industry’s captains were confident the sector was poised for growth in 2021.
It said capacity utilisation in the industry would rise to 80% in 2021, from 61% this year, while the gold output would increase by 32% to 33 tonnes.
But the analysts said the industry would remain under threat from foreign currency shortages, the effects of the Covid-19 scourge, capital constraints, infrastructure deficits and the power crisis.
They were also worried about Zimbabwe’s unstable policy environment.
Economists also said the 30% foreign currency retained by the central bank from exports would remain a drawback for mines while a directive that they must liquidate the forex within two months would continue to affect operations.
Gold miners have also been affected by delays in payments from the state-run Fidelity Printers and Refiners (FPR), which has always disrupted cashflows.
Market analyst Evonia Muzondo said projections for mining sector growth were over-ambitious.
“They appear to have not factored in Covid-19,” she told Standardbusiness.
“The mining sector faced challenges even before the onset of Covid-19.
“Retention levels are very low, big mines such as RioZim witnessed huge payment disruptions as they were not paid timeously.”
RioZim, one of the country’s largest gold producers, has warned against delays by the central bank in releasing foreign currency for exports.
“The delays on the payment of the company’s gold receipts by the Reserve Bank of Zimbabwe (RBZ) carried on throughout the quarter which severely strained the working capital and cash flows of the group and greatly hampered production,” RioZim said in a third-quarter trading update last week.
Muzondo added: “Yes, the economy has opened up, but there are issues that were there even before Covid-19 and they haven’t been fixed.
“Issues like electricity and retention levels are increasing side-marketing. In the gold sector, miners are only allowed to sell to FPR.
“These issues have been coming up and it appears the (Mines) ministry is brushing them aside.
“It is not just the price of minerals on the global market that determines the performance of the sector,” she noted.
Economist Persistence Gwanyaya said in the absence of reforms, the sector may miss its target to achieve a US$12 billion mining industry by 2023.
“I am not sure the 2023 target of a US$12 billion sector is achievable. Gold is being smuggled,” Gwanyanya said.
“It becomes more realistic if we focus our efforts on stability which is the way to deal with other nefarious issues like smuggling.
“It’s not about production, because the production is there but that gold is not being sold under formal channels.
“What we need to do is address housekeeping issues to make sure the formal channels are used for all trading in minerals,” Gwanyanya added.
Parliamentary portfolio committee on mines and energy chairperson Edmond Mkaratigwa said the mining sector remained vulnerable.
Zimbabwe National Chamber of Commerce CEO Chris Mugaga agreed that the mining sector was in trouble.
“You are continuously milking the same cow, it’s an economy that has two or three industries working,” Mugaga added.
The Standard