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Gloomy 2022 looms: Mining execs

Gloomy 2022 looms: Mining execs

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SEVENTY percent of top executives running the country’s major mining companies have painted a gloomy picture of the operating and investment climate for the sector in the coming year despite projecting a bullish economic outturn, a survey by the Chamber of Mines of Zimbabwe has shown.

Official figures show that mineral shipments and tobacco account for over 70% of the country’s exports. Sentiments shared by mining executives in a study titled State of the Mining Sector: Prospects for 2022, revealed that although operating costs are anticipated to increase at a pace higher than the increase in revenue, more than half of the sample size contends that profitability will improve next year.

Mining executives, the survey further showed, are pessimistic about their prospects to raise adequate external capital in 2022.

At position 140 out of 180, Zimbabwe is one of the least ranked countries on the World Bank Ease of Doing Business index.

“The respondents are less confident about the prospects of a competitive investment environment. The findings show that about 70% of the mining executives expect the investment environment to remain depressed as in 2021. Only 30% expect it to improve in 2022,” the survey showed.

“About 82% of the respondents are anticipating the situation to remain the same citing uncompetitive investment environment and high-country risk. Respondents indicated that financial institutions are requesting the setting up of collection accounts with lending banks to guarantee uninterrupted payments of loans and to mitigate counterparty risk.”

Zimbabwe is this year expected to recover from two years of economic contraction buoyed by strong agricultural output and mining.

Most respondent executives, at 74%, are expecting the mining policy environment to remain unpredictable and inconsistent, citing the government’s failure to finalise outstanding policy matters, including mineral development policy and the mining cadastre, the report showed.

Turning to the foreign currency situation in the country, the miners proposed payment in local currency of royalty, electricity costs, taxes, and statutory obligations in order to restore their value.

“The auction rate must be used for charging all fees, taxes and rates. The respondents further recommended authorities to ensure an efficient auction market (convergence of the official and parallel exchange rate). Respondents from the gold industry indicated that payment delays by Fidelity Printers and Refiners continue to undermine production (an improvement in payment turnaround of not more than five days is recommended),” the report says.

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“Coal producers recommended improved payment turnaround by Zesa, implementation of the agreed Zesa payment framework and extension of the export window until Zesa demand is restored to normalcy.”

On energy and infrastructure prospects, the survey findings show that mining executives are anticipating the infrastructure and energy situation for the mining sector to worsen in 2022.

“Reasons provided include fragile electricity supply, Zesa’s push for increased tariffs as areas of concern and exporters’ inability to meet Zesa’s additional requirements to import power from the region. Significant number of respondents, at 33%, reported that they face daily outages of at least six hours. Respondents experiencing significant power outages indicated that they are not connected to dedicated power lines,” the survey reads.

“Mining executives are concerned about Zesa’s proposal for mining companies to secure bank guarantees as security for power supply, which will further strain their cashflows. Hence, they expect Zesa to abandon the proposal.”

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