- December 23, 2020
- Posted in LOCAL
The year 2020 was a difficult year for both large producers and small scale miners due to falling commodity prices as well as the impact of the COVID-19 pandemic which ravaged the entire globe.
Mostly affected in terms of both output and price compressions were base minerals such as chrome ore and ferrochrome, according to Finance minister Mthuli Ncube.
As a result, the sector ameliorated contraction to -4.7% in 2020.
This article seeks to discuss the bad and the good experienced by the mining sector during the course of this year.
Failure to pay gold producers timeously
Fidelity Printers and Refiners (FPR) underpays and sometimes pays late for gold. The body pays producers partially in forex and partially in amounts of Zimbabwe dollars determined by the official exchange rate.
Delays in payment for gold deliveries is one of the major contributory factors to the smuggling of Zimbabwe’s yellow metal to countries such as the United Arab Emirates and neighbouring South Africa.
Payment delays saw one of the biggest mines, RioZim shutting down its operations citing “insignificant” part payment of its gold deliveries to (FPR).
FPR has attributed the delays to settle payments for gold deliveries to the shortage of foreign currency following the outbreak of the Covid-19 pandemic, which has seen restrictions on international flights that transport the hard currency into the country.
For the industry to grow, FPR needs to reduce the turnaround time for payment of gold delivered by both large and small-scale producers. Currently, the turnaround time for payment is not sustainable. It forces producers to sell their gold in the black market.
Subdued capacity utilization
Total capacity utilization in the mining industry remained subdued at around 61% owing to challenges in raising capital and investment, according to Chamber of Mines. The main hindrance to capital flowing into the sector is a negative perception about the country and the political risk factor.
In addition, the Reserve Bank of Zimbabwe (RBZ) has faced obstacles in paying gold producers timeously, thus gravely affecting working capital for the miners.
Year-in, year-out, lives are lost in Zimbabwe’s mining sector, with corruption and inadequate monitoring of mining activities by the government cited as major causes.
The year 2020 was no exception.
On November 10, 2020, six miners got trapped underground at Patridge Mine in Esigodini and even today, their bodies have not been retrieved as the government has abandoned rescue efforts, saying the mission is too risky.
Again, rescuers are still trying to reach out to least 30 miners in Bindura who are trapped underground after a shaft collapsed. Other accidents which happened this year include five artisanal miners who got trapped underground at Task Mine in Chegutu as well as two miners who died after a shaft collapsed at the Globe and Phoenix Mine in Kwekwe District, 200 km southwest of the capital Harare.
In May this year another worker at Vumbachikwe Mine died after he allegedly fell during a blasting exercise when he was alone underground.
To end these disasters, mining activities across the country should be monitored. There should be training of people who can lead and monitor operations, especially on areas of drilling and blasting.
Corruption continues to rear its ugly head in Zimbabwe’s mining sector. This year, the Zimbabwe Morning Post unearthed serious corruption cases involving officials in the Ministry of Mines and Mining Development who are allegedly causing man-made disputes in mining towns occurring around the country due to deliberate double allocation of registration certificates.
An investigation carried by the online publication shows that Provincial Mining Directors (PMDs), though armed with full knowledge on the ownership of mine claims in the country, deliberately re-allocate mine claim certificates to their loyal syndicates who either give them cash upfront or a percentage of the loot.
The publication also reported that small scale miners in Midlands Province were accusing the Midlands PMD Nelson Munyanduri and the national office of operating a well-orchestrated conspiracy of deceit, fraud, misrepresentations, chicanery and double-dealing after he double allocated a mining certificate on a disputed land.
Gold leakages remain on the increase in the country and require tightening of surveillance and penalties for illegal externalisation and other dealings, according to Finance minister Mthuli Ncube in his 2021 national budget.
Ncube said the Gold Mobilisation and Surveillance Committee, as well as the Minerals and Border Control Unit will be strengthened and capacitated to be able to execute their mandate,” he said, without giving figures.
According to government estimates, the country is losing about US$100 million monthly through smuggling.
Recently, the police arrested suspended Miners Federation of Zimbabwe president Henrietta Rushwaya on allegations of attempting to smuggle 6kg of gold to Dubai worth about US$300 000.
Chamber of Mines survey findings show that mining executives are worried about policy inconsistencies which characterized the operating environment for 2020 to persist in 2021, impacting negatively on business planning. They cited misallignment in foreign exchange and fiscal framework, liquidation of unutilised nostro balances, and multiple taxes to weigh down mining operations in 2021.
$1 billion credit facility
On May 1, 2020 President Emmerson Mnangagwa announced an $18 billion economic stimulus package to scale up production in all sectors affected by the COVID-19 pandemic.
Out of the $18 billion, a total of $1 billion was meant to support a credit facility to incentivise investment in large scale and small scale mining and speed up implementation of a computerised cadastre system.
Though the intention to incentivise investment in large scale and small scale mining was good, the reports that a number of small scale miners failed to access the facility due to red tape among other challenges, are very unfortunate.
Mineral exports up
In his budget, Ncube revealed that in terms of export earnings, mineral exports were around US$2.4 billion for the period January to September 2020, compared to US$2.1 billion recorded over the same period last year.
Keeping mines operational during lockdown
Ncube said due to the nature of mining operations, most mining houses did not completely shut down during the lockdown period like other sectors. However, small scale miners operations were disrupted as the police kept on harassing them, demanding exemption letters.
In 2021, the government expects the mining industry to rebound by 11% driven by planned expansion programmes aimed at increasing production by miners as we move towards the attainment of the US$12 billion industry. This, it said, will be achieved through increased exploration, expansion of existing mining projects, resuscitation of closed mines, opening of new mines and mineral beneficiation and value addition.
Further, expected improvement in availability of power supply and foreign currency are expected to propel production and capacity utilisation from current 61% to about 80% in 2021.
According to Chamber of Mines latest survey report, about 90% of mines are planning to ramp up production in 2021 while 10% expect to remain the same. Of the respondents that are expecting to increase production, approximately 40% are expecting to ramp up production by more than 30%. About 10% expect to increase output by between 10% and 30%.
Mining executives are expecting improvement in the global commodity market in 2021, with 90% of respondents indicating that they are optimistic of a favorable commodity market in 2021 on the back of anticipated improvement in the covid-19 situation. About 10% are skeptical about market conditions in 2021 and expect the covid-19 situation and depressed demand specifically for base metals to persist in 2021.