Zimbabwe’s mining industry has slightly exceeded the midyear growth projection of 3.1% by achieving 3.5%, largely supported by increased production in the gold, nickel, platinum and palladium sectors, says Pan-African advisory firm africapractice Harare-based consultant Chiedza Danha.

“Though the mining industry remains a significant contributor to the national economy, providing 13% to fiscal revenue and 15% to nominal gross domestic product (GDP), it continues to perform below capacity on account of depressed global commodity prices, inadequate power supply and insufficient capital,” she highlights.

According to Danha, insufficient investment remains the primary hurdle to growth in Zimbabwe’s mining sector, largely attributable to a lack of clarity on indigenisation laws.

“However, positive steps have been taken by government and the private sector to attract the investor community,” she asserts, noting that this has resulted in promising visits from several business delegations. However, she avers that increased clarity on the country’s indigenisation laws will entice more investors.

Power supply challenges have also contributed to the sector’s slow growth, but Danha points out that power utility Zimbabwe Power Company’s Kariba hydropower station project and Zambia’s Kariba North expansion programme will “ease power constraints in the medium to long term”.

Further, the country’s national development agenda places particular emphasis on securing investment in power generation, which is likely to create further electrical capacity.

The declining commodity prices have also been a significant growth hurdle for Zimbabwe’s mining industry, resulting in mining export earnings declining by nearly 17%, says Danha.

She states that, despite these challenges, Zimbabwe’s mining sector has significant growth potential and was identified as key to the country’s economic recovery in the national development blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, which was published last year.

Danha points out that the gold sector is the current “star performer” in the country’s mining industry, achieving output improvements of 29.3% for the January to June period, increasing from 6.8 t to 8.8 t. Subsequently, the 2015 output projection was revised to 17.5 t.

She adds that the gold sector is likely to remain a source of “continued growth”, highlighting the reopening of Zimbabwean independent miner RioZim’s Cam and Motor gold mine, in Mashonaland West, as a recent success story.

Danha states that the small-scale gold mining sector has achieved the most significant improvements, increasing its production in the first six months of 2015 to 3.1 t, compared with 1 t produced during the same period last year. She adds that the success of small-scale gold miners is likely to continue, owing to the likely development of a small-scale mining financial facility by the Zimbabwe Mining Development Corporation.

Meanwhile, Danha notes that the closure of platinum producer Zimplats’ Bimha mine last year and the declining international platinum price have contributed to Zimbabwe’s platinum output declining from 6.4 t during the first six months of 2014 to 5.9 t during the same period this year.

Zimbabwe diamond output has been declining, owing to the exhaustion of alluvial diamonds, she points out, noting that national policy changes and nationalisation of the sector will result in a number of mining companies merging to create a 50% government-owned shareholder. The remaining 50% share will be divided among Zimbabwe’s six remaining diamond miners.

Trends
Danha states that the most prominent trend currently impacting on Zimbabwe’s mining sector has been the increased focus on beneficiation and value add to realise the Zimbabwe government’s policy of increasing export revenues through processed minerals.

“Platinum producers announced last year their commitment to the refurbishment of a base metals refinery housed by Zimplats. The $100-million project constitutes the first phase in realising full beneficiation and is expected to take two years to complete.”

Danha adds that the second phase will involve upgrading the base metals refinery and the construction of another smelter, pointing out that mining company Bindura Nickel Corporation has raised $20-million to reopen and refurbish its smelter. The refurbishment is expected to be completed in March next year.

Other significant developments in Zimbabwe’s mining sector have been the lifting of the chrome ore and fines exportation ban, as well as the export tax on chrome ore and fines, both of which Danha states have resulted in chrome ore and fines royalty rates increasing from 2% to 5%.

Further, a sovereign wealth fund, governed by a dedicated board, has been created to support Zimbabwe’s broad-based empowerment policies. Danha explains that the fund will be led by the Office of the President and Cabinet, in conjunction with the National Treasury of Zimbabwe and the country’s central bank.