Despite experiencing growth last year, intermittent power supply and a lack of new foreign direct investment (FDI) are the main causes of the Zimbabwe mining sector’s declining performance, says specialist strategy and communications consultancy Africa Practice mining sector lead Rishon Chimboza.

Mining has been a lifeline for the country’s economy, with more than 60% of foreign exchange receipts coming from the mining sector. Yet, the sector, which plays a crucial role by contributing almost 10% of the country’s gross domestic product, is operating below its potential, he tells Mining Weekly.

Moreover, small to medium-sized gold mining producers, which had a record production of 33 t last year, have been the most affected by these power cuts.

However, the power supply challenge is expected to improve for the remainder of this year, Chimboza says, noting that “State-owned power utility Zimbabwe Electricity Supply Authority has announced that, from the beginning of August, it will import an additional supply of about 400 MW a week from South African State-owned electricity producer Eskom”.

Despite this positive forecast for power supply, Chimboza believes that it is too soon to tell what the impact on the mining sector’s productivity will be.

Meanwhile, platinum producers, which have been the most consistent performing miners over the past ten years, will continue to import power from the Southern African Power Pool and, therefore, their operations are unlikely to be affected.

Outlook

Zimbabwe’s economic challenges over the past 20 years have resulted in little exploration activity in the mining sector and, subsequently, no greenfield projects of notable scale have been brought to production.

However, the outlook is positive, as more constructive changes are being implemented, including the Zimbabwe Ministry of Mines and Mining Development aggressively reforming the mining sector through policy change, the encouragement of foreign investment and Mines and Mining Development Minister Winston Chitando pursuing his stated intention of scrapping the controversial indigenisation requirements for mining sector investors and amending the current Mining Act.

“Some of the best performing commodities in the country are coal, chrome and platinum-group metals (PGMs), as well as lithium, which has also been attracting significant investor interest. Three significant PGMs projects have been announced this year – Great Dyke Resources, platinum mining company Karo Resources and Mauritius incorporated Bravura Holdings.”

Chimboza points out that Zimbabwe’s gold output of 33 t in 2018 was at its highest since it attained independence in 1980. “Until the mid-1990s, Zimbabwe was one of Africa’s largest gold producers and now it doesn’t feature in the top five. This is not as a result of diminishing resources, but rather a struggling economy. In the same period, countries such as Ghana, Mali and Tanzania moved up the ranks in terms of gold producers.”

He says there is scope for the country to be a more significant gold producer, but it will require the right combination of producer price incentives and addressing the power challenges to be successful.

“Moreover, despite a stigma surrounding diamonds produced in Zimbabwe, the Zimbabwean Mining Ministry has in the past two years made way in marketing Zimbabwe’s diamond sector internationally, as well as implementing improved governance systems.”

Zimbabwe produced 3.3-million carats of diamonds in 2018, a 400% increase over a ten-year period, according to the Kimberley Process Certification Scheme. However, this is still far behind the diamond production leaders, Russia and Botswana, which last year produced 43.2-million carats and 24.4-million carats respectively.

“Nevertheless, this is impressive growth, outpacing other minerals that the country mines. “Zimbabwe’s diamond output is expected to reach 4.1-million carats in 2019, despite the production disruptions caused by Cyclone Idai in March, which mainly affected the eastern part of the country where the main diamond fields are located.”

Going forward, this number will certainly increase as further exploration for alluvial diamonds has started, he mentions.

“As the Zimbabwe mining sector makes such a great contribution to the economy, any increase in mining output that is supported by strong external commodity prices will have a material impact on the economy.”

While investor interest in Zimbabwe has risen since November 2017, followed by the announcement of numerous new projects, translating these interests and agreements into productive projects remains a challenge.

“As investment starts coming in, Zimbabwe has to demonstrate that it is ready for it,” Chimboza asserts, suggesting various solutions that could aid the sector.

“For example, a digital mining cadastre is desperately needed to speed up the licensing process and improve transparency. Additionally, a digital geodatabase will reduce time spent on research for exploration companies. These constraints can be addressed in three to five years and will go a long way towards making the sector ready for investment.”

Chimboza concludes that Zimbabwe has set optimistic targets for its main minerals, such as gold, platinum, diamonds, chrome and coal, which the Minister of Mines is aggressively seeking investors for. Once the challenge of intermittent power supply has been mitigated, one key challenge of the many that the sector faces will be addressed.