Zimbabwe government moves to step up indigenisation

via Zimbabwe government moves to step up indigenisation January 19, 2014 Zimbabwe Standard

The Zimbabwe government will this year make sure that foreign companies comply with the country’s indigenisation regulations, a senior official has said.

This comes at a time when substantial revenues are expected to emanate from the mining sector this year under the much-touted economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset)

Youth, Indigenisation and Economic Empowerment deputy minister, Mathius Tongofa said government was no longer placing emphasis on equities but on ensuring that the masses and disadvantaged benefit.

“We are saying compliance is not an option and we are actually going a gear up when it comes to that because we want the companies to comply. But the way we want to do things is to ensure that it’s broad based,” he said.

Tongofa added: “There are still a number of mining companies that are yet to comply but some are still coming to meet the required plan. Some of the mines did not present to us the real problems as they only said they were “putting things in place” in order to comply but some of them continue to come to give their plans to the ministry.”

Government has said it would prioritise beneficiation this year as enunciated in the budget and its mining policy with the objectives of ensuring maximisation of value to the country and addressing unemployment among others.

However, some mining companies have raised concern that beneficiation is a separate industry altogether which requires new investors different from actual mining operations that involve extracting ore from the ground.

Beneficiation is the second stage in the mining process, after extraction of the ore from the ground and is the technical term describing the industrial process of mechanically separating minerals from each other.

The Chamber of Mines has previously argued that while potential exists for further beneficiation, it must be stressed that some products are already being beneficiated locally.

The Platinum Producers Association was last year looking at developing a refinery but mining companies argued then that volumes did not justify investment in beneficiation.

Tongofa said beneficiation was the right move as it would add value to minerals. This he said would provide government with more revenue from the mining companies reaping profits from the country’s resources.

“It [beneficiation] can either be separated as a downstream industry or the companies can link the two but now we are putting in place measures to prevent exporting of unprocessed minerals with the aim of forcing companies to add value to the commodities,” he said.

A Zimbabwe School of Mines paper states that minerals are unevenly distributed and cannot be replaced.

A mineral deposit may therefore be considered a depleting asset whose production is restricted to the area in which it occurs.

These factors impose limitations on a mining company in the areas of business practices, financing, and production practices. Because its mineral assets are constantly being depleted, a mining company must discover additional reserves or acquire them to stay in the mining business.

“Other peculiar features of the mineral industries are associated with operations. Production costs tend to increase with depth and declining grade,” the paper reads.

It is understood that following increases in mining sector taxes, a number of mining companies will scale down operations and focus on extracting readily accessible ore.

The mining sector was initially projected to grow by 17,1% in 2013, but this was revised downwards to 6,5%, mainly on account of low exploration, lack of capital and weakening commodity prices on the international markets.