Senior Business Reporter
MINING companies expect to create over 4 000 new jobs next year on the back of US$1 billion capital expenditure programmes in the sector, the industry’s largest representative body has said.
The projected growth represents a 9 percent increase in new formal employment from the nearly 45 000 workers employed in the sector presently, the Chamber of Mines of Zimbabwe (CoMZ) said.
The mining industry, one of Zimbabwe’s key productive sectors, accounts for 73 percent of foreign direct investment into the country, 83 percent of exports, 19 percent of Government revenues, 2 percent of formal employment and 11 percent of individual incomes.
In light of the industry’s significance to the economy, the Second Republic, under President Mnangagwa, in 2019, launched a US$12 billion mining economy target to be achieved by 2023.
The envisaged milestone is premised on increasing production through expansion projects, reopening of closed mines, as well as the launch of new projects.
By the end of this year, the mining sector is expected to have grown to an US$8 billion economy from US$5,3 billion last year and US$2,7 billion in 2018.
According to a report on the state of the mining industry and prospects for 2023 presented to CoMZ by an independent consultant in Harare last week, the sector is overly optimistic about increasing the number of new jobs next year.
This comes on the back of improvements in the Covid-19 situation across the globe, which has driven demand for and prices of commodities, as well as the planned expansion projects, which are expected to drive increased hiring of new workers.
According to the report, “formal employment in the mining sector is expected to increase by 9 percent”.
Official data from CoMZ shows that the mining industry employs at least 45 000 people, who are registered with the National Employment Council for the mining industry.
“Analysis of survey data shows that a minimum cumulative capital expenditure of US$1 billion is expected in 2023.
“Of the capital projects, 72 percent are expected to be completed in the next 24 months,” says the report.
The report notes that analysis of survey data shows that average capacity utilisation for the mining industry is expected at 84 percent in 2023, compared to 81 percent this year.
Power shortages, high-cost structure and foreign currency shortages are some of the key constraints to production and capacity utilisation in the mining industry.
If these constraints are addressed, CoMZ believes the mining industry has the potential to grow by an estimated 11 percent, with selected minerals such as gold improving to 45 000 tonnes from 38 200kg this year; and platinum to 16 170kg, from 15 400kg at present.
For palladium, the projected output will be 13 400kg next year, from 12 780kg; diamond production will rise to 6,3 million carats, from 5,3 million carats; while lithium output would rise by 100 percent to 100 000 tonnes.
Zimbabwe’s mining sector, which is also driven by nickel, coal, chrome and palladium is anticipated to register a seven percent growth in 2023, from 5,2 percent this year.
In 2023, electricity consumption in the mining industry is expected to increase by 20 percent due to expansion projects being undertaken by different mining entities.
Under the National Development Strategy 1 (NDS1), Zimbabwe will require 3 500MW of electricity to spur production in different economic sectors.
NDS1 is the Government’s five-year economic blueprint anchoring the economy between 2021 and 2025 and it construes policies aimed at transforming Zimbabwe into an upper middle-income economy by 2030.
zesa is confident that the 3 500MW of electricity the country requires to power projects under NDS1 is achievable as mining and industrial sectors have submitted applications to invest in power generation aggregating to 2 300 MW.
At present, Zimbabwe electricity consumption stands at 1 850MW.
The mining industry was also undertaking several initiatives to increase local content procurement in line with the NDS1 to bolster employment figures and production across the value chains in all economic sectors.
Such initiatives include individual companies adopting a local procurement policy, where 40 percent of the firm’s raw materials and mining consumables are sourced from the domestic market.
Speaking at the presentation of the survey results, Mines and Mining Development Minister Winston Chitando said he was pleased that there was a positive framework for engagement between the Government and the mining industry.
“What is important and what I’m pleased about is that there is a framework for positive engagement between Government and industry.
“We are aware of the drivers of some of these issues which are affecting the mining industry and we need to look at how best we can go about them.
“But, of course, as usual, the chamber will come up with recommendations and, as usual, our doors are open for further engagement,” he said.
In an interview, CoMZ president Mr Colin Chibafa said: “The key challenges we are facing are around availability of foreign currency as we are surrendering 40 percent to the Reserve Bank, so the 60 percent we are retaining is insufficient to meet our requirements.
“The second key challenge that we have seen is around power supply, availability and also recently the cost. Most miners, as you have seen from the report, are experiencing at least 6 to 12 hours of power outages.
“This is negatively impacting on the volume that we are able to produce as miners and also the cost of doing business.
“The current cost tariff that Mai has announced, which has seen a 42 percent increase in the cost of power, is unaffordable for mining companies as we cannot pass that cost onto our customers.”
Mr Chibafa said they will continue engaging the Government to address the challenges bedevilling the mining industry to achieve the US$12 billion milestone.
In his address to the miners, Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya said the apex bank will continue with a tight monetary policy stance to promote macroeconomic stability.
“We are also putting in place supportive infrastructure or supportive policies to ensure that the economy remains stable so that your businesses continue to do business in a favourable environment.
“We are going to continue with a tight monetary policy stance to ensure that the value of our local currency is maintained.
“It’s too premature for us to soften the policy because we do believe that this economy is about sentiment-driven perception, so we are going to continue with a tight monetary policy stance,” he said.
Meanwhile, the requirement for mineral royalties to be paid partly in kind has become law with effect from the beginning of last month, with miners of designated minerals now required to remit half their royalties to the Reserve Bank in the form of refined minerals.
For other minerals, half of the royalties will be paid in the acceptable currency and the other half in the actual mineral. For diamonds, 5 percent of production will be paid in stones. For gold, 2,5 percent will be bullion; for platinum, 1 percent will be actual metal; and 1 percent will be applied for base metals. For lithium, the royalties would be in the form of a suitable compound since lithium is a highly reactive metal in raw form. The other half of the royalty will continue to be paid in cash.
“We are going to ensure that the full products (minerals) that are specified in the Statutory Instrument 189 of 2022 are taken as reserves. These are going to be the nucleus for the reserves which we are going to take in kind and there is no prejudice to the miner because the 15 percent is coming from the money that was taken by the Government as royalties,” said Dr Mangudya.
Royalties are a form of tax payable as a percentage of the gross value or volume of minerals produced and are due to the owner of the mineral rights.
In Zimbabwe, the minerals belong to the State and this has existed since the 1930s, when the mineral rights owned by the British South Africa Company were taken over by the State for modest compensation.
The storage of the actual stones or metals by the RBZ will allow the bank and the Government to build up reserves to support the domestic currency, among other benefits.
The Government has the option of selling some of these reserves when liquid foreign currency is needed for public obligations while this offers an opportunity to sell the minerals when market prices are at a peak.