US$12bn target: Consult widely

Source: US$12bn target: Consult widely | Theindependent (Zimbabwe)

 

Editor’s Memo..Faith Zaba

FINANCE minister Mthuli Ncube in his 2020 budget statement a fortnight ago said as government moves towards achieving its goal to have a US$12 billion mining industry by 2023, the mining sector was projected to rebound to 4,7% on account of expected improvement in electricity supply.

Many economists, financial analysts and mining experts have labelled it an impossible feat to transform a US$3 billion industry into a US$12 billion one in three years. Zimbabwe’s mining sector has indicated that output will this year drop by 30% due to the depressed operating environment and power cuts. Export earnings from minerals have missed government’s US$4 billion target, owing to various production constraints, as well as increased side-marketing activities and smuggling as the economic crisis deepens.

The mining sector is critical in generating foreign currency, contributing about 70% of the country’s forex earnings. While Ncube has committed to capacitating small-scale miners with appropriate skills, equipment and modern technologies, improving production and transparency in the mining sector, curbing mineral leakages through tightening of the Gold Trade Act and capacitating the gold mobilisation unit, it is not possible to transform a US$3 billion industry into a US$12 billion one in such a short space of time.

This can only happen if volumes of production go up, world commodity prices increase and there is value addition, among other factors. However, for the production volumes to increase, it will depend on the socio-political environment and quality of infrastructure, as well as availability of capital.

Obviously on the high world commodity prices that will depend on the performance of the world economy. Currently, all three are against Zimbabwe. The following are areas which government needs to deal with to realise the full potential of the mining sector in the country:

l Create a political and economic environment that attracts investment. Government cannot just throw such figures when it is not easy to do business in the country. Zimbabwe is ranked 155 out of 190 countries on the global ease of doing business;

l Rail and road networks need capital funding and adequate working capital. There must be a solid business proposition;

l Currently, there is no effective exploration policy, which is naturally attached to the mineral development policy. Mines minister Winston Chitando promised to deliver on that. The target production volumes have no justification if they are not based on bankable mineral resource figures generated by the mineral resource accounting firms. This is the most critical variable;

l Mining experts say there is need to target small shallow oxide deposits. They argue that these resources will soon go into decline against increasing depths;
l Zimbabwe needs to redesign the whole small-scale mining strategy;

l On coal mining, the country cannot easily export thermal coal even to neighbouring countries due to high production and logistics costs, as well as the inherent high sulphur levels in the deposits;

l On coalbed methane gas, Zimbabwe is still in initial production testing. There is a lot of work still to be done both technically and commercially. Besides the country still needs to craft a gas policy to regulate the new sector;

l Chrome sector is a cyclical and generally very risky industry as it is affected by global market trends around steel. The sector is heavily dependent on competitive electricity tariffs. The current tariff and US/China trade war are threatening the sector. Chrome mining companies are currently loss-making entities;

l New projects such as the lithium Karo Resources need lead time to place orders, get capital and equipment delivered. Mining experts say it can take an average of three years to do all the processes including tests;

l On diamonds, it may also take time to start seeing growth in that area, seeing that they have not even started exploration;

l Skills and competencies are also key;

l Minerals Marketing Corporation of Zimbabwe would need to be transformed into a truly world-class commodity broker to handle the said volumes together with Zimbabwe Revenue Authority.

In view of all this, having a US$12 billion mining industry will take longer than three years. It could be a 5-10 year strategic plan done in phases. It has to be supported by clear and consistent policies. Chitando needs to be complimented through for starting the ball rolling. However there must be wide stakeholder consultations and cooperation for it to happen.

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