Mining sector has so much potential

07 Feb, 2020 - 00:02 0 Views
Mining sector has so much potential

eBusiness Weekly

Elias Pacheso

As the world gathered at the Mining Indaba, which was held between the 3rd and 6th of February 2020, last week, I decided to reflect on the opportunities and challenges facing this key sector of our economy.

The sector has so much potential but remains in the doldrums owing to a number of factors. Addressing these would almost overnight see the country rise into the regional powerhouse it once was.

According to available statistics Zimbabwe racked in US$3,2 billion in foreign income from mining exports in 2018. Gold exports alone brought in about a third of all the country’s export earnings around US$1,1 billion.

Zimbabwe is targeting US$12 billion in mining exports by the year 2023 according to the country’s Ministry of Mines and Mining Development.

The ministry sees gold exports at US$4 billion by 2023 and platinum at US$3 billion. Other minerals expected to contribute to this ambitious target include chrome, lithium and coal.

Zimbabwe generally exports between US$2,5 billion and US$3,5 billion worth of minerals annually.

The target is therefore a significant increase almost four times what is currently generated from exports, a stark reminder of the potential in our economy.

Zimbabwe is well endowed in mineral resources but is yet to take advantage of this wealth owing to a plethora of challenges. Some of these challenges have been with us for more than two decades while others are starting to emerge and more might continue to come.

I will start with the elephant in the room so that we quickly dispense of it and stay focussed on the bigger picture in the lucrative gold sector.

The mad rush for gold that has been witnessed in some of the country’s rich gold mining areas, and the attendant havoc that has seen machete wars is worrying to say the least and sends the wrong signals to the world about the country’s mining policies.

That the Government has awoken to this fact and has unleashed a crackdown team is encouraging.

However, the damage is already done and a lot of work must now be spent on repairing the country’s image in that sector while ensuring the complete elimination of the menace.

There is a greater need for serious marketing of brand Zimbabwe. The country is already known the world over for wrong reasons and therefore the starting point will be to tell those markets the correct story.

Unless the Government sets up clear rules of operation in the artisanal mining sector, there will continue to be problems in this area.

Unfortunately, due to the economic decline, the mining sector is often seen as a quick and easy way to make a living by the majority of people without alternative means.

This is made worse by the recurring droughts that have affected agricultural performance. The area of small scale mining is very risky and many lives have been lost in unsafe shafts and of course the fight for the precious metal and space.

There have been calls for the Government to repeal the Gold Act to ensure that gold mining by artisanal miners is legalised.

The current Act is not friendly to mining activities and does not allow individuals to buy and hold gold something which promotes the illicit trade through informal channels, costing the country much needed foreign currency.

Moving on, it is a well-known fact that the current power shortages have affected mining output in a big way. According to the Chamber of Mines, as much as a 20 percent decline in mining output is attributable to the lack of electricity in the sector. This is a significant number. The ministry of energy has allowed the direct importation of power for mining houses and this has helped the situation a little.

The ministry should go further and maybe consider allowing the mining companies to establish own power stations to avoid unnecessary loss of production hours. There are so many companies with capacity to set up own power generation structures and operate off grid. 

Pricing distortions arising from a weak and unstable local currency have affected the trade and financing of mining activities in the country.

Unless there is a clear policy on the pricing of minerals especially precious metals in the country, the country will continue to lose foreign currency as gold is smuggled through illegal channels outside the country.

To address this problem, the Government has been setting up gold milling and buying centres in order to ensure that it captures all the gold being mined by artisanal miners in the country.

The Government needs to go a step further and allow an attractive pricing regime to attract this gold and ensure that the gold is formally exported.

The benefits if a well-functioning mining sector cannot be underestimated, aside from creating employment the sector has the potential to bring in significant foreign currency inflows and allow for the development of a strong manufacturing base.

Imagine if the country did not need to import any steel for its construction projects, surely that would make it easier for the country to embark on major infrastructure projects.

To encourage investment in the mining sector there is need for clear and consistent policies that encourage long-term investment in the sector.

The sector has gone for many years without new investment and this has meant that output has remained depressed.

On a brighter note the fact that Zimbabwe’s mineral wealth is largely untapped is great and with the right policies in place can unlock a lot of value for current and future generations.

New mining methods and the digitalisation of the sector can unlock significant value for the country. It is my hope that during our lifetime we see the introduction of new policies that unlock this value.

New industries like the renewable storage sector that has seen a spike in the demand of battery metals such lithium, cobalt, nickel and vanadium should encourage investors to explore these minerals. Downstream investments can be made in Zimbabwe, if the right environment obtains.

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