eBusiness Weekly
Golden Sibanda
President Emmerson Mnangagwa has firmly set Zimbabwe on a positive economic transformation path that will benefit the mining sector in the coming years, according to US global market data, analytical tools and risk services provider Fitch Solutions.
Fitch Solutions said it expected the country’s mining industry to grow by an average 2,4 percent between 2018 and 2027, as it did not anticipate radical policy changes in the country’s extractive industry.
This stems from the fact that while policies such as indigenisation and economic empowerment were scrapped for most minerals, the 51/49 equity shareholding structure was still applicable to diamonds and platinum, which may limit foreign entry into this area; Zimbabwe’s biggest exports earner.
Government has indicated it will soon come up with diamond and platinum policies that will address majority of the concerns for investors wishing to invest in these lucrative sub sectors.
Mining a strategic sector
Mining accounts for over 60 percent of annual foreign exchange into Zimbabwe, contributing 12-16 percent of the country’s gross domestic product (GDP) and employing over 65 000 directly and indirectly.
President Mnangagwa’s administration also recognizes the centrality of the mining sector to economic growth and development and has thus befittingly, designated the sector as the driver of the economy in the short to medium term.
Government, cognizant of the potential and importance of the sector, targets to grow it to an $18 billion industry by 2030, while the sector will play key role towards the vision of making Zimbabwe a middle income state by that time.
For 2018, Finance and Economic Planning Minister Patrick Chinamasa, projected the mining sector to generate $3,7 billion in export earnings from $2,6 billion the previous year.
However, the US firm said in a recent note that the election of President Mnangagwa boded well for the country’s mining sector over the coming years following his victory in the July 30, 2018 harmonized elections.
The President – elect romped to victory with 50,8 percent of the vote while his Zanu-PF party also won a majority in the legislative election, which took place on the same day, taking 144 out of 210 directly electable seats.
“As we mentioned in our analysis immediately following the removal of ex-leader, Mugabe on November 15 2017, Emmerson Mnangagwa is broadly seen as a reform-minded leader and will now benefit from the political support needed to implement business-friendly economic reforms, which will strengthen investor confidence.”
Nevertheless, Fitch Solutions said that the country’s mining sector remained highly restrictive and it remains reticent to change earlier forecasts until “we see any material change in existing mining policies”.
Reforms to drive investment
“Since initially coming to power in November 2017, Emmerson Mnangagwa has indicated he is willing to enact a number of reforms to the broader economy and the mining industry in particular, that will improve investor sentiment.”
Indeed, President Mnangagwa ran his presidential campaign on promises to make progress towards both economic reforms and re-engaging with the international community, after years of isolation and economic collapse under Mugabe.
In regards to the mining sector, President Mnangagwa’s approach to date has been significantly more collaborative than the previous regime headed by former President Mugabe until his exit last November.
Potential risk to mining
President Mnangagwa’s Government will look to formalise the widespread small-scale gold mining operations across the country by providing an inexpensive permit and enabling miners to sell gold ore directly to refineries.
Depending on the extent of their implementation, these reforms pose upside risks to the country’s gold production outlook. Furthermore, in June of this year, a long-standing legal dispute over land between the Zimbabwean Government and the country’s largest platinum miner, Impala Platinum, was resolved.
In exchange for releasing 23 903 hectares of its claims, the Zimbabwean Government gave Impala Platinum two leases valid for the life of its operations, signaling an already much improved relationship between government and mining stakeholders.
“While our core review remains that Zimbabwe is now politically well set up for positive economic reforms that will benefit the mining industry over the coming years, our political risk analysts highlight ongoing risks pertaining to civil unrest in the immediate aftermath of the election,” Fitch said.
Fitch said while the election was largely free and fair by most international observers, the opposition MDC Alliance criticized it as fraudulent and some observers highlighting irregularities with the conduct of the election leading to violent clashes between the protesters and national security forces.
“Were this unrest to continue or escalate further over the coming weeks and months, the new government’s political capital and therefore its ability to create a stable political environment under which to enact promised reforms, would be significantly hindered” the US firm said in its analytical report.
