Coronavirus: Zimbabwe to lose 60% of mineral output, suffer US$400m revenue loss

Zimbabwe mining

Zimbabwe could suffer a 60% fall in mineral output in the second quarter and lose over US$400 million in mining revenue due to the impact of the coronavirus, the Chamber of Mines says.

Production, already under pressure due to Zimbabwe’s economic crisis, has suffered due to lockdowns around the world, which have disrupted supplies and made it hard for miners to move minerals to market, the Chamber says in a new report on the impact of COVID-19 on mines.

“It is estimated that mineral production for the second quarter of 2020 may decline by about 60% compared to the first quarter, with revenue losses exceeding US$400 million,” says the Chamber.

“The revenue loss for the first 30 days arising from a total lock down exceeds US$200 million, with estimated loss for gold and Platinum of about US$160 million. Potential revenue loss for nickel, ferrochrome, coal, and diamonds for the second quarter of 2020 is estimated to exceed US$100 million.”

The hardest hit, so far, has been the ferrochrome industry, where prices have come down to “shut-down levels, even lower than those of 2015”. Portnex has since halted operations at its Kwekwe plant while Afrochine, in Selous, has cut production to below 50% of installed capacity.

“The platinum and nickel industries have not been spared of the logistical complications arising from the lockdown in South Africa and other markets. There are difficulties in transporting PGMs and nickel concentrates to South Africa due to the new South African measures on COVID-19,” the miners say.

What to do

The Chamber of Mines has laid out proposals that it says Government must take to shore up the industry, which is the country’s biggest foreign currency earner.

On workers, the mines say they are now failing to pay salaries. They propose a waiver on payroll tax for the quarter.

“It is against this background that the Chamber is appealing to the Government to waiver payroll tax for the mining sector for the second quarter of 2020 to reduce payroll costs during this time of reduced revenue. This practice has been adopted by majority of countries in the world including Australia, USA, Germany and France.”

On taxes, the miners say they cannot import critical supplies, already a major concern before the outbreak. They want to be allowed to pay taxes in local currency.

“Subdued earnings for mining companies have significantly reduced their foreign exchange balances to import critical supplies for both production or care and maintenance. Thus, the Chamber of Mines is appealing to Government to allow mining companies to pay taxes, electricity and utilities in RTGS in order to allow mining companies to use the available forex to sustain care and maintenance and stay in business.”

The mines also want a break from paying royalties.

“The Chamber is appealing for a royalty holiday for the second quarter of 2020 in light of reduced revenues for mining companies. This position can be reviewed in the third quarter in line with developments in the global economy and the fight against Covid-19.”

Miners also want a change on incentives.

“The Chamber further appeals that for any surrendered portion, fair compensation through an incentive scheme as is the case for gold producers be paid. The incentive should be reviewed to a minimum of 40% of gross proceeds to match local costs that are pegged at parallel market rates.”

ZESA tariffs, the Chamber also says, must be cut.

“The Chamber is also appealing for a reduction in electricity tariff for ferrochrome producers in light of the depressed prices and their need to remain in business.”

The Chamber also wants to see a suspension of duty on personal protective equipment (PPE)

“In order to guarantee adequate PPE and safety in the mining sector, we are appealing to Government to suspend customs duties and related taxes on PPE and allow efficient logistical movement of these essential requirements through suspending Bureau Veritus inspections in the importation of PPE and other supplies (sanitisers, wipes, Infrared-thermometers, thermo-scanners, ventilators, etc).”

Zimbabwe earned US$2.91 billion from mineral exports in 2019, accounted for 55.2% of total exports, according to RBZ data.

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