Zimbabwe’s mining executives are pessimistic about 2024, concerned over low mineral prices, power supply, and access to capital, according to a new survey.
Each year, the Chamber of Mines comes up with a Mining Business Confidence Index, which measures what miners think about the coming year. The index is on a scale of -100 to +100, with the lowest score being the least level of confidence and the biggest score the highest level of confidence.
Last year, the index was 9.4%, meaning that miners were only slightly positive about 2023. In the latest report, the index has turned negative, falling to -0.3%. This means that miners are now pessimistic about what lies ahead.
This is the first time that the index has gone below zero under the administration of President Emmerson Mnangagwa, who has placed mining at the core of his economic policy.
After Mnangagwa rose to power late in 2017, the index rose sharply as the mining industry became confident for 2018. Hopeful miners swung the index from -6.6% to 21.9%. That confidence has since disappeared over policy concerns, costs, and global commodity prices.
According to the report: “Notable variables that weigh down their confidence include depressed commodity price outlook, gloomy investment environment, inadequate foreign exchange and infrastructure bottlenecks.”
Here, we summarise what miners are saying about their fears for 2024:
Profits are falling
Miners see profitability falling by 15% in 2023. Half of the miners surveyed say they are struggling to break even. Most expect profits to fall, with only gold miners expecting to remain profitable in 2024.
Miners expect revenue this year to fall by 20%, and a further 10% next year, mostly due to weak commodity prices. Companies plan to produce more minerals to counter the lower prices, but any production increase will not be enough to cover the price decline. There is not enough capital available for them to increase production significantly.
Miners expect output to grow by an average of 12% in 2024. Gold will go up to 39 tonnes from this year’s expected 33 tonnes.
Power costs will soar after ZESA increased tariffs from USc12.21/kWh to US$14.21/kWh. This will see costs taing up 24% of costs, up from the current 21%. Most miners want the power tariff cut to between USc7/kWh and USc10/kWh.
Overall, miners see the cost of production rising by up to 10% next year.
Royalties must come down
Last year, the government increased the royalties for platinum miners from 2.5% to 7%, and for lithium from 2% to 5%. Miners say these increases have driven costs up by up to 5%.
Miners also worry about a beneficiation tax on platinum that will come into effect in January. They say the tax is unnecessary, as Zimplats is currently building a refinery and has agreed to process platinum for the industry in Zimbabwe.
The mining industry needs US$2 billion over the next year to ramp up production and stay in business. However, most of the miners expect the shortage of capital to continue.
Foreign currency retention
The government pays exporters 75% of their earnings in USD and 25% in local currency. Because of the decline of the Zimbabwe dollar, miners are losing value. They recommend that they be allowed to keep at least 90% in forex, so that they can fund their operations.
Miners are worried about inconsistent government policy. Most don’t expect this to change in 2024.