Survey: Zimbabwe’s miners are more confident about 2022, but old worries still lurk under

Zimbabwe's mines will invest more in 2023, but concerns remain over policy and costs

Zimbabwe’s mining executives are more confident of the industry’s prospects next year than they were in 2021, but their optimism is tempered by old concerns over erratic government policy.

According to the Zimbabwe Chamber of Mine’s latest annual survey of sentiment among the heads of the country’s biggest mines, “mining executives are confident about the prospects for their businesses in 2022,” encouraged by the commodity price outlook, improvement in capacity utilization, and new investment in growing output.

The survey uses the Mining Business Confidence Index to gauge how confident players in the industry are. The index scale ranges from -100 to +100, with the lowest score representing the least level of confidence and the biggest score representing the highest.

The index moved to 17 from 9.8 previously.

The index is still lower than the 21.9 score that it hit late in 2017, when miners had their hopes up after the fall of the previous government. The index had been -6.6% before then.

Here, we summarise what the miners are optimistic about in the latest survey, and what is keeping them awake at night.

The Good

Most of the miners said they are planning to ramp up production in 2022 by ranges of 3% to as high as 100%. Some 58% of respondents plan to increase production by up to 40%, while 42% have plans to increase output by over 40%.

Survey findings show major plans in the gold and platinum sectors to increase production in 2022.

Three gold mines said they had revived operations in 2021 and would lift production in 2022. Seven other gold mines are undertaking expansion projects. All platinum producers said they are spending on capital projects with additional output expected in 2022 and the medium term.

The miners see capacity utilization rising to 83% from 80% this year. Some 55% of executives plan to inject more capital into their companies in 2022.

The Bad

According to the report, miners remain worried about investment competitiveness, access to capital, access to foreign exchange, mining policy environment and country risk.

They do not see any improvement in the investment environment. They see the cost of capital remaining high, with the forex crisis and infrastructure deficits continuing.

Miners cannot bid at the RBZ forex auction to cover shortfalls, as they are considered net exporters, and this is hurting their businesses. Mines are allowed to keep 60% of their export earnings in US dollars. They are paid the remainder in Zimbabwe dollars at the official exchange rate.

“Almost all respondents indicated that the foreign exchange retentions at 60% were inadequate to meet their operational requirements,” the report found. Mines want to be allowed to pay for taxes, royalty and power in local currency.

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While miners expect to be more profitable next year, profits will be lower than in 2021 as costs rise faster than revenue. The biggest costs will come from procurement (45%), labour (22%), and electricity (17%).

High taxes such as royalty beneficiation taxes, environmental management levies and rural district council charges will also continue to erode profitability.

Platinum and lithium miners, who are charged a tax for exporting raw minerals, say the charge is undermining the industry, and “some investors have rejected potentially viable projects in the sectors”.