The Govt says mining is booming. But here is what the miners, and Govt’s own data, are saying

Worker at Shamva Mine: Chamber of Mines worried by rising costs

The Zimbabwe government says mining is booming, but the industry says it is under growing pressure from the threat of weak global metal prices and rising costs at home.

According to the Chamber of Mines, prices of key minerals have fallen sharply. Rhodium, part of the platinum group minerals, is down 74% over the past 12 months. Lithium, which Zimbabwe is hoping will lift mineral exports, is down 69%, palladium (-41%), diamond (-60%) and nickel (-8%). While prices are falling, costs are rising, the Chamber says in a new report.

“The prices are coming down at a time the cost structure for the mining industry has increased, propped up by high electricity which went up by more than 40% in the last 11 months,” the Chamber says.

Other major costs are coming from last year’s increases in royalties, which doubled for platinum producers from 2.5% to 5% and rose from 2% to 5% for lithium miners.

All these factors have driven overall production costs by more than 10%, the Chamber says.

“While mining companies have tried to reduce their costs through various strategies including cutting back on capital expenditure and optimising their businesses, the viability gap is so huge that only with government intervention in the form of electricity tariff and royalty reduction can viability be restored,” the miners say.

However, mines are unlikely to get relief soon. The power utility ZESA increased tariffs for miners to US12.21 cents/kWh last year, saying tariffs were too low to sustain power supply. This week, ZESA said in a statement that it has asked for higher tariffs so that it can maintain infrastructure and service debts.

Electricity now accounts for 20% of mines’ operational costs.

Finance Minister Mthuli Ncube is also unlikely to be moved on taxes; when he raised royalties last year, he complained that miners were paying too little.

“Despite the significant contribution to output and export receipts, the mining sector contributed about 1.2% of GDP in direct taxes to the Fiscus in 2021. This is a significant contrast to countries in sub-Saharan Africa which averaged 2% during the same period,” Ncube said.

Silent boom: the numbers

The government frequently claims to have achieved its target to grow the mining industry to US$12 billion this year. In a speech at the opening of Parliament last week, President Emmerson Mnangagwa repeated the claim, saying: “Our mining sector, grew from US$2.8 billion (in exports) in 2017 to the present US$12 billion, and is propelling socio-economic development and growth.”

However, the government’s own data does not back this claim. Mineral exports in 2022 stood at US$5.6 billion, rising from US$5 billion in 2021, according to central bank figures. While Mnangagwa claims growth, exports are in fact falling. Mineral exports fell by 12.5% to US$2.58 billion in the first half of the year, compared to the same period last year, RBZ figures show.

Deliveries of gold were 22.4 tonnes in September, lagging behind the 25.6 tonnes for the same time last year. This means Zimbabwe is missing its target of 40 tonnes for the year.

This week, Zimstat data showed that the mining industry had shrunk by 6.1% in the first quarter of 2023, before recovering 4.7% in the second quarter.

Zimstat also said the mining confidence index fell to 12.7 in the second quarter of the year from 36.8 in the first three months of the year. The index uses information given by miners on their expectations for production. Their biggest worry, Zimstat says, are power shortages, cash flow challenges and “uncertainty about the economic environment”.

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