Golden Sibanda in Nyanga
THE Chamber of Mines of Zimbabwe has called for a mineral development policy to unlock the country’s vast mineral wealth. Chamber of Mines president Mr Winston Chitando said if the many
challenges besetting the sector were resolved, production could double within the next five years.
Finance Minister Tendai Biti revised the 9,4 percent growth rate he projected in his National Budget last year, to 5,6 percent in his Mid-Term Fiscal Policy Review.
Mr Chitando cited three broad factors that he said were constraining the mining firms’ potential for growth: availability of capital, cost of operations and the price of minerals. He said addressing these issues would ensure equilibrium — where cost of output does not tally with returns, as some mineral occurrences were of low grade and expensive to extract.
Mr Chitando was speaking in Nyanga yesterday at the 43rd edition of the Institute of Bankers of Zimbabwe Winter Banking School, which ends tomorrow.
He said the Government needed to urgently craft a mineral development policy to address these major issues to unlock the sector’s potential to anchor national economic growth. Apart from capital, the price of minerals and high costs of production, other challenges included shortage of power and skills, lack of exploration, perceptions around implementation of indigenisation regulations and the sector’s contribution to the fiscus.
But the Chamber of Mines president singled out the charges levied by various Government departments as some of the biggest constraints to the growth of mining.
“The structure of fiscal charges (royalties, environmental fees) is really stifling the growth of the industry, leading to the sterilisation of the country’s (mineral) resources,” he said.
According to the Chamber of Mines, the Government has over the past three years increased royalties five times, with gold and platinum registering 100 and 200 percent increases, respectively. He said royalties gobbled up about 17 percent of the mining companies’ revenue and up to 60 percent of the firms’ profitability before tax.
Each time charges were increased, companies had to review downwards the cut-off grade of minerals.
Addressing the challenges facing the sector would also enable the industry to attract foreign direct investment needed for optimising production, expanding output and embarking on exploration for more minerals to fully unlock the country’s mineral wealth.
The industry, according to the Chamber of Mines, required between US$5 and US$7 billion to recapitalise operations for optimal performance over the next five years. Of these financial requirements, gold mining required 33 percent, platinum 40 percent, diamonds 11 percent, coal eight percent while chrome and nickel required four percent apiece.
Mining companies contend that if they secured the requisite funding — for instance — gold production would reach 50 000kg, platinum 21 000kg, ferrochrome 262 000kg and nickel 8 000kg by 2016, from 13 000kg, 11 000kg, 162 000kg and 25 000kg respectively. While debate rages on the actual contribution of mining to Treasury, the Chamber of Mines says the sector accounts for 13 percent of GDP growth and 50 percent of foreign exchange earnings.
Mr Chitando said to stimulate growth in the industry, there was need for policy consistency, predictability, a competitive fiscal regime, competitive investment environment and mining sector administration reforms.
Other critical aspects included a sustainable environmental, policy framework, mineral development policy and maximisation of mineral contribution through resource linkages promoting the development of a vibrant and sustainable small mining sector.