Mining sector in dire need of attention

Vandudzai Zirebwa Buy Zimbabwe
The mining sector was, until recently, the most viable and most promising sector in Southern Africa. This rising trend was also evident in Zimbabwe over the course of the past decade. In 2012 the World Bank projected that Zimbabwe’s investment demands in the mining sector will be around $11 billion. The group said the sector will grow at a double digit rate between 2013 and 2017 compared to all other sectors which are anticipated to grow in single digits.

The group was very optimistic that the contribution of the mining and mineral exploration could increase, with well-targeted value addition and beneficiation programmes, however, they indicated the need for the Government and the stakeholders to address the then prevailing policy conditions.

Its now 2016, its only fair to ask if the projections are being recognised. If no, then why not? The mining sector in Zimbabwe is heavily affected by exogenous factors. The revenues are declining. The average revenue generated by the mining sector since 2011 is $2 billion which declined to $1,8 billion in 2015 .

The industry testifies that the decline in revenues is due to low output and the subdued international commodities prices among other factors.

The mining sector forms the large source of Government revenues and is the highest contributor in terms of Foreign Direct Investment in most of the mining countries. In Zimbabwe the mining sector has been the backbone of the economy since 2009 when the country dollarised. Mining generates income and foreign exchange through exports and stimulates local economies through local purchase of inputs.

Income from the mining sector activities is spent on domestically produced services, tax revenue which is available to fund education health and roads electricity and to enhance infrastructural development, capital expenditure and direct and indirect employment .

Many towns in Zimbabwe were established from mining or agricultural activities, unfortunately a few of them are thriving.

The president of the Chamber of Mines Zimbabwe Mr Toendepi Muganyi recently indicated that the challenges that Zimbabwe is facing are not only unique to the country alone especially in light of weakening global prices.

He said mining houses had exhausted internal strategies and surviving measures to restore the viability of the mining sector indicating that it was now up to Government to intervene with supportive policy measures to save the industry from the continued downturn.

The industry has potential to employ 45 000 jobs directly and another 78 260 jobs in the industries that either supply goods and services to the mining sector, or use mining products for downstream value addition.

The social multiplier of mining is very significant for Zimbabwe

Many people do not realise the catastrophic effects of the decline in the mining sector .The issues that need to be addressed in the Zimbabwean economy are high power outages and high electricity tariffs but those that are peculiar to the mining sector are high royalties, taxes and fees.

The sector is pleading with Government on tax relief measures as the mining sector’s biggest challenge is the decline in the commodity prices. The fall in these prices dampens revenue growth and weighing down the viability of the sector, followed by low output and relatively high cost structure which the mining companies are failing to break even .

Amid all these challenges Mr Muganyi indicated that the Government has shown some desire and commitment to respond to a number of issues presented by the chamber of mines. More so all is not lost as there are some pockets of recovery in selected minerals.

As Buy Zimbabwe, we are for wealth and job creation, hence in partnership with the Chamber and MEJRKH communication and advisory we are hosting the MINEX which is a platform which will bring together mines and stakeholders to share experiences and expectations as a means of developing mutually beneficial relationship .

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  • http://www.gardeneye.co.uk/ TheDistressedButterfly

    Well looking at the mining sector from outside Zim – it is completely obvious that the extraordinarily high levels of entry and taxation is discouraging inward investment.
    The article is right in that by encouraging companies with taxes breaks and incentives into the country to explore for raw materials and mine, the longterm affects of employment, taxable profits and improved infrastructure would be immense.
    It should be the absolute primary business priority for this to be done and get the country back to a sound financial footing which will take courage and great leadership.