Zimpapers Logo

Tinashe Makichi Mining Matrix
In April 2011, the Government announced a ban on exports of all chrome ore including fines. The underlying principle being that the country is losing out by exporting raw materials as opposed to beneficiating. Following the ban, Government then resumed exports in 2015 leading to the formation of a special purpose vehicle, Apple Bridge Investments. Before the export ban, Zimbabwe had been producing an average 750,000 tonnes per year. The 2011 ban was not the first as the Government in 2007 also suspended raw chrome exports.

About a fortnight ago Mines and Mining Development Minister Walter Chidhakwa announced that Government was again now considering a ban on chrome ore exports. At a macro-economic level this makes sense and rudimentary economics informs us that a country gains less by exporting an unrefined mineral than exporting a refined one.

This is in line with Government’s value addition and benefaction thrust and while maybe on the other hand Government did not manage to reap enough benefits from the lifting of the ban in 2015.

Estimates indicate that by exporting raw materials, the country only gets 20 percent of the material’s value while the remaining 80 percent accrues to the processing countries.

Having said the above, it should be noted however that at a micro-economic level, the situation on the ground remains desolate and there are some fundamentals which must be addressed before the ban is put in motion.

Going forward, Government needs to look at alternative solutions which will attempt to address the challenges within the context of Zim-Asset.

Its quite critical that Government should propose a possible winning solution for the chrome industry because overnight, small scale chrome miners who were now thriving following the lifting of the ban on chrome ore exports are set to suffer.

Furthermore the existing smelting capacity in the country cannot consume the entire annual production.

The smelters in existence are old and archaic (one such smelter was established in 1949 – more than half a century ago). The existing designs of the idle capacity and modern designs are completely different.

Technological innovation requires a complete dismantling and rebuilding of the smelters in the country which also lowers electricity consumption .

The country at the moment does not have adequate electricity for these old designs (it must be noted that due to the high temperatures required in the process, only an electrical arc furnace is suitable), likely to be the most expensive option.

In as much as Government wants to drive the benefaction agenda, this analysis however seeks to also highlight the capital implications of the current initiative to reintroduce the ban on the export of lumpy chrome ore.

We understand that Government’s ultimate objective is targeted at generating higher earnings on a value added product guaranteeing increased inflows of foreign exchange in the country as the ferrochrome is destined for export.

Small scale miners remain largely under funded with the majority seeking assistance from Government and established miners within the sector.

It is my humble view that the proposed ban will inflict further problems on small scale miners. Therefore it is questionable who stands to gain from the ban as it largely threatens to bring most of the smaller mining operations to a standstill.

Export earnings from chrome remain a large contributor to our economy and pose a viable solution to resuscitation of our economy and assist with poverty alleviation.

The current situation presents an opportunity for local miners to expand operations or resuscitate operations due to increased chrome demand.

By opening the market at this opportune time large numbers of small scale miners will be able to gain from the prices offered by the international market. In addition the looming shortage of chrome in South Africa presents an opportunity to further gain from the current era where miners are still allowed to export chrome.

Local miners had begun to see steady revenues which are making the case for mine reinvestment and expansion planning. International Buyers have started to show increased interest in trading within Zimbabwe and investing in small scale miners leading to the resuscitation of the sector as a whole.

This reinforces the fact that there is opportunity for the smelters and small scale miners to develop within the sector with the outlay of revenue from external buyers which traditionally has larger margins.