Zimbabwe: Mining Sector Remains Lucrative

Zimbabwe: Mining Sector Remains Lucrative

ZIMBABWE’S mining sector remains very lucrative although proposed changes in mining laws have dampened enthusiasm for foreign investment, Chamber of Mines chief executive Mr David Murangari said this week.

Interest from external investors had also fallen sharply over the past five years although no statistics were immediately available. This, aided by the politics of economics, has seen investment in the mining industry dropping in Zimbabwe, says Mr Murangari.

“International investors keep inquiring on the potential of the country’s mining sector,” he said.

“Interest from outside investors is still there but has rather been subdued and has failed to translate into real investments. The level of inquiry has declined over the last half-decade due to lack of clarity in mining policy.

“Currently, we do not have specific numbers but investors are keen on finding out the sustainability of operations during these hyperinflationary periods.”

Earlier this year, the Ministry of Mines and Mining Development mooted a proposal to slash foreign ownership of mines by 51 percent, of which 25 percent would be surrendered to Government at no cost. This was part of Zimbabwe’s black economic empowerment.

However, the proposed amendments have caused disquiet in some mining circles with analysts expressing fear that they could scare away potential investors. Mining giants Impala Platinum and Metallon Gold also warned on the possibility of disinvesting but changed their minds following Government assurances that their investments were safe.

Despite the uncertainty, Zimbabwe’s mining industry still remains one of the most lucrative in the world, thanks to its vast reserves of coal, platinum, nickel, asbestos, gold and gemstones.

About 40 different minerals are mined in Zimbabwe, mostly along the 500km-long and 11km-wide stretch of rock commonly referred to as the Great Dyke, which straddles the Harare-Bulawayo railway line.

Zimbabwe holds the world’s second largest platinum reserves outside South Africa. This probably explains why Impala plans to invest over US$2 billion in expansion projects over the next four years.

Gold and nickel miner RioZim has diversified into diamond production at Murowa in Zvishavane and coal in Sengwa while Anglo Platinum is sinking a US$100 million mine at Shurugwi in the mineral-rich Midlands province.

The recent discovery of uranium at Kanyemba has also given the industry a lift although gold has apparently lost its glitter, with output declining in the last five years.

Mining accounts for about 4 percent of Gross Domestic Product, about 4,5 percent of employment and 16 percent of total foreign currency inflows.

Analysts say in the short-term difficulties in skills retention, shortages of energy (electricity and fuel), high operating costs, an overvalued exchange rate and depressed direct investment will continue to present challenges for local mining companies to enjoy the full benefits of high commodity prices on the international markets.

However, they say increased attention to the platinum group of metals through the RBZ’s strategic minerals campaign is expected to result in higher platinum output in 2006. The outlook for the other metals will depend largely on the National Economic Development Priority Programme (NEDPP).

Copyright © 2006 The Herald. All rights reserved.

Share this post