HomeBusiness DigestSorry, We Are Closed For 'care and maintenance’'

Sorry, We Are Closed For ‘care and maintenance’’

A CAT has got nine lives, so goes the old saying.

The same might as well be said about Zimbabweans. Many outsiders marvel at the resilience of the people in the face of hardship. Their calmness and perseverance is striking considering the chaos which usually comes with similar situations across the continent.
It is amazing how both the people and businesses have survived the past decade of economic shrinkage.
Both the people and corporates have devised ways of keeping afloat whilst hoping for an early reversal of the downturn. On the way, people are emigrating in droves while companies have scaled down operations.
 Five years ago no one expected the bad situation to get worse, but it did. So far, few, if any, companies are still fully operational. For many, they have engaged in what they call “care and maintenance”.
Loosely put, stop operations; send most employees home; and leave only a few to manage the business premises and infrastructure.
Mining houses are amongst the worst hit and most of them are currently not producing. Toronto listed New Dawn Mining Corp, announced the suspension of gold production at Turk Mine. The mine was placed under temporary “care and maintenance” on  October 3. This was hardly surprising given the non-payment of proceeds on gold sold to Fidelity Printers and the high operational costs emanating from the unrealistic exchange rates and the prevailing hyperinflation.
According to their press release, the Chamber of Mines disclosed that gold miners are owed more than US$30 million for deliveries dating as far back as 2007. This is contrary to international practice where gold producers are paid within four days of delivery. The Chamber refuted the gold leakage claims in the formal sector. There is no way that gold could be smuggled from mines given the permanent presence of law enforcers, RBZ officials and international auditors at most sites, the Chamber argued.
Only last week, South African gold producer, Metallon, was reported to have stopped operations at its mines. More than 3 000 employees lost their jobs after Shamva, How, Mazowe, Redwing and Arcturus mines reportedly ceased operations. (see below).
Bindura Nickel mine also issued a cautionary statement citing worsening business conditions amidst speculation that
it is also in “care and maintenance”.
The inclusion of the Minerals Marketing Corporation of Zimbabwe under sanctions meant that outstanding receipts for the sale of minerals will not be forthcoming. While the miners can possibly invoice commodities directly, they will still encounter problems in accessing their Foreign Currency Accounts. In most cases the funds are not readily available when they want to use them.
The sad picture is not limited to the mining industry alone. It is gloomy across all sectors. Delta Corporation reported that volumes in their businesses were down by between 25-53% during the six months to 30 September 2008.
Margins across the divisions were unviable due to price controls and cash shortages. The business is also currently in the “care and maintenance” mode prioritising the preservation of working capital, reduction of costs and curtailment of product distribution. It makes sense for businesses to conserve stocks while avoiding giving away products for free.
Sales volumes in most companies have come off by almost 50% this year in line with the ever declining capacity utilisation in the industry. African Distillers reported a 60% volume decline. At the same time Colcom announced at its annual general meeting that local volumes retreated by 72% on prior year.
It is sad that exactly a decade ago the country had one of the most vigorous and diverse mining industries on the continent. In an article published in the Zimbabwe Quoted Companies Survey of October 1998, John Hollaway noted then that Zimbabwe had more formal mines than the rest of the continent put together, and produced almost as many different minerals as South Africa.
“Zimbabwe’s diverse, resilient mining industry arises from the mining law. This has three main principles, all of which have been seriously compromised elsewhere in Africa: ‘free access’, ‘finder’ keepers’ and ‘use it or lose it’”. The success of the sector then was because the mineral rights were freely negotiable as they are in all successful mining countries.
A lot has changed since then. In fact, we wonder if Hollaway would still believe that “if you want to go mining in Africa, Zimbabwe is the place to do it”. Surely the ever-decreasing number of miners in the country would say no, at least not just now!
(lHowever, Metallon this week issued a statement denying that it had shut down its mines. “Metallon Gold Zimbabwe, which employs about 5 000 people, has not closed nor has any intention of closing its five mines or embark on a retrenchment programme,” said the statement. It said “all its five mines continue to operate”. — Editor.)

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