According to a Chamber of Mines of Zimbabwe (CMZ) annual report, electricity supply remained a major challenge facing mining entities while an arrangement to provide reliable supplies to consumers who paid premium tariffs paid dividends, but companies complained about the high tariff application.
“Some members could not access electricity on the scheme due to the absence of a dedicated transmission infrastructure. With suppressed demand surpassing supply by over 2 000MW, developmental efforts in the mining industry is going to be seriously affected,” reads part of the CMZ’s report. “New projects are unlikely to take off, and if they do, the extent of demand management will be severe for those that are not able to participate in the ring-fenced contracts with Zesa.”
The CMZ suggested that the immediate solution to the power problems was to negotiate with regional electricity suppliers for incremental power supplies.
The chamber said that the increases in royalty rates for gold and platinum from 4,5% and 5% to 7% and 10% respectively would heavily weigh down on the mining sector’s projected growth of 15,9%.
“Hardest hit is the gold sector whose majority of companies are still struggling to increase their production capacities to viable levels,” read the annual report.
But Mines Minister, Obert Mpofu, assured the mining firms during a CMZ annual conference in Victoria Falls last week that his ministry would review the royalties.
The CMZ said mining firms continued to face challenges in raising the required capital to meet planned capacity developmental requirements, adding that the tight liquidity conditions meant that local borrowing was limited to short-term working capital requirements in the face of huge capital requirements for developmental projects.
It is estimated that more than U$7 billion was required over the next five years to finance developmental projects. But of the $2,881 billion loans advanced in 2011, the mining industry accessed 6,4% while the bulk of the loans went to the manufacturing sector (18,8%), agriculture (16,32%) and services 15%.
The mines noted that it was difficult to access credit from international banks after Zimbabwe deteriorated on competiveness, according to the International Finance Corporation.
“The cost of production during the year rose on the back of labour costs, electricity, imported consumables and cost of capital. Mining title fees, royalties and development levies were also increased during the year.”