THE unstable situation in Zimbabwe is frustrating mining giant Bindura Nickel Corporation (BNC) which is failing to access more than US$500 million it needs for major capital projects with potential offshore financiers continuously citing the heightened sovereign political risk, businessdigest has established.
By Melody Chikono
The country is reeling from a political stalemate between President Emmerson Mnangagwa and main opposition MDC leader Nelson Chamisa over the disputed outcome of last year’s presidential election. Dialogue between the two leaders is widely seen as crucial to resolving the economic and political crises in the country.
This comes as the country’s capital markets have largely remained volatile reflecting the explosive situation, but BNC board chairperson Muchadeyi Masunda says it is time Zimbabwean politicians realised there was more at stake than just power and find a negotiated settlement to the deadlock.
The country’s risk profile has also characterised local banks’ ability to access concessional lines of credit from foreign banks and complicated interventions to contain currency volatility and the liquidity crunch, discouraging foreign direct investment.
Masunda on Tuesday told businessdigest that BNC is seized with the task of accessing foreign capital markets for fresh lines of credit that will enable the mining company to secure funding as the local financial market is largely dry.
While he admitted that they have been benefiaries of the central bank’s foreign currency allocation scheme, he said it is inadequate. This was compounded by the political environment, he said.
“The toxic nature of politics is making it difficult for many companies in Zimbabwe like BNC which would need to access affordable finance for major capital projects. Mining is a major capital-intensive business and if only we can access from these institutions, it can do the trick,” Masunda said. “I have always said capital is a very timid animal, it won’t stay where it feels trapped. We need access to bigger markets out there. We have said we are pursuing a number of capital projects most of which are being delayed by lack of foreign currency.”
He added: “For us to uptake any meaningful project we need nothing less than US$500 million. Nickel prices are going up and it can be expected to reach as high as US$6 000 per tonne. We need to be taking advantage of the demand for electric motor vehicles which is pushing demand for nickel. Basically, what I’m saying is we must learn to come in at the opportune time as we are not in living in a vacuum. We need to be in sync which what’s happening on the markets.”
In the full year ending March 31, 2019, BNC rolled out US$5,4 million in capex investments in respect of installation of steelworks for the loading station, civil works and other projects.
Masunda said more capital was needed for the entity, but offshore capital markets where to not accessible. He said politics is largely the reason why the country is lagging behind in infrastructural development — for instance, the dilapidated railway and road networks — noting that BNC had lost potentially lucrative smelting and refining business.
There is hope that Zimbabwe’s moribund railway network could soon be revived on the back of a US$400 million recapitalisation agreement between the National Railways of Zimbabwe funded by Afrexim Bank.
President Emmerson Mnangagwa met with Afrexim president Benedict Okey Orama in Tokyo, Japan, to discuss financial packages for Zimbabwe. The NRZ project is one of the deals Afrexim is funding.
“We have lagged behind in terms of infrastructure development, especially railway which used to work in the past.
At peak we would receive concentrate (a bulk commodity) from as far as Australia, Canada, South Africa, Botswana and many other countries, for smelting and refining. We have lost business which would have become lucrative if we had functional infrastructure,” Masunda said. We use to produce enough feedstock. I pray the politicians wake up to smell the coffee that there is more at stake than just power. The expected mining targets can be achieved, but it will be very difficult in the environment.”