ZIMBABWE has of late been experiencing numerous challenges that have harmed the economy, including foreign currency shortages, exchange rate volatility, rolling power cuts and government policy inconsistency. The mining sector, the biggest economic driver at the moment, has not been spared, as some mines have been fighting to stay afloat, while others have ceased operations. Zimbabwe Independent chief reporter Andrew Kunambura (AK) spoke to Chamber of Mines president Elizabeth Nerwande (EN, pictured) on the sidelines of the Mimosa Mines annual long-service awards in Zvishavane last Friday about a wide range of issues affecting the mining industry. Below are the excerpts:
AK: Let me start by asking you to give an outline of the state of affairs in the mining sector.
EN: What I can tell you is that from January until July, the first six months of 2019, the mining sector has declined. I cannot give you specific figures off hand, but the decline has been quite significant in some sectors.
AK: What caused this decline?
EN: What we have seen is that this decline has come mainly because of the power outages. There have been a lot of power cuts which we have witnessed all over Zimbabwe and you know in mining, once you lose even a day’s supply of power, that is a lot of production that has gone down. The power outages have been very significant and very disruptive.
So what is happening is that some mining houses have simply stopped production. What this means is that the next few months are uncertain. What we have also seen is that prices have been fluctuating at the global level, whether it is platinum or gold. However, they have started coming up, but in the first half of the year, they were not so high. And then there is also the issue of inconsistent government policies.
AK: How much of this decline can be attributed to government policies?
EN: We have also been greatly affected by policies that have been inconsistent here and there. We have witnessed that. You have seen quite a number of statutory instruments coming through. There is a lot of inconsistency here and we have said we need to change that because this affects pricing.
The disparities in terms of the exchange rate have also been detrimental. We earn forex and when we pay suppliers, we use the interbank market rate and then the person we are buying from is using the parallel market rate, which is higher, meaning we have to close the gap. That loss is quite significant.
AK: Can you explain some of these policies that have affected the mining industry?
EN: What has been happening is that the issue of pricing has also been of significance because you find that a lot of mining is totally dependent on our suppliers and when we look at the exchange rate fluctuations for example, our suppliers charge their goods and services using the parallel market rate and we then end up with that price difference and it is quite significant in some areas. So what will happen is that this will eat into our capital expenditure and it implies that some of our programmes have had to be shelved and this has affected us in a big way.
However, I must hasten to say what we have been doing as the chamber is that we have been working well behind closed doors with all stakeholders and ministries. We have also been having inter-ministerial meetings. We have been having everybody in one room and saying these are the challenges we are facing. That has produced a few positive results.
For instance, if you look at the mid-term budget review by Finance minister Mthuli Ncube, there were quite a number of issues that were addressed, chiefly the issue of royalties. It used to be worked out not as an expense.
We were always double-taxed as the mining sector, but now it is treated as an expense.At least that has been looked at. The issue of royalties for gold was also addressed. This is the first time we have seen almost 40% of the concerns we submitted towards that budget being addressed. I can say the future could be bright if we carry on with this meaningful lobbying and sitting down to address all these issues.
AK: You spoke about platinum, what about other minerals such as gold, chrome and diamonds?
EN: Again, there has been a decline in the first six months of the year, especially in gold. The other thing that has adversely affected the entire mining industry is the issue of foreign currency retention threshold by the Reserve Bank of Zimbabwe, where miners can access only 50% of their forex and the rest is retained.
AK: Can you elaborate on how exactly this has affected the sector?
EN: There are two things. In the gold sector, they are given 50% of their sales returns in forex, but even that 50% has been coming far too late. So what this does is that it reduces confidence and you might find that some of the gold miners might not use official channels. The other issue is that the RTGS payments are done using the interbank ratio, while we get goods and services on the parallel market rate and this has greatly affected us.
AK: As the chamber, what are you doing to address these anomalies?
EN: We are trying as the chamber to make sure that we reach a mutual path, where they make sure that their nostro accounts are fed on time and that the retention threshold is increased.
We are also trying to negotiate with government and other stakeholders for them to understand our problems. We can only achieve the US$12 billion mining economy by 2023, which government is talking about, if we put our heads together and make sure that all policies that are supposed to be in place are looked at.
AK: Can you also share with us the state of affairs in the diamond sector, where we understand there have been a lot of issues.
EN: When we look at the diamond sector, again it has not been spared in terms of the issues I am talking about. I think the issues that have affected every other sector, be it platinum, gold or diamond, it has been the same.
AK: What are your expectations in the 2020 annual budget to be presented in parliament later this month by Finance minister Mthuli Ncube?
EN: You might need to know that the ministry of mines and mining development has been working on a fiscal regime and we are hoping that this can be concluded early because we need to look at a consolidated approach in terms of our taxes and the entire fiscal regime.
AK: There have also been concerns about the environmental impact of mining activities in some communities involving some of your members. How are you addressing those issues?
EN: We have got committees within the chamber that deal directly with that and we urge all our mining houses to adhere to the environmental policies during the lives of mines. What has also been happening is that the ministry of mines and mining development has been looking at a comprehensive approach to the environmental concerns.
AK: What exactly are they considering, if you may know?
EN: We understand they are planning to introduce a 2% environmental levy and we were saying really this has become an obligation for mining houses and we would support it because it helps preserve the environment both during the life of mine and even long after the mines have gone.
AK: Have you received any specific complaints about mines not adhering to environmental requirements?
EN: Yes, here and there we have picked up that there are people who may not be adhering to their environmental impact assessment plans, but where members of the chamber are concerned, we have not had problems.
AK: How are you addressing concerns about value-addition and beneficiation, especially on platinum, lithium and chrome which have lagged behind?
EN: There are already plans in place. There are actually definite roadmaps that have been put in place with the mining houses working together with government. We are already at another stage.
AK: Lastly, what are your expectations going into 2020 going forward?
EN: We see the outlook in a positive way because prices are now going up on the global market and we have every reason to be hopeful. If the number of challenges we are talking about can be addressed, we can fly.