eBusiness Weekly
HARARE – Zimbabwe’s mining sector improved production in 2018, with average capacity utilisation going up to 75 percent from 71 percent in 2017, an industry report released on Monday shows.
However, this was in spite of revelations that most firms had at some stage in the year been forced to halt production due to foreign currency constraints.
According 2018 state of the mining industry report released by the Chamber of Mines of Zimbabwe, the increase in production had however not been matched with a jump in profitability as only 20 percent of companies recorded profit increases.
Seventy percent of firms registered a drop, while 10 percent managed to break even.
The sector was dominated by six key minerals – gold, diamonds, nickel, chrome, coal and platinum group metals which accounted for 95 percent of the $2.2 billion generated as at the end of October 2018.
“Monetary policy issues raised by respondents as affecting their operations include low foreign exchange retentions by the mining industry; exchange rate disparities resulting in mismatch between revenue and the costs and high interest rates on the market making it difficult for mining companies to raise capital,” the Chamber of Mines said.
Last week the Reserve Bank of Zimbabwe increased the gold sector’s foreign currency retention rate from 30 percent to 55 percent.
For the rest of the mining sector, retention is now pegged at 50 percent, up from 35 percent.
“The rationale (for the review) was that we had been starving them for a long period and we said we will review it every now and then,” bank governor John Mangudya said.
He said government would continue to support the “goose that is laying the golden egg.”
Dr Mangudya said government was working on reducing its expenditure which would create space for more foreign currency allocations to critical sectors such as mining.
Miners have in the meantime demanded that foreign currency allocations be reviewed in line with the actual US dollar costs obtaining on the market for inputs, with the remainder of export earnings liquidated at “fair value” and not the government’s 1:1 ratio to the bond note.
Meanwhile, the mining business confidence index (MBCI) for 2019 remains positive but slumped to eight from 21 in 2018.
The MBCI measures mining business sentiments, either optimism or pessimism, about the prospects of the mining industry and the Zimbabwean economy in general in the next 12 months.
The index is interpreted from a scale ranging from -100 to +100, with the lowest score representing the least level of confidence and the biggest score representing the highest level of confidence.
Issues that are looked at when coming up with the index include growth and profitability prospects, consistency and predictability of policies, employment and perception of political risk. – New Ziana
