eBusiness Weekly
Africa Moyo
The mining sector says it is ready to play a key role in economic transformation, but is calling on Government to tweak or drop some policies currently choking the industry if “rapid and sustained growth” is to be achieved.
Chamber of Mines of Zimbabwe (CoMZ) president Batirai Manhando, said it was imperative for Government to urgently redress the mining sector policy environment if it was to exceed current performance.
In the first 10 months to October this year, the sector had contributed $2,2 billion to the $3,4 billion export receipts generated by the country.
Last year, the mining sector clocked $2,3 billion, making it the single biggest foreign currency earner for the country.
But Manhando said; “. . . there are a number of policies that require urgent attention to position the mining industry for rapid and sustained growth.
“As the mining industry, we are ready to play our role for the effective and efficient exploitation of Zimbabwe’s mineral endowment.
“The mining industry has grown in prominence over the years and we remain committed to contribute to the economic and social development of the country.”
He said this during the launch of the State of the Mining Industry 2018 Report in Harare on Monday.
Mining executives interviewed by researchers during the collection of data for the State of the Mining Industry 2018 Report, said they were “pessimistic” that Government would implement “consistent and predictable” mining policies next year.
Around 40 percent of respondents say they are unsatisfied that mining legislation would be predictable in 2019 while another 40 percent are neutral on the matter.
The remaining 20 percent is positive that there will be policy consistency in the coming year.
Consultation before introducing laws
There is a general view by miners that the level of consultation before introducing new laws “improved” this year compared to the prior year.
A survey shows that 70 percent of mining bosses affirmed that Government was consulting them before announcing fresh policies while 30 percent thought the “level of consultation remained the same as 2017”.
All mining executives interviewed by researchers that compiled the State of the Mining Industry 2018 Report, said the country’s mining laws are “uncompetitive” while 80 percent said the policies were unpredictable.
Another 80 percent said the country’s mining policies are “uncertain” while 70 percent said they were “inconsistent”.
The majority of respondents fingered policies relating to fiscal issues (100 percent); monetary (100 percent); beneficiation (100 percent); and environmental (100 percent), as undermining the performance of the mining sector.
Monetary policy and forex management
Monetary policy issues raised by respondents as suffocating mining operations include low foreign exchange retentions by miners; exchange rate disparities resulting in mismatch between revenue and the costs and high interest rates on the market, making it difficult to raise capital.
The country is battling fierce foreign currency shortages due to limited exports, resulting in exchange rate disparities and high cost of loans.
Some mining houses such as RioZim Limited have been hit hard by foreign currency shortages, resulting in the recent closure of operations at its three mines – Dalny, Renco and Cam and Motor.
The company has since resumed operations after the Reserve Bank of Zimbabwe released foreign currency for the procurement of critical raw materials.
Ninety percent of respondents said they were contending with high interest rates, while 100 percent said they were being affected by exchange rate disparities and low foreign currency retentions.
Gold miners are retaining 50 percent of their foreign currency earnings, but Government has begun pushing for a phased review that will see them pocketing up to 70 percent.
Miners recommended that foreign currency allocations be reviewed “in line with actual US$ costs” obtaining on the market.
“Any remained of export proceeds paid in RTGS should be liquidated at fair value in line with obtaining local costs or market conditions (as opposed to 1:1).”
Fiscal policy concerns
All respondents recommended that royalty should be deducted as a tax expense in tandem with best practice in other mining jurisdictions.
The 15 percent diamond royalty for instance, is the highest in the region.
But it is the recently announced 2 percent tax that has caused chaos in the mining sector.
All executives said the tax, which is paid up-front, will be an additional burden to the mining sector that claims to be “already operating in a punitive fiscal (tax) framework”
Miners said the tax, which is levied on transactions across the entire mining value chain and is not based on ability to pay, is actually more than 30 percent.
Already, the tax has caused price increases not only across the mining value chain, but in all sectors of the economy.
Small mines operating away from major cities say if the 2 percent is not removed or significantly reviewed, they would be forced to “suspend operations”.
“Respondents also felt that the tax will discourage ploughing back of profits due to multiple taxing, and would also increase the total capital requirement for similar projects without the tax,” reads part of the report.
This year, capacity utilisation in the mining industry rose to 75 percent from 71 percent last year and as at October 31.
