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Zimbabwe is endowed with mineral riches spanning gold, platinum, chrome, diamonds and coal among others that have attracted investors from SA, Russia, China, Europe and other regions. However, it is faced this year with a potential decline in the mining sector - one of the country's major economic mainstays.
Mining companies have complained about high royalties, high taxes and other mining fees deemed exorbitant. Now, according to Mhembere, who is also chief executive officer of Zimplats, the local unit of Implats, softer commodity prices will put a further damper on any growth prospects.
Analysts said the downcast commodity prices expected to persist for the greater part of this year will subdue the performance of Zimbabwe’s mining sector in 2015.
They added that the 3.1% growth outlook projected for the sector by Finance Minister Patrick Chinamasa looks increasingly unlikely.
“Metal prices are depressed and it’s cutting across all minerals, gold, platinum, base metals and everything else. This is adding up to pressures for the industry in Zimbabwe,” Mhembere said in a recent interview.
He has previously been quoted as saying “the costs of other raw materials that are used and imported into the country are very high”.
“Mining costs are rising and margins are starting to take a knock. The government is also making all sorts of revenue demands and this is squeezing the industry even tighter; we may say investors (are) putting less capital in mining projects until the outlook in prices improves,” a senior mining executive told Fin24 on Monday morning.
Mineworkers' pay rise in jeopardy
Reports say mining companies in Zimbabwe may be unable to pay mineworkers a salary raise they are expecting this year because of lower commodity prices.
On Monday Bloomberg quoted the Chamber of Mines as saying in a separate paper that the mining industry in Zimbabwe "continues to operate below capacity amidst a host of challenges, not restricted to but including lower capital and FDI inflows" among others.
The report also blamed “depressed metal prices” for the expected subdued performance of the mining sector.
Implats spokesperson Johan Theron said in recently emailed responses to questions that metal prices continue to “deteriorate”, largely “as a result of a depressed global economy and concerns that our metals remain oversupplied”.
He highlighted that depressed metal prices will “be the single biggest challenge for the industry in 2015”. Gold, which has been down to lows last seen nearly 10 years ago, is however looking lucrative in Zimbabwe on a bullish outlook, with major producers of the precious metal aiming to boost production.
