Abstract
The mining sector, along with every other key economic sector in Zimbabwe,
continues to be affected by
the political situation in the country.
Following months of stalemate and tough negotiations, the
opposition
Movement for Democratic Change (MDC) and Robert Mugabe' s Zimbabwean
African
National Union-Patriotic Front (ZANU-PF) finally formed a new
coalition government in the middle of
February 2009. While a positive
development in itself, the list of challenges that the new unity
government faces is long, and a renewed breakdown can by no means be
discounted over the coming
months, with the most potent threat coming from
the military (for more detail, see the Political
Environment section of
this report). It should also be reiterated that Zimbabwe still suffers from
hyperinflation
and frequent power shortages. The Zimbabwean dollar is no
longer widely accepted as a valid
source of any real value and the economy
now only deals in the South African rand or the US dollar.
However, the
geology of Zimbabwe is very richly endowed. Of the 40 known metals and
minerals that it
is home to, gold, platinum, and chrome form the principal
endowments. The country’s gold reserves are
among the largest in the
African region, while it hosts the second largest platinum reserves in the
world.
Another segment that has caught the attention of miners in Zimbabwe
is diamonds after the discovery of a
number of significant
kimberlites.
Gold sector liberalised
One recent positive development
was the announcement by the central bank in February 2009 that it
would
relinquish its role as mandatory sales agent for gold sales. At the same time,
it was announced that
gold miners would be allowed to hold on to foreign
currency earnings. These moves will provide a badlyneeded
shot in the arm
to the depressed gold mining sector. Already, Mwana Africa has said that it
will
look to restart production at its Freda Rebecca mine as a result of
these liberalising moves.
Global overview
On page 9 of this report,
BMI examines the phenomenon of increased Chinese activity in the global
mining sector and what this means for the industry moving forward.
Industry Forecast
Frequent power cuts, a shortage of foreign currency, and
labour shortages are further country-specific
factors which are having a
hugely negative impact on the sectors performance. Coupled with this the
slump in global metal prices is forcing mines to cut back production. Under
these conditions, it is no
surprise that BMI is pessimistic about the
prospects of Zimbabwe’s mining sector in the short term.
Indeed, in
2008 we estimated that the sector fell by almost 6% in real terms, while 2009
should see a
further decline. Two areas which look particularly stricken
are gold mining and nickel. The former is on
the verge of collapse due to
funds being withheld by the Reserve Bank of Zimbabwe. Meanwhile, the
country’s largest nickel producer shut all its mines in November 2008
due to falling prices for the metal.
However, the nation has abundant
mineral resources and a well-developed, albeit deteriorating,
infrastructure network. In this sense, there is hope that the country’s
mining sector can begin to recover,
especially when the global economy
returns to growth. However, it must be remembered that many
problems in
the country are self-inflicted and, until the political situation resolves
itself, it is hard to hold
anything but a negative prognosis. In 2013, we
expect the industry to be worth around US$0.18bn,
although this depends on
how the currency will fare over the next five years.
| 
View Cart
