The mining industry has a capital shortfall amounting to US$10 billion required to implement different investment projects across the country to improve the sector’s contribution to the economy.
The Chamber of Mines of Zimbabwe (CoMZ) chief executive officer, Isaac Kwesu, said this on Tuesday while appearing before the Parliamentary Portfolio Committee on Budget, Finance and Economic Development chaired by Dr Mathew Nyashanu.
In 2019, President Mnangagwa launched a US$12 billion mining industry roadmap.
Under the US$12 billion mining strategy gold is expected to contribute US$4 billion, platinum (US$3 billion), diamond (US$1 billion), coal (US$1 billion), chrome, ferro-chrome and carbon steel (US$1 billion), lithium (US$500 million). Other minerals are envisaged to contribute US$1,5 billion.
As Zimbabwe’s major economic mainstay, the mining industry was presently contributing 70 percent of the country’s exports with data from Treasury showing that mineral earnings last year spiked to US$5,2 billion from US$2,7 billion in 2017.
“Mining is capital intensive, we have vast mineral resources to unlock value but we need capital.
“This is an area that we have been seized with for quite some time. We have a shortfall of as much as US$10 billion for all projects that require investments and the number changes from time to time,” said Mr Kwesu.
Demand for capital in the mining sector has also been exacerbated by the drive to achieve the US$12 billion mining economy by 2023.
The journey towards the set target entails that much effort should be spent on exploration, improving productivity as well as capacitating operations through embarking on expansion projects and opening new mines and reopening of closed mines.
While the CoMZ is on record saying the US$12 billion milestone was achievable, Mr Kwesu told the committee on Budget, Finance and Economic Development that his organisation feels that there are a host of issues that they want authorities to address to boost output.
“We may have a number of issues that we feel need to be addressed through budget or through fiscal framework.
“Traditionally, we always submit through the Ministry of Finance and Economic Development but some of these issues by and large are general economic issues as well as mining-specific issues.
“Where there is a royalty, the royalty for gold must be competitive as compared to what is obtained in other countries, the same with other minerals such as diamonds.
“We need a fiscal framework that supports the growth and development of mining, a framework that is equally competitive when we compare it with other jurisdictions to attract investments in our country,” he said.
“Issues also surrounding beneficiation, there is a lot that has been happening and it is also our hope that the beneficiation policy dovetails with what is obtaining in terms of our circumstances.”
Mr Kwesu said the chamber of mines was also looking forward to the Government to tackle multiple and high taxation that miners were being levied by Rural District Councils (RDCs) over and above other taxes they were paying directly to Treasury.
“There are issues around RDCs where they charge whatever they feel, the local authorities just come up with their numbers without involving key stakeholders and these are issues that we have been submitting to the Government,” he said.
On their experience regarding the forex auction system, Mr Kwesu said the productive sectors recorded significant growth and increased capacity utilisation.
However, he said overtime it was observed that could not clear the foreign currency allocation backlog for successful bids on time, an indication that the bids allotted were more than the available forex at the time of trade.
“Or maybe, the exchange rate discovered through auction was not reflective of the general market fundamentals.
“There was also a general belief that some unscrupulous business entities and speculators took advantage of the arbitrage opportunities that existed between the auction market and the parallel market to make quick gains, they would either buy forex at the auction market at lower prices at the auction market and sell it at alternative markets to make quick gains and those who may have used the forex for production purposes would price their final good and services using parallel market rates,” he said.
This, the CoMZ chief executive officer said, ultimately affected mines in the sense that they continued offloading their export proceeds in the official market but local suppliers were pricing the inputs using the obtaining parallel market rate.
“This means that miners were losing value for the export proceeds equivalent to more than 20 percent of the 40 percent we surrender, its value was almost half, we could only buy half of what our US dollar could have bought if we were using US dollar to buy the local inputs,” said Mr Kwesu.
As a result of the above, the mining industry’s viability was negatively affected as the sector only managed to expand at 80 percent equivalent to their revenues while capacity utilisation was negatively impacted as a majority of the miners also failed to meet their production targets.
“It is our belief that however, the new measures that were announced by the President of the Republic of Zimbabwe Cde E.D Mnangagwa, these measures will address the challenges in the forex exchange market that were affecting our constituency.
“Some of these measures specifically are expected to foster discipline and reduce access to arbitrage opportunities.
“The introduction of the willing buyer-willing seller at the interbank foreign exchange market will ensure that the market discovery price system will somewhat match demand and supply based on economic fundamentals.”
“It is our hope that over time, the auction rate will converge to the interbank rate as the proceeds from exporters which constitute the feedstock for the au risk market will now be liquidated at the willing buyer- willing seller exchange rate,” he said.