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Chamber of Mines optimistic about 2011

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Platinum and gold are expected to lead the growth in the mining sector in 2011 riding on the positive macroeconomic developments in 2010.

NewsDay Business Reporter Victoria Mtomba this week caught up with Chamber of Mines president Victor Gapare to find out what the year holds in store for the sector and the economy.

NewsDay (ND): What are your projections for the performance of the sector this year?

Victor Gapare (VG): Our projections are that the mining sector will continue on a strong growth path in 2011, on the back of the 2010 performance. All sub-sectors are envisaged to record further growth with the notable exception of asbestos and to some extent granite.

On a weighted basis, the mining sector is forecast to record a weighted growth of 44% in 2011, with platinum and gold being the lead sub-sectors contributing to strong growth.

As great as this is, the Chamber of Mines has pointed out to the government that we must not mistake the green shoots of recovery for a tropical forest.

It is important that good economic policies be sustained going forward to strengthen recovery fundamentals.

Mining sector growth could be much higher, but due to the recurring challenges that continue to beset the economy, chiefly the lack of adequate, appropriately priced financing for recapitalisation, working capital and recurring power outages continue to undermine production.

As the Chamber of Mines has pointed out before, the mining sector has great potential for catalysing economy-wide growth.

Optimising the mining potential requires significant new capital and that requires a competitive mining fiscal regime that allows new capital for exploration and mining development.

ND: How do you see the Indigenisation and Empowerment Act affecting the sector this year?

VG: The mining industry supports the indigenisation and empowerment initiative.

What we have said is that the framework for empowerment must not be premised on piecemeal, fragmented or visceral dismemberment of existing firms.

The empowerment initiative must prioritise new enterprise development, new businesses, new firms and creation of new jobs.

There has to be consensus across the spectrum of key stakeholders on what constitutes a fair, equitable and transparent indigenisation framework.

The Chamber of Mines envisages a broad-based empowerment framework that prioritises growth on the basis of new investment.

This is the same pattern that has so successfully transformed such economies as Malaysia and Singapore, which were among the poorest in the world five decades ago.

The Chamber of Mines has submitted that a haphazardly implemented empowerment programme will not only fail to transform the economy positively, but can be a harbinger for further regression at a time when much of world and sub-Saharan Africa is moving forward progressively, reducing poverty and achieving economic growth and development.

ND: Do you think the mining sector is going to be able to get the $3-5 billion required for the sector to recover?

VG: Mining houses have expanded capital raising initiatives and were making some progress, though very slow, but the uncertainties regarding the issue of indigenisation and lately the talk of harsher fiscal (tax, royalties) policies have slowed the initiatives.

Mines will continue to make efforts to secure recapitalisation funding.

The local banking sector is growing steadily, with deposits increasingly from $1,3 billion in December 2009 to about $2,4 billion in December 2010, but this is far less than adequate for mining sector recovery, as the sector requires as much as $3-5 billion for recapitalisation and new projects.

The mining sector therefore continues to explore regional and international capital raising initiatives in addition to domestic working capital financing.

The Chamber of Mines remains hopeful that good progress will be achieved in 2011. An improved investment environment characterised by certainty, secure tenure and predictability are key ingredients for attracting inward investment in mining.

ND: How do you think the sector is going to unlock funding?

VG: The Chamber of Mines anticipates some progress on capital-raising initiatives, but it is still too early to project what specific amounts will be realised during the year. Mining is a long-term business and results will not show immediately as projects can have gestation periods of five to ten years.

ND: Do you think the sector will be able to attract new investors this year?

VG: Investment is a function of a host of intertwined and inter-related factors, including perceptions about the sovereign risk of the country, political and macroeconomic stability, consistent and predictable economic policies, among others.

For this reason, the Chamber of Mines continues to advocate for improving the investment environment and doing business conditions in Zimbabwe so as to attract inward investment.

The economic policy environment has improved measurably since the inception of Sterp by the inclusive government.

International investment will improve markedly, once investors’ concerns are allayed, once they see political stability entrenched and sustaining of business-friendly policies.

Principally the implementation of the indigenisation framework will be a key indicator determining how investors see the future of the country.

The Chamber of Mines remains optimistic regarding the future of the mining industry in Zimbabwe and that economic growth will be sustained over the medium and long term.

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