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Mining sector needs cash injection

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Recapitalisation of the mining and manufacturing sectors key to Zimbabwe’s economic recovery, says Frost & Sullivan.

After a decade of decline, Zimbabwe’s economy is recovering. The economy recorded 8,7% growth in 2010 and is forecast to grow by a further 9,3% in 2011.

This growth is supported by an increase in production output of the country’s mining sector.

New analysis from Frost & Sullivan, Production and Investment Trends in the Zimbabwean Mining and Manufacturing Industries, finds that the mining industry is the main driver for the Zimbabwean economy, with export receipts in the sector reaching $1,70 billion in 2010.

The manufacturing industry generated
approximately $400 million in exports receipts in 2010, supported by growth in the beverages and cement sectors.

“Significant capital injection is required to revive the industry to pre-2000 levels of production output and expand it further. This is chief among the factors expected to contribute to the recovery of Zimbabwe’s mining and manufacturing sectors,” notes Frost & Sullivan’s IPC industry analyst Charles Shonayi.

The Chamber of Mines estimates that the country’s mining sector now requires $6 billion for the recapitalisation. “This will largely be channelled towards refurbishing processing plants, equipment and machinery.”

The dollarisation of the economy and the abolishment of all surrender requirements to the Reserve Bank from 19 March 2009, has improved the business environment and helped Zimbabwean businesses in managing their foreign currencies in order to enhance their competitiveness in the world market.

Furthermore, the liberalisation of the gold sector has allowed gold mines that had suspended operations to resume production. The government anticipates gold production to increase to 13 tonnes in 2011.

In 2010, the Zimbabwe mining sector recorded a 46% increase in production output and is expected to grow by a further 44% in 2011.

This is against the background of rising international commodity prices.

Mining and manufacturing companies in Zimbabwe are, however, expected to continue to struggle to raise funds to start or expand operations during the short term.

Plant refurbishment requires substantial amounts of capital investment and this places additional pressure on the investment and operating costs.

“The Zimbabwean capital market at present is lacking liquidity, and the absence of significant reasonably priced long-term borrowings is placing constraints on capital expenditure projects,” states Shonayi. — timeslive.co.za

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