THE mining sector has been one of the most critical drivers of economic growth in the last three years, contributing more than 60% of total exports. Experts contend limited exploration in the capital-intensive sector continues to stifle its potential. NewsDay Business Reporter, Victoria Mtomba (ND), spoke to secretary of Mines and Mining Development Prince Mupazviriho on the state of the mining sector in retrospect and its oulook. Below are excerpts of the interview.
ND: Since 2009 the mining sector has been a major driver of the economy. What has been the reason for the booming of the sector? PM: The sector’s boom is attributable to a stable macroeconomic environment brought about by the adoption of a multicurrency system in 2009. This has enabled planning, coupled with persistence in firm international commodity prices.
ND: Which minerals performed well last year? PM: Platinum, diamonds and gold have been the most performing commodities. Cumulatively, these minerals have contributed at least 90% to total mineral export earnings. Diamonds performed well, earning close to $1 billion.
ND: What were the major challenges for the sector? PM: The sector continues to be inundated by numerous challenges that include frequent power outages, high tariffs, slowing down of international commodity prices, especially since late 2011, lack of medium to long-term lines of credit for working capital and recapitalisation, obsolete equipment and technology, inefficient infrastructure, illegal sanctions imposed on the country that have compounded challenges on credit lines and access to competitive markets, and speculative tendencies by investors with regards to the operating environment leading to lack of commitment on the ground.
ND: How were some of the challenges addressed? PM: Not much could be done in terms of falling commodity prices since it is an external factor beyond our control, but the issue of power has been one of our main priorities with the relevant authorities.
Power is a critical factor not only to enhancing performance of the mining sector, but also to reviving the manufacturing industry and the entire economic activities.
We, therefore, have tried to match mining projects aimed at power generation, particularly through allocation of exploration and mining rights for coal and gas, with the objective to enhance thermal generation in the country. For example, when an investor comes searching for areas to mine, say coal, we try to encourage the investor to also set up power generating plants. This would ensure uninterrupted power supplies to their operations and feed excess to the national grid.
ND: Do you think the mining sector will be able to unlock value in 2013? PM: Historically when there is talk of elections, investors tend to adopt a wait-and-see attitude resulting in a slowdown in foreign direct investment. As we go towards the election period, it may be speculated that funding challenges will continue. However, this investor reluctance cannot be a licence to infringe on national interest, particularly continued sustainable utilisation of mineral rights over an election event. Investments that have come so far are long-term investments.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
ND: Compliance with the indigenisation law has been one of the major issues in the sector in 2012. How has the indigenisation and empowerment law affected the mining industry? PM: The mining sector has been one of the major successes. The perceived lack of clarity in the application of the indigenisation and empowerment regulations in the sector by foreign investors has resulted in some investors delaying to commit investments?
There is, therefore, need to explain this policy articulately to investors to make them understand that it is actually beneficial both to the investor and the country. However, it must be noted that a good number of investors do not want to acknowledge the indigenisation law speculating that it may be repealed. Indigenisation is a matter of national interest and anyone hoping it will one day be repealed is doing so at their own peril. All major mining companies have complied and we are the lead sector in terms of compliance.
Compliance with the indigenisation law has been one of the major issues in the sector in 2012.
ND: Are you happy with the compliance of foreign mining firms with the law? What was its success rate? PM: The mining sector has been at the forefront of complying with the indigenisation law. Most big mines have complied and community share ownership schemes have been set up.
Some companies still have their proposals being evaluated by the relevant ministry.
ND: How much has been realised from Marange diamonds? PM: Zimbabwe has raised more than $1,2 billion over the past three years from the export of diamonds extracted from Marange in royalties, advance payment of dividends and corporate taxes. All revenue generated from dividends has been forwarded to Treasury. Collection of royalties and corporate tax is under the purviews of Zimra.
ND: How many coal special grants are now operational from those licensed? PM:Two companies, Garplex and Makomo Resources, are now in production. The rest are still at various stages of exploration.
