Key industry stakeholders seek government intervention for ailing sector.
Challenges in the Mining Landscape
Zimbabwe’s primary mining entities report that plummeting metal prices combined with increasing operational costs are jeopardizing the industry’s viability. Notable South African resource conglomerates, including Impala Platinum (Implats), Anglo American Platinum, and Sibanye-Stillwater, play significant roles within this sector.
Zimbabwe, recognized as the second-largest global platinum producer, is rich in an array of resources like gold, lithium, chrome, coal, and diamonds.
The economic pillar of Zimbabwe, mineral exports, now face the looming threat of diminished viability.
A Dual Problem: Falling Prices and Rising Costs
According to the chamber of mines, costs for the mining sector have surged, particularly due to the soaring electricity rates, which witnessed a hike of over 40% in under a year.
Zimplats, an Implats subsidiary in Zimbabwe, highlighted its vulnerability to commodity price fluctuations in its 2023 annual report. It emphasized potential re-measurements for future metal prices, as outlined in the sales contract with Implats.
Recent data paints a grim picture for the mining industry with plummeting prices across multiple essential minerals:
- Rhodium: -74%
- Lithium: -69%
- Palladium: -41%
- Nickel: -8%
In contrast, while gold maintained its position, diamonds experienced a sharp 60% decline in global commodity markets.
Government Royalties Exacerbate Issues
The chamber of mines also points to the government’s increased royalties for platinum and lithium, which intensified the financial distress of Zimbabwean miners. The royalty for platinum rose from 2.5% to 5%, and lithium witnessed a similar increase from 2% to 5%.
However, despite the royalty hikes, the 2023 first-half data from the Zimbabwe Revenue Authority showed a decline in mining royalty collections, falling short by a significant 22% from its set targets.
Hope Lies in Government Intervention
Affected mining enterprises have reported cost increments surpassing 10%. To navigate this crisis, some have embarked on cost-reduction measures and business optimization. However, with the viability gap widening, the industry heavily relies on government-led solutions, primarily focusing on electricity tariff and royalty reductions.
Power Troubles Compound the Crisis
Electricity supply remains a significant concern for Zimbabwe’s miners. State power utility, Zesa, plans to amplify its electricity generation over the upcoming years. By 2025, it aims to add a substantial 2,300MW to the grid, primarily catering to the mining sector’s demand.
The Road Ahead
Industry executives expressed concerns to Business Report about the sustainability of the mining sector in light of the softened commodity prices. They warned that such conditions, coupled with high expectations of royalty revenue from the government, might halt new projects and curtail expansion plans.