Power crisis cripples mining industry

CLOUDINE MATOLA

Zimbabwe’s mining sector is reeling from crippling power cuts, enduring prolonged load-shedding daily and other issues that put miners’ ability to continue operations in jeopardy, executives have said.

Miners are suffering as a result of the rolling blackouts, which have compelled mining businesses to use costly backup diesel generators, increasing production costs.

Mining executives stated that the mining industry’s sustainability is at risk due to the power outages.

At peak hours, the country’s electricity demand is 1,700 megawatts (MW), but State-owned power utility ZESA’s daily output is around 1,200 MW, resulting in a shortage of electricity of almost 500MW.

To cover for the shortfall, ZESA is importing electricity from regional power utilities.

However, the state-owned power utility isn’t getting enough imports since it entered into non-firm contracts with regional power utilities, meaning they only supply Zimbabwe with electricity when they have excess.

“Mining executives (100%) indicated that they were facing unscheduled power outages resulting in production stoppages and output losses. Analysis of survey data shows that the mining industry is losing up to 10% of potential output due to power outages,” reads part of the Chamber of Mines of Zimbabwe survey.

It continued: “Most survey respondents (95%) indicated that the current electricity tariff framework is suboptimal highlighting that it is unaffordable and uncompetitive compared to regional averages. Survey findings show that mining executives are generally concerned about the high electricity tariff which is pegged at USc14.21/KWh with a peak tariff of around USc19/ KWh. They also indicated that during power outages they resort to diesel powered generators which are expensive to run and have an implied tariff exceeding USc30/kwh.

“In terms of tariff tolerance, about 93% of mining executives indicated that they would accommodate a tariff of less than USc10/kwh while 7% indicated that they would tolerate a tariff of above USc10/kwh but not exceeding USc13/kwh. Analysis of tariff proposals show that the average recommended tariff for the mining industry is around USc8.75/kwh.”

The mining sector is also facing other severe headwinds including dwindling profitability, rising cost of production, worsening forex access, deteriorating investment environment, and many others.

According to them, this places the industry, which the government identified alongside agriculture, as the anchor of economic development, under siege and seriously in grave danger of collapsing.

Government, according to mining executives, has increased its invisible hand in this sector by imposing hefty taxes as part of attempts to rake in cash to fund its operations.

The executives are also gloomy about the profitability of their businesses in 2025, largely due to the high-cost structure and subdued commodity prices on the international market.

Since the global demand for commodities has declined, the sector’s contribution to Zimbabwe’s gross domestic product has shrunk .

Apart from that, several mining companies in Zimbabwe have shed many jobs, impoverishing many families as a result.

“The measured profitability prospects index for 2025 is -0.7. Mining executives are generally pessimistic about profitability of their businesses in 2025,” reads part of the report.

 “Approximately 70% of respondents indicated that their cost of production will increase by between 5% and 10% in 2025. About 20% of respondents indicated that their cost of production will increase by over 10% while 10% indicated that their cost of production will increase by between 0% and 5%.”

The mining executives also said they are expecting the investment environment to worsen due to the fiscal regime, uncertainty on mining policy as well as legislation and policy reversals which are being experienced in the sector.

“The measured index for investment competitiveness for 2025 is -12.4. This means that mining executives are generally pessimistic about prospects for a competitive investment environment in 2025 citing unstable fiscal regime, uncertainty on mining policy and legislation and policy reversals.

“Approximately 85% of respondent mining executives expect the investment environment to either worsen or remain uncompetitive as was the case for 2024. Survey respondents cited the following constraints as undermining investment competitiveness in the mining sector,” chamber of mines said.

The mining companies are also facing difficulties in accessing foreign currency and mining executives are expecting the situation to worsen in 2025.

“The measured index for prospects for improved access to foreign exchange for 2025 is -29.4. This means that mining executives expect access to foreign currency to deteriorate in 2025. Respondent mining executives indicated that they were facing difficulties in accessing adequate foreign currency to meet their requirements.

“In the outlook, the majority of respondents, 94%, reported that they expect access to foreign currency to either worsen or remain depressed as was the case in 2024 while 6% of respondent executives indicated that they expect access to foreign currency to be better in 2025.,” the report said.

It continued:”All mining executives (100%) indicated that the current 75% foreign currency retention is inadequate to meet their operational requirements and funding of expansion projects.”

The mining executives also highlighted that the measured index for mining fiscal regime prospects for 2025 is -5.9 which shows that mining executives are generally pessimistic about the prospects for an optimal fiscal regime in 2025.

Also, the measured index for 2025 is lower than the +12.5 recorded for 2024. Most mining executives, about (90%), indicated that the fiscal framework for the mining industry is suboptimal, citing a multiplicity of taxes, high royalty, beneficiation taxes, special capital gains tax and high fees and levies.