PHILLIMON MHLANGA
Zimbabwe’s miners say the increased unscheduled power cuts and foreign currency shortages have undermined the sector’s growth prospects.
The mining executives also said the unresolved problematic tax issues continue to weigh down mining performance, increasing the overall cost of production. The industry players expect the fiscal framework to remain unstable.
The areas of concern raised include an increase in royalties for platinum, diamond, beneficiation taxes for platinum group metals and payment of taxes in foreign currency.
The miners also said the high cost structures were also hurting the capital-intensive sector.
Most miners are now using diesel powered generators during times of power supply disruptions to sustain their operations, propping up the overall cost of production in the mining industry.
Another concern was the increase in the electricity tariff to about US$0.1221 per kilowatt hour (kWh). Miners said the increase in electricity cost will consume on average 20% of mining companies’ stay in business capital budgets which are largely funded from retained earnings.
“As an industry we are struggling to access power.
“We are also facing difficulties in accessing adequate foreign currency to meet operations requirements and expect the situation to remain challenging in 2023.
Recurring policy changes including increases in taxes and levels and uncertainty surrounding progress concerning amendments to the Mines and Minerals Act are other key areas of concern in the legislation environment for the mining industry,” the president of the Chamber of Mines of Zimbabwe, Collin Chibafa said.
He added: “The other issue is a higher tariff of US$0.1221 per kWh which is expected to increase the overall cost of production.
“We want a tariff which is affordable and fair. We continue to engage so that we continue to play a key role in the development of the economy.”
Isaac Kwesu, the Chamber of Mines of Zimbabwe CEO weighed in saying: “Key constraints undermining the mining sector performance include crippling power shortages. This is also affecting those miners connected to dedicated power lines. The power outages are resulting in production stoppages and output losses.
This is hampering the gross prospects of the mining sector.”
He said beyond power shortages, there was also the issue of foreign currency shortages required to import critical equipment and service obligations.
“Another problem hurting the mining industry is the issue of high electricity tariffs and the taxes and fiscal policies,” he said.
The State of the Mining Sector Survey report unveiled yesterday showed that executives in the mining sector expect profitability in the sector to be subdued by power cuts, high cost structure and increased electricity costs.
They expect the overall cost of production to increase by between 10-20%.
