HARARE: South African mining companies in Zimbabwe, as well as others, have put all new and expansion projects on hold, the chamber of mines has said, giving an update on the state of the industry.
This comes as mining companies in the mineral rich but troubled country seek to preserve cash in a biting economic environment that has been worsened by suppressed metal prices, lack of access to capital and power shortages.
South African mining companies in Zimbabwe include the world’s biggest platinum producers, Anglo Platinum and Impala Platinum as well as Aquarius Platinum. South African businessman, Mzi Khumalo’s Metallon Gold, is also one of the biggest mining companies in the country.
“There is not much to talk about immediately in terms of new projects coming on board this year. Negotiations on most of these projects are long term; not much expansion that we may foresee currently,” said chamber of mines of Zimbabwe chief executive, Isaac Kwesu, in a briefing on the state of the industry.
The chamber of mines is due to release a state of the mining industry report on Zimbabwe later this month. Mining companies are due to start wage negotiations this month and will be hard pressed for a salary raise in an environment they say is getting tougher.
Other experts say Zimbabwe’s mining industry may not recover, especially as the government – fearing the effects of a worsening drought – switches its focus to mining companies for revenues to prop up food imports.
Further compounding matters for the Zimbabwean mining firms are demands for a massive 10 percent salary increase by workers in the industry. Cost structures for most mining companies are expected to worsen this year, forcing the miners to intensify cost cutting measures.
“Performance in the sector will remain sluggish,” Kwesu said. He said 2016 presented a gloomy outlook for the Zimbabwean miners, with ferrochrome producer, Zimasco, shutting down most of its smelters. The government has demanded that platinum miners set up smelters inside the country to enhance local beneficiation of minerals.
Analysts at BMI Research, a Fitch Group company, said in a research report on the Zimbabwe mining sector that the country’s mining industry would “face increasing challenges to its current growth” trend.
They added that political and economic concerns would also weigh on mining investors in the country. “Political and economic risk remains a particular concern from both a regulatory and investment point of view,” says the report, released at the end of last month.
Zimbabwe has the world’s second largest reserves of platinum and vast deposits of chrome, gold, diamonds and coal. However, investors have often complained of uncertainty from the country’s operating and regulatory frameworks.