Zimbabwe’s Rocky Road to Recovery

Zimbabwe’s undervalued mining industry struggles to attract investors.

Anita Kruger

Zimbabwe-BLOGOnce labeled the breadbasket of Africa, Zimbabwe’s mineral wealth remains undisputed, yet the country has a long road ahead to reclaim its place as a major mining destination. Zimbabwe had initially built its mining sector on its vast gold reserves distributed in its Archean terrain, which boasts one of the world’s highest yields per square kilometer. Over the last ten years platinum has taken the spotlight, as Zimbabwe sits on the world’s second largest platinum reserves after South Africa. The country is the fourth largest diamond producer in the world and contains an estimated 30% of global diamond resources, with the Marange fields responsible for the majority of the country’s diamond production.

Among Zimbabwe’s variety of up 60 minerals, the country boasts impressive nickel, chrome, copper and iron ore reserves. Nickel as a byproduct of platinum production dominates the country’s base metal production in terms of value. The chrome that is found in the Great Dyke is world class and value adding in this sector is seen as the key to reviving the Zimbabwean manufacturing sector. Zimbabwe also has high quality iron ore grading from 40% Fe and above. Though still relatively unexplored, Zimbabwe also hosts a range of industrial minerals such as asbestos, lithium, graphite, limestone, granite and barite.

Simply having the resources is not enough and Zimbabwe’s difficulty in getting the sector back to its pre-crisis production levels is proving to be harder than initially thought. Softening commodity prices have hampered investment and production around the world, but, coupled with Zimbabwe’s unfortunate reputation, the country keeps battling to get its mining sector and economy back on track. “The mining sector continues to be affected by the systematic challenges of the past. In Zimbabwe there has always been an issue of capital, infrastructure (energy) and the shortage of skills. These problems remain prevalent today and they have been affecting the growth in the mining sector. The growth of Zimbabwe’s mining sector has also been affected by the unrest in the region and the price of commodities. Growth in the industry is softening and tends to be negative on the backdrop of the systematic challenges the mining sector faces,” said Isaac Kwesu, CEO of the Chamber of Mines Zimbabwe.

Currently ranked 170th out of 189 countries in the World Bank’s 2014 ease of doing business report, Zimbabwe has slipped two places since 2013. Difficulties in accessing electricity and credit and in trading across borders continue to hamper business. While the government is making every effort to ensure that the right policy environment is created, it is still difficult for investors to put their faith and their dollars in a country where policy is perceived to be uncertain. “With the lack of clarity in terms of policies it remains difficult for both current operators and new investors to commit resources to Zimbabwe. The government is working with the private sector in trying to ensure that Zimbabwe address these policy concerns,” said Kwesu.

While the EU had lifted its sanctions on Zimbabwe early in 2013, the country is still limited by sanctions imposed by the Office of Foreign Assets Control (OFAC), which hinders the ability to make foreign transactions. This makes it increasingly difficult to attract the necessary investment for further exploration activity and production expansion. “Both the current operators as well as new capital form outside investors are key for exploration in Zimbabwe. It is critical for Zimbabwe to promote exploration and have information readily available to investors,” said Isaac Kwesu, CEO of the Chamber of Mines Zimbabwe.

While Zimbabwe remains in a fragile state as far as it mining sector and economic recovery is concerned, there is still reason to be hopeful. The government recognizes the pivotal role that the mining sector will play in the country’s economic recovery and we have seen stability and clear policy direction over the last year through the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset) that was implemented by the government after the 2013 elections. Zim Asset will run up until 2018 aiming to achieve a GDP growth rate of 10% by 2018, with the key focus falling on food security and nutrition, social services and poverty eradication, infrastructure and utilities and value addition and beneficiation.

Zimbabwe’s road to recovery has been a rocky one and there are still many challenges to be overcome. However, the country as often portrayed by the media, is not the one that the investor will experience on the ground. The government is open for business, its people are proud and educated, and despite all the challenges that Zimbabwe has been faced with, the mining sector has continued to exist. Those who currently operate in Zimbabwe’s mining sector remain fiercely committed to the country, which speaks volumes to the potential that the sector holds. As long as the resources are in the ground and there is a willingness to do business, Zimbabwe will remain one of Africa’s most exciting mining destinations.

This article was written as part of the research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2015. To participate in this report, please contact Sharon Saylor at ssaylor@gbreports.com.

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