Zimbabwe does not waste any time, after the change of regime, hungry for economic revival. Considering its well to do past, and some of the institutions and infrastructure in place, which survived Mugabe in still working and upgradable shape, the future seems to look bright despite the obvious challenges.
This optimism and willingness to act was nowhere as well seen as during the mining conference in Cape Town. Everybody from the region was there, same old faces, with new pitches and much more optimism than was visible during the similar conferences in the last years. Zimbabwe was one of the main sources of this good mood. Even with heralded introduction of 5% export tax on unprocessed lithium from January 2019.
Obviously the regional players sharpen their teethes on the Zimbabwean prospects, being much more savvy in the regional realities, than junior mining companies from afar, whose often deeper pockets can not compensate for the years of exposure to South African region realities.
All that, while Zimbabwean mining ministry is in capable hands of its veteran, at least until the new election this year..
Mr. Winston Chitando has been successfully running Mimosa Platinum Mine for years. He is however a fresh face in the couloirs of power. Having in front of him a formidable challenges of providing more clarity in mining legal and policy framework (Reform of the Mines and Minerals Act has been in drafts since 2007, now 2016/17 draft is under review..), taking the discussion (already lasting for almost 3 years) on the new fiscal regime for natural resources in the direction of decisive conclusion (the matter of sorting out platinum export tariffs should be particularly close to his heart..) are certainly no easy tasks.
It is unlikely that he will manage to sort out these issue before the election and whether he will remain in his sit afterwards – that remains to be seen.
Considering such political situation the companies need to weight advantage of being a first mover with imminent political risk.
It is nowhere more pronounceable than in lithium space. Obviously Mr. Chitando has been pitching lithium opportunities well, during the conference, underlining the number of new enquiries from private players regarding the possibilities for new projects and underscoring the successes of two on-going projects by Bikita Minerals and Arcadia Lithium.
The job of mining minister is particularly important considering that Zimbabwe’s mining industry accounts for 13 percent of GDP and more than 60 percent of its export earnings – the main source of so much needed hard currency.
It is not that he has no results.. just yesterday a big, fat deal has been struck in between Gov owned Zimbabwe Mining Development Corporation (ZMDC) and yet unnamed foreign investor to exploit lithium deposits worth $1,4 billion in Matabeleland North.
We shall be able to find out more on the deal in the next days..
Still, one needs to consider that new investments are one thing and maintenance of the current output and operations the other.
It is certainly worthy to quote a paper published during a Confederation of Zimbabwe Industries (CZI) symposium (February 2018), in which the Chamber of Mines states:
“The local mining industry is in dire need of capital for both sustenance and ramp up. In 2018, the mining industry requires around US$777 million to optimize production, with US$401 million needed for sustaining operations and US$376 million for replacement and expansion capital.”
“Despite the aforementioned growth, the sector remains fragile and continues to operate below capacity on the back of a host of challenges, not restricted, but including: foreign exchange challenges (shortages and delays in foreign payments, inadequate capital, and high cost structure (high electricity tariff, sub-optimal fiscal charges).”
Lack of capital in the country seems as a particularly attractive opportunity for frontier markets oriented smart money. Especially considering relatively recent changes in the ownership regulation.
Now foreigners that had been limited to 49 percent ownership in mining companies are allowed to own 100 percent for all minerals except diamonds and platinum, where the government or its entities must hold a majority stake.