The advent of the Covid-19 pandemic has dealt a major blow to Zimbabwe’s envisioned US$12 billion mining industry by 2023 with the disruptions that have already taken place leaving the country’s aspirations hanging in the balance.
Launched last year, the ambitious project took off on a rather slow start as the sector was already facing legacy challenges which include low productivity owing to a variety of reasons which include lack of efficient equipment and foreign currency shortages for the procurement of supplies.
This, together with power outages at the time, worsened productivity levels in the sector.
Zimbabwe anticipates augmenting its 32.4 tonnes of gold production realized in 2018 to 100 tonnes by 2023 translating to US$ 4 billion in revenue receipts annually from the sub-sector alone.
It also plans to revamp the platinum metals sector to earn US$ 3 billion while chrome is targeted to up its output from 369 000 tonnes to 1.1 million tonnes by 2023.
The diamond sector is also tipped to be central in attaining the US$12 billion target and is projected to produce 10 million carats from current levels of around 1.5 million carats.
The Zimbabwe Consolidated Diamond Mining company (ZCDC) earlier this year indicated that it expects to double production to over three million carats this year but this was prior to the covid-19 pandemic.
The pandemic has hence brought undesired effects to the prices on the international markets, as Zimbabwe is only just a price-taker.
Global consulting firm, Deloitte recently pointed to price falls in commodities including copper, iron ore and zinc, in its Understanding the Sector Impact of COVID-19: Mining & Metals report.
Recovery is expected to be slower than initially expected as lockdown restrictions in major economies continue to drag growth in the global economy.
Major commodity off-takers such as China were the pandemic started have witnessed contraction in their economies and will have less appetite for minerals.
Yet for producers like Zimbabwe, the mining sector faces far much greater challenges.
Before lockdown, Zimbabwe Chamber of Mines had projected that the country could lose 60 percent of its mineral production in the second quarter valued at US$400 million and reported that by March 2020 the industry had lost more than US$200 million.
Furthermore, production in Zimbabwe’s mines was halted beginning of lockdown end of March.
An environmental conservation lobby group, Zimbabwe Environmental Lawyers Association (ZELA) in its Mining Communities Situational Report for May 2020 noted that the Covid-19 restrictive measures did not only affect mineral production on site but also obliterated of supply chains within the sector.
“Production has also been affected by closure of mining equipment suppliers and services, although these have now been opened following the relaxation of the lockdown through SI 99 of 2020,” the report said.
The pandemic is further expected to reduce deliveries, particularly in the gold sub-sector as witnessed in an increase in illicit trading of commodities.
A recent Kimberly Process Civil Society Coalition study attested to the negative effects of lockdown restrictions on diamond sales at global auction markets.
In the small scale mining sector, gold deliveries are already skewed towards informal buyers and worse still, the prices have dropped.
“As on the 6th of May, black market gold dealers were buying gold on the cheap at US$42 per gram, while Fidelity Printers and Refineries (FPR) was buying at US$47 per gram but subjecting the price to the 55% in US$ and 45% in RTGS policy,”
“Cash shortages in US$ at the banks is also said to be a factor in the low prices being offered for gold. For black market dealers with the financial muscle such low prices are good for business since gold is a store of value,” the ZELA report said.
With so many loose ends yet to be tied, Zimbabwe’s mining sector faces mega headwinds which are predominantly external as exacerbated by the Covid-19 pandemic and these have already started to dampen traction towards the US$12 billion mining economy with just three years left.