Zim a better mining destination?

HARARE - Zimbabwe could emerge as a better mining destination particularly in platinum compared to South Africa, if it changes its policy an analyst says.

SA – holding the world’s largest known platinum reserves and followed by Zimbabwe – is currently facing operational problems ranging from increased downtime due to worker strikes and increased labour costs among others, presenting a window of opportunity for Zimbabwe mines.

Recently, the country running Africa’s largest economy was rattled by strikes in Marikana with Lonmin mine workers demanding higher wages, a development which would diminish the mining company’s profits.

It is not Lonmin alone. The labour unrest also spread to other mines in the country.
“In the long term Zimbabwe has a bigger advantage as a mining destination, particularly in platinum mining,” said leading independent economist John Robertson.

Robertson said apart from the rising labour costs, SA miners were also facing rising costs in accessing their minerals as they had to sink shafts a couple of kilometres deep.

“If Zimbabwe changes its Indigenisation policy it will become a better mining destination,” said Robertson, adding that the policy was hitting the industry “much harder than the problems in South Africa.”

He said Zimbabwe would be certainly a better mining destination if government would pay for the shareholdings it is demanding from foreign-owned mining firms.

“Zimbabwe’s mining sector has great potential but there is no money,” Robertson said.

After all, Robertson said, Zimbabwe might not benefit from SA’s mining woes unless there is shift in policy.

“SA could easily change its policy. Zimbabwe needs to be competitive in the absolute sense,” he said, adding that South African mining firms were already enjoying operating in Zimbabwe.

Robertson’s comments come as David van Wyk, a senior researcher at the South African Bench Marks Foundation (BMF) said Zimbabwe's platinum mines were an example of well-run and socially aware operations.

According to Businesslive.co.za, van Wyk told South Africa’s parliament’s portfolio committee on mineral resources, that South African platinum and other miners had been less than honest about their recruitment of labour and corporate social responsibility programmes.

His presentation was part of a process of trying to understand what led to the Marikana massacre.
Van Wyk said Zimbabwean platinum mines were safe with few accidents, good living conditions and a 100 percent worker literacy rate.

“All the mine management are black and they are afraid of the President so they do everything by the book,” he said, adding that the report findings showed that Zimbabwe’s regulatory compliance was high, unlike SA where the mining companies often bought government officials.

Implats spokesperson Rob Gilmour has also said the company’s Zimbabwe and SA operations could not be compared.

“The Zimbabwe mine is shallow and highly mechanised, while our Rustenburg mine is a deep operation and manpower intensive. The Rustenburg mine employs 47 000 workers compared to a couple of thousand in Zimbabwe.”

Gilmour said the Zimbabwe mine workers were highly literate compared with their South African counterparts and this was a function of that country’s education system.

In March this year, Imara – an independent, Botswana-listed investment advisory firm – said challenges SA’s platinum industry could present Zimbabwe with an ‘unprecedented’ opportunity if the country’s government adjusted its indigenisation policy.

Bruce Williamson, Imara African Resources Fund manager, said though SA was the world’s major platinum producer, the country’s miners were facing operational problems and “confidence was being eroded, creating an opportunity for Zimbabwe.”

Williamson said many platinum miners in SA were confronting challenges of heat, rock pressure and long travelling times, adding that those who raced to bring new projects on stream had found progress slower than expected.

“In the coming years, the rising cost of water may also create potential difficulties,” he said.

He said that safety-related work stoppages enforced by SA government coupled with sporadic mine violence were severely impacting production.

“If the Zimbabwean authorities were wise to the opportunity, they could adjust indigenisation policy and immediately accept a ten percent free-carry equity shareholding in Zimplats, Mimosa, Unki and other mining companies,” said Williamson.

“This would allow Zimbabwean miners to expand while South African miners focused on platinum group metals (PGM)s are battling.”

Williamson said the global market would then gain confidence in Zimbabwean equity and spot the huge growth potential and low cost of production, resulting in significant equity uplift over the next few years.

“The end-result of this scenario is that the Zimbabwean government’s ten percent shareholding under an investor-friendly environment would probably be worth the 50 percent they are demanding under an unfriendly investor environment," he added.

Zimbabwe’s Indigenisation Act requires all foreign-owned firms to cede at least 51 percent shareholding to black Zimbabweans and Indigenisation minister Saviour Kasukuwere has said the mining sector has been fully indigenised.

“But they need to do this now while South African PGM players are in disarray,” Williamson warned. - Eric Chiriga

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