Zim Mining Indaba 2011

Summary of Opening Remarks by the Minister of Mines & Mining Development, Honourable Obert Mpofu.

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In a gripping key note address to the delegates, Honourable Obert Mpofu informed the gathering that the Government did not have any intention of cancelling mining licences held by foreign companies especially considering that consultations were still in progress.

He said government was committed to working with all stakeholders and encouraged all parties to engage in meaningful dialogue with his ministry instead of speaking through the media. Minister Mpofu also indicated that the government will not pull out of the KPS (Kimberley Process Certification Scheme) and remains committed to the KPS principles. Despite the economic challenges being faced by the Industry, mainly power supply, poor infrastructure and bad publicity among many others. Minister Mpofu remains optimistic that the Mining Industry will drive the economic turnaround of Zimbabwe. The government through his Ministry awarded 20 licences for coal exploration and mining as a way of ensuring that the country is able to generate adequate electricity for the economy in general.

“We have no intention of cancelling any licenses. There are some negotiations taking place with some parties. No license has been cancelled. We have no such intentions.”

Remarks from the Minister of Economic Planning and Investments, Honourable Tapiwa Mashakada

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In his address, the Honourable Minister said that the Mining sector has the capacity to play a leading role in driving the growth that the Government is anticipating in the Medium Term Plan (2011-2015).The projected new capital injections were mostly subject to firming of international commodity prices, improved power supply and a more conducive investment environment among other factors.

He cited the challenges and constraints to Investments in Zimbabwe as being poor infrastructure, negative publicity, high startup costs, and International Isolation, Indigenisation and empowerment regulations. MinisterMashakada said violation of bilateral investment promotion and protection agreements, policy uncertainty and the country being perceived as a high risk was also making it difficult to attract investors.

The Minister mentioned that the infrastructure in Zimbabwe had deteriorated significantly over the past decade, resulting in lack of sufficient and reliable infrastructure services to support industries in the country.. On Infrastructure Investment Strategies, he advised that the Government welcomes FDI, and private sector initiatives in rebuilding, rehabilitating, maintaining, modernizing and expanding the country’s infrastructure base.

He informed delegates that despite all these challenges, the Government approved Mining Investments projects amounting to US$1.7 billion. He also stated that investments activities in Zimbabwe only accounted for 4% of GDP, whereas in other developing countries like China, investments accounted for 40% of GDP. Zimbabwe is aiming at achieving 25-30% of GDP between 2011-2015

In conclusion, the minister said that the mining sector should continue to play a leading role in supporting the turnaround of the economy and that there is need for continued dialogue and engagement between parties in mapping the development path of this critical industry as well as a need for increased transparency, and accountability in the sector.

“Government is currently working on a number of initiatives to improve the investment climate, the key policy targets include operationalisation of the One-Stop-Shop investment centre and coming up with an investment Promotion and protection Bill by December 2011,”

Remarks from the Minister of Youth and Indigenisation, Honourable Saviour Kasukuwere

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The minster presented an overview of the Indigenisation and economic agenda which he said was a growth oriented and inclusive development strategy whose key principles are to establish:

  • Community schemes- aimed at allowing the local communities to benefit from their God given natural resources in the communities.
  • Employee schemes- aimed at creating employee benefit schemes which will ultimately empower the workers.
  • Sovereign Wealth Fund (SWF)-aimed at housing all the shares that belong to the future generations thus creating savings for the future generations. The fund will enable the government to create long term sustainable capital growth.

Minister Kasukuwere said the Government was committed to inclusive empowerment that promotes economic growth by forging economically beneficial partnerships between local and foreign investors while also recognising the local communities. He said that the government is aware of the foreign investors’ s concerns and whilst it is also open to foreign investments, all concerned parties must follow the laws of Zimbabwe and engage in constructive dialogue and meaningful partnerships between local and foreign investors that are mutually beneficial.

“This is not a ‘Kasukuwere Act’ but an Act for Zimbabweans. We are not seeking confrontation but are simply following the regulations as stipulated by the Indigenisation and Economic Empowerment Act.”

Chamber of Mines Observations

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The President of The Zimbabwe Chamber of Mines, Mr Winston Chitando said the Mining Companies through the Chamber of Mines will continue to engage with Government in an effort to find solutions that will ultimately create sustainable economic growth in the Industry.

  • Challenges: He highlighted the various challenges the industry was facing among them, the cost of production, poor power supplies, poor infrastructure, and financial constraints in terms of liquidity. Challenge around funding was mainly due to the fact that financial products on offer are short term and limited, hence loans are only available for working capital. In respect of energy, the chamber was working closely with Zesa Holdings to ensure adequate electricity supplies to the mines. He mentioned that besides all these challenges, there is still appetite for investments opportunities in Zimbabwe as evidenced by the surge in mining sector investments which went up to US$260 million this year, compared to US $80 million last year.

  • Funding Requirements. The mining sector requires US$8 billion for it to meaningfully contribute to the economic recovery, currently the mining sector amounts to 50% of total exports and is a major source of foreign direct investment. Through its short loan scheme, the Reserve Bank set aside US$1.2 billion compared to US$737 million last year, of this amount, US$502 million was disbursed and the mining industry was only awarded 18% yet other industries like telecommunication and agriculture got 40% and 34% respectively. Mr Chitando was of the opinion that the Mining Industry should have been given a bigger share considering the industry’s contribution to the economic growth.

  • Trends and Developments in the Mining Sector Platinum production rose to 161 000 ounces in the first half, representing a 21% increase compared to the same period last year. This was mainly due to improved production capacities and slight improvement in the supply of electricity. Gold production increased by 37% in the first half of the year as compared to the same figures last year. Gold is also projected to reach 13 000 kilogrammes by the year end. Coal production increased by 1.46 million tonnes for the first seven months of this year while it is expected to end the year at 2.5 million tonnes. However, some minerals failed to perform to expectations, these included asbestos, iron ore and phosphate rock.

“Discussions are going on in terms of implementation and we are looking forward to a win-win situation,”

Nationalisation of Mines from a South African perspective presented by Bheki Sibiya CEO- Chamber of Mines South Africa

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Mr Sibiya stated that there were many factors to be considered before governments embarked on such a major development, as it might affect the economy negatively. He spoke about the two possible scenarios of nationalisations, namely Nationalisation with compensation and Nationalisation without compensation. On Nationalisation with compensations, he highlighted the major challenge as being lack of funds to allow for compensation, giving an example of the power crisis in South African, the government was facing electricity challenges resulting in many industrial projects being cancelled. This, he said was a clear indication that the government does not have adequate funds to allow for nationalisation with compensation.

On the Issue of Nationalisation without compensation, he indicated that South Africa signed the Bilateral Investments Protection agreement with 42 countries and if South Africa was to nationalise without compensation, these countries were likely to file for bridge of contract as per the Bilateral agreement. The government should also look at issues of major concern e.g. that 60% of South African mines are foreign owned and the ripple effects would be, low mining maintenance resulting in low production, which will result in diminished revenue earnings for the government, more unemployment as well as less foreign earnings. The rand will likely lose value against other currencies fuelling inflation. He highlighted that other industries e.g. financial industry will also be negatively affected by this move. In conclusion, Mr Sibiya told the gathering that nationalisation was not very conducive in the African countries scenario as it had more negative effects than benefits.

Zimbabwe Diamond Industry presented by Keith Lapperman, Independent Diamond Consultant

In order to fully benefit from its diamond resources, Zimbabwe should estimate its resources, have a solid diamond policy document, conduct a marketing strategy, create a diverse client base, maximise on price, and create a conducive working environment by coming up with policies that are bankable . He urged Zimbabwe to adhere to the Kimberley Process and aim at becoming a leader in the Kimberley process as it is a major supplier of the diamonds. In conclusion, he mentioned the advantages that Zimbabwe has as a new entry in the diamond industry, in that it can learn from the mistakes of other countries and design its own meaningful policy. He urged all stakeholders in the industry to have extreme co-ordination and to be swift in decision making.

Issues and Opportunities in Africa, presented by Ian Kramer, Director of Energy and Natural Resources at KPMG

Africa should maximise on its natural deposits as nearly one third of the world’s mineral reserves are found in Africa as well as it being a home to large deposits of diamonds and coal.

On Africa issues and opportunities, Mr. Kramer mentioned that, Resource Nationalism was potentially deterring investment, i.e. security of tenure, unstable fiscal regime, talent crunch (lack of skilled resources and lack of educators),lack of infrastructure and environmental degradation. Opportunities included unexplored reserves, location of Africa in the world, room to Improve government and governance policies thereby attracting investments. He added that China was unveiling new opportunities in Africa and that the benefits of beneficiation are still to be realised, therefore African countries should captitalise on these opportunities. In conclusion, Mr. Kramer said governments must ensure and guarantee stability in terms of Fiscal policy as the yearly introduction of incremental taxes is a deterrent to smooth investment inflows and that the rules of engagements on an investment must be clear in order to attract the much needed foreign investments.

Power issues in the Mining Sector presented by Eng. P F Chivaura -Zesa Holdings

Challenges in Power Supply.

  • Lack of investment in generation with last plant being commissioned in 1986/8 hence Demand outstrips Supply
  • Reduced availability of imports in the Region
  • Increased demand in the absence of investment in generation
  • Inadequate Payment for Imports and a premium cost of imports at peak hours
  • Maintenance and refurbishment of plant lagging behind due to poor funding because of compromised Tariff for over a decade
  • Inefficient usage of power on the back of lack of supplies e.g. use of inefficient appliances
  • To avoid System collapse there is need to implement the dreaded load shedding
  • Shortage of skilled Human resource
  • Transportation of Coal is failing to meet the requirements for Small Thermals.
  • Vandalism of infrastructure costly to repair/restore

Zesa is also facing challenges caused by load growth in the mining industry because of Investment projects by large mining customers (almost 800MW in the medium term) and resuscitation of production levels by large users (currently suppressed demand of 340MW)

Developments and solutions

The Ring Fenced Customers scheme which is a voluntary scheme offered to Industry and Mines made significant improvements in electricity supply. Presently, 50 Customers signed on to a contractual demand of 170MW. Benefits realised are evidenced by gold production for mines on this scheme which exceeded planned targets as there was minimal load shedding.

Eng. Chivaura called upon the mining industry to participate in the identified projects as Zesa had no financial capacity to implement these bankable projects. He said the mining industry should not to be scared of the new tariffs as it was an unavoidable prescription if the industry is to enjoy long term benefits.

The state of infrastructure in Zimbabwe presented Mr. Machimbirike-IDC

The road network in Zimbabwe has deteriorated and it was now hampering productivity in the economy.The rail track infrastructure, signaling and telecommunication system had also deteriorated due to theft and lack of repairs and inadequate maintenance due to financial constraints. Vandalism and reduced economic activity has negatively impacted on capacity utilization of NRZ. On Policy Measures to address the transport systems, he recommended a review of the regulatory framework governing railway transport, establishment of an independent Regulatory Authority as well as pursuing strategic partnerships. He further recommended the finalisation and adoption of the draft National Transport Policy to facilitate the development of an integrated transport system in order to optimize resource use and to ensure various modes complement each other.

Mine Site Visit to Freda Rebecca

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More than 30 foreign and local delegates visited the wealthy Freda Rebecca Mine in Bindura for a tour after the two-day conference. The tour included discussions on gold production, coming at a time when Freda Rebecca Mine has made major investments into its huge mine, the second largest in Zimbabwe. During the hyperinflationary period, the mine was closed and was put under care and maintenance. The trip to Bindura was aimed at helping those who have never experienced the real mining world appreciate what it is all about. The Tour team went underground where they experienced real mining being done at first hand, they also toured the mixing area, leaning facilities as well as where the final gold grade is prepared for the world, The trip served as evidence to potential investors to show that the mining industry was finally ticking and that the industry was on its recovery path.

Summary of closing Remarks from Utho

This year’s Mining Indaba, among other functions, provided a platform for exploration of mining and related opportunities in Zimbabwe, while simultaneously allowing delegates to widen their network in the growing industry. In respect of the latter, the event comprised of comprehensive business matchmaking sessions and networking opportunities with global mining stakeholders and investors. However, to many the major highlight of the conference was an opportunity to have a one on one with the speakers especially the Ministers. Delegates had a rare opportunity of questioning the ministers on burning issues, and getting responses that will ultimately assist the investors in making informed decisions. Participants agreed that this year’s Indaba was more interactive and informative. However, there are still many challenges facing the mining industry in Zimbabwe and the general consensus among the participants was that the Government needed to be more transparent and come up with realistic policies. The industry must also participate by coming up with recovery projects that are bankable instead of just waiting for the government to make the imitative.

We thank all our sponsors. Speakers, exhibitors and delegates for their continued support to the Indaba. It is our hope as Utho, that the 4th edition of the Mining Indaba will be even more interactive, more innovative and above all enable Zimbabwe to move closer to its target goal of creating a sustainable mining environment.

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