HARARE – Mining sector growth is expected to be subdued this year in the absence of fundamental reforms within the sector, a local securities group has said.
In its Portfolio Manager’s Digest for the second quarter for 2017, Old Mutual Securities (OM Securities) said old mines must be resuscitated by increasing installed capacity, while new ones are developed through exploration if the sector is to record any significant growth.
“Generally, the mining sector is unlikely to achieve significant growth… All these factors hinge on key milestones that are yet to be achieved by the gazetting of a revised mines and minerals bill,” OM Securities said.
In 2016, the sector recorded an overall growth of 8,2 percent contributing 8,7 percent to Gross Domestic Product.
While Finance and Economic Development minister Patrick Chinamasa has forecast a 5,7 percent growth for the sector, market watchers have said this projection is optimistic.
The sector’s performance — which accounts for an average 60 percent of the country’s exports — has a huge bearing on the economic prospects of the country.
But OM Securities said with the low nostro account balances in the banking sector and shrinking physical cash in circulation, local miners are in for a tough year.
Miners have been battling liquidity problems, despite government paying some of the miners in cash.
OM Securities has also warned that the country was going to miss its 28-tonne gold output target.
“Gold output is unlikely to attain the 28-tonne target set by government with projections of 22 tonnes for 2017 being forecast as more likely by the Chamber of Mines,” OM Securities said.
The country produced 10 tonnes in the first half of 2017, the central bank said last week, while projecting 25 tonnes as total output for the year.
In its 2017 Economic Update, the World Bank also said gold production — which accounts for half of the mining sector’s foreign exchange earnings — was set for a 10 percent rebound on the back of buoyant international prices, highlighting government’s 28-tonne projection remained optimistic.
“The mining sector is expected to continue growing, but it will remain vulnerable to macroeconomic conditions,” the World Bank said.
However, Zimbabwe hopes to breach the 28-tonne mark by promoting small-scale gold production which has accounted for over 40 percent of the total output since 2015 when government decriminalised artisanal mining.
Last year, the country produced 23 tonnes of the yellow metal and earned over $914 million in export receipts after missing its 24-tonne gold output projection on the back of cash and payment glitches experienced in September 2016 by artisanal miners.
To boost gold output, RBZ subsidiary, Fidelity Printers and Refiners, has also increased the number of registered gold buyers to 344 agents, as the apex bank moves to help the country achieve its 28-tonne projection.
In the first quarter of 2017 alone, the RBZ allocated over $5 million in cash to purchase gold from artisanal gold miners who demand hard cash for the yellow metal.