The Herald (Harare)

26 May 2014

Zimbabwe: High Fees, Charges Hamper Mining

Victoria Falls — Mining fees and charges remain too high and top of the major issues affecting viability and contribution of mining to economic growth, an industry executive has said.Chamber of Mines of Zimbabwe acting chief executive Mr Issac Kwesu said this during the three day annual general meeting that ended at the weekend.

The conference was running under the theme "Mining for transformation, resetting the role of mining as the cornerstone of growing the economy through Zim-Asset 2014 /18".

Mr Kwesu said the AGM came at a time when the mining sector was facing many challenges that include softening prices, capital shortage, intermittent power supply and high cost of utilities.

"Royalty regime is still an issue, especially when one considers that our royalties are levied on gross revenue, it becomes a high cost to mining companies," Mr Kwesu said.

"And when you compare our royalty regime and the region, ours is one of the highest and mining companies are struggling because of this high additional cost," he said.

For instance, Mr Kwesu said gold mining companies in Zimbabwe pay a royalty of 7 percent against the regional average tariff rate of between 2 and 3 percent.

"Gold mining companies in Zimbabwe pay a royalty of 7 percent against a regional average of 2 to 3 percent, this is making the operating environment difficult."

Minerals such as gold, diamond, coal bed methane, mineral oils, natural gas, platinum and coal have particularly been targeted for stiff fees as was the case in 2011.

The mining sector accounts for 16,6 percent of gross domestic product and more than 50 percent of total exports into the country, apart from employing thousands of people.

Mr Kwesu said in the four months to February, there had been reduction in gold output largely because of the constraints of tariffs, prices and shortage and cost of power.

According to the chamber, fees and charges effected in 2011 remained in force in 2013 and the current year with only cosmetic reduction having effected after CoMZ lobbying.

This has made local mining companies less competitive in the region.

Mining companies are also battling to mobilise requisite resources to expand and fund new projects. The chamber says $5 to $7 billion is required in the next five years.

Zimbabwe has faced difficulties attracting foreign investment into mining, due to perceived high risk profile, at the time the economy is faced with crippling liquidity crunch.

Mining, despite facing problems, has also been weighed down by low or softening prices on global markets, yet it is expected to drive economic growth going forward.

Mining firms are also currently actively lobbying the Government for a reduction of power tariffs.

Mines pay 12c per kilowatt hour for ring fenced power and 8c for normal supplies.

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