Zimbabwe: Mining sector needs capital injection


Posted on June 22, 2011 21:07

Zimbabwe’s mining industry is the main driver for the southern African country’s economy, with export receipts in the sector reaching US$1.70 billion in 2010 and the manufacturing sector accounting for US$400 million in export receipts in 2010, a survey has shown.

A study by a South African based business research and consulting firm, Frost & Sullivan, has indicated that although the Zimbabwean economy is recovering significant fresh capital injection is required.

“Significant capital injection is required to revive the industry to pre-2000 levels of production output and expand it further. This is chief among the factors expected to contribute to the recovery of Zimbabwe’s mining and manufacturing sectors,” Frost & Sullivan said on Wednesday, June 22, 2011.

According to Zimbabwe’s Chamber of Mines, the country’s main mining body, the gold mining sector would need US$1 billion over the next five years to get the industry back on track.

After a decade of decline the country’s economy is recovering with a growth rate of 8.7 percent, registered in 2010. And 2011 forecasts for 2011 indicate a further 9.3 percent growth.

In 2010, the mining sector recorded a 46.0 percent increase in production output, and is expected to grow by a further 47 per cent in 2011.

According to figures from the chamber of mines, the sector produced minerals worth $394.7 million in the first quarter of 2011.

However, mining and manufacturing companies are expected to continue to struggle to raise funds to start or expand operations in the short term.

“The Zimbabwean capital market at present is lacking liquidity, and the absence of significant, reasonably priced long-term borrowings is placing constraints on capital expenditure projects,” adds the report.

In 1999, the country’s yearly gold production peaked at 28 000 kg but almost immediately started a rapid decline in line with political upheavals that beset the country, bottoming at 3 100 kg in 2008 when the economy virtually collapsed.

After the economic recession and the establishment of a coalition government, the industry started a slow recovery but was once again hampered in the uncertainty that has come with the country’s empowerment policies.

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