Zimbabwe mines body forecasts difficult year

Zimbabwe's mining body has forecast a further difficult year for the mining sector in 2016 due to a myriad of challenges including depressed international commodity prices and power shortages.

The mining sector, which has recorded negative growth for the second year in a row since the country adopted use of multiple foreign currencies in 2009, was however expected to recover and grow by a marginal 1.6 percent next year, the Chamber of Mines said.

The mining sector, the second largest contributor to Zimbabwe's Gross Domestic Product after agriculture, recorded negative growth of minus 2.5 percent in 2015 from minus 3.4 percent in 2014.

"In 2016, the sector will continue to be weighed down by depressed commodity prices, power shortages, inadequate capital and an unsustainable cost structure compounded by high electricity tariffs, high cost of funding and sub-optimal royalty," the Chamber said in a commentary on the 2016 national budget.

The mines body that represents major mining companies in the country said the sector needed to grow by 3.3 percent in 2016 to get back to 2014 output levels and by 37 percent to get back to 2012 peak value level.

The mines body has previously said the sector needs 5 billion U.S. dollars to recapitalize and push production to optimum levels.

Meanwhile, the chamber welcomed the move by government in August to defer 15 percent export tax on unrefined platinum to Jan. 1, 2017.

Government had slapped the miners with the tax in January to compel them to set up smelters and refine the precious metal locally.

Zimbabwe has the world's second largest platinum reserves after South Africa.

"This positive move would provide a reprieve to platinum producers as they set up their beneficiation infrastructure in line with proposals submitted to government," the mines body said.

However, just like gold, the platinum sector required support in the form of royalty reduction from the current 10 percent to restore viability especially during this period of depressed prices, it added.

The chamber also urged government to expedite reforms in the sector including amending the Mines and Minerals Act and review the fiscal policy to reduce investor uncertainty. Enditem