Is Zimbabwe losing out on the gold boom again?


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During the last week of August 2011, as the gold price nearly touched US$2 000 per ounce, Indigenisation Minister Saviour Kasukuwere picked the moment to rattle his sabre at Canadian firm Caledonia, which had purchased Blanket Mine in 2006.

Within four years of Caledonia investing in the mine, Blanket Mine commissioned a shaft expansion project that increased hoisting capacity from the No. 4 Shaft from 500 tonnes per day to 3 000 tonnes per day.

It was less than a year after this commissioning that Kasukuwere sought to kick the Canadian firm out, saying it had not complied with Zimbabwe’s local ownership laws.

Kasukuwere’s belligerence, in advance of an indigenisation policy championed by his boss, President Robert Mugabe, had a chilling effect across the mining sector. Inevitably, investors halted what expansion plans they had on the few mining operations in the country.

The biggest of the miners, Zimplats, reported at the time that “difficult banking conditions” were delaying the implementation of planned expansion projects. Bankers were, no doubt, keeping a close eye on Zimbabwe’s investment environment.

“It’s a huge disappointment that we find ourselves in this position – we’ve been a model investor in this country,” an exasperated Impala Platinum CEO, Dave Brown, told investors at a 2011 briefing.

“The ownership rule could retard investment in mining and other industries at a time when it’s needed.”

The effect of Zimbabwe’s lost years is exposed by how the likes of Tanzania and Mali, which have joined Ghana and South Africa as top African gold producers, seized the moment.

In 1999, when Zimbabwe produced nearly 30 tonnes of gold, Tanzania’s output was 5 tonnes. By 2008, when Zimbabwe reached its nadir of 3.6 tonnes, Tanzania’s production was 36 tonnes.

Analysts credit the end of the State Mining Company (STAMICO) monopoly in the late 1980s, as well as liberal ownership and currency regimes, for the remarkable growth of Tanzania’s mining industry.

Recent changes in Tanzania’s mining rules under the John Magufuli government, which asserts “permanent sovereignty” over the east African country’s natural resources, have clouded the investment climate, but are yet to put a real dent on output.

Similarly, Mali, a country whose output was 24 tonnes in 1999 when Zimbabwe recorded its previous peak, has overtaken the southern African country. Mali’s output peaked at 61 tonnes last year, nearly double Zimbabwe’s new record production.

As the gold price rises, Zimbabwe, tied down by policy inertia and a power crisis, is once again looking at its peers with envy as they take full advantage.- NewZwire

(59 VIEWS)

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The Insider

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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