Wednesday, May 5, 2010

Zim mining industry still struggling, says Chamber

Zimbabwe Business Media
Bulawayo, Zimbabwe

27 April 2010 - Severe power cuts, the unavailability of cash loans from capital lending institutions and foreign investors anxiety about the country's controversial indigenisation laws are some of the factors negatively impacting on the revival of production in Zimbabwe's mining sector, the Chamber of Mines says.

Chamber of Mines president Victor Gapare told local media that it was largely due to these and other factors that the country had still recorded a marginal increase in monthly gold output from 487.8 kilogrammes in February to 661,8 kilogrammes in March, representing a 30 per cent increase.

He said it will take time for the mines to start producing on average because of several negative factors, key among them the power crisis, a lack of operating capital and growing investor anxiety over the indigenisation law.

“The mines are suffering from severe power cuts and it is impossible to produce without power. Banks just don’t have capital to lend to mining businesses at the moment.

"Even equity investors are hesitant about investing in the country at the moment as they await finalisation of indigenisation and economic empowerment matters,” Gapare said.

However, Gapare said the March increase was so far the highest the country had recorded after the January and February records and could be attributed to the slow build up of production capacity at some mines around the country.

“Production for March is the highest monthly production recorded for the year to date. This is attributed to continuous investment in rebuilding production capacities. This investment is from revenues generated from production.”

Mines and Mining Development minister Obert Mpofu told The Business Diary that unlike the manufacturing sector which got a US$500 million bail-out loan from state coffers, government has no immediate rescue plan for the mining sector.

"The mining sector should be able to solve some of the cash problems they face progressively. Of course, there are such issues as power, for which government is responsible. We have many plans for the revival of power stations and the capitalisation of the operational ones.

"But again these are facing funding problems, so there is no easy way out except to work out things progressively as the state accumulates enough capital to fund its power generation project," Mpofu says.

The Bankers Association of Zimbabwe (BAZ) has stated that financial institutions are not yet ready to give out the long term capital needed by mining houses and industry because they are in a liquidity crisis on their own.

Analysts say the country's growing political and investment risk ratings can be attributed to political undercurrents, particularly the writing of a new consititution, which process should be followed by elections in which the parties in the unity government will turn against each other in a potentially disastrous fight for political survival.

"Banks are still in a crisis but not so much that they cant lend. But in every bank, all risk analysts tell you that it is not yet time to lend on the long-term because, as provided for in the Global Political Agreement that brought about the unity government, Zimbabwe will hold elections upon the conclusion of the current constitution-making process.

"President Robert Mugabe has already said that elections will take place regardless of whether the country fails or suceeds in crafting the new constitution.

"So that means elections within the next 24 or so months and we all know what an economic disaster elections have always been for this country. The red banner is out, and the banks have seen it," said Nyoni, an economic analyst from the National University of Science and Technology (NUST) in Bulawayo.

Zimbabwe is struggling to increase gold output to at least 10 000 kilogrammes annually in order to be readmitted to the London Bullion market. In 2008, the country recorded the lowest output of 3 100 kilogrammes as the majority of the country's mines closed down because of the economic crisis. Last year, there was a marginal increase in output to 4 2 00 kilogrammes.


Thursday, April 29, 2010

Zim transport infrastructure dilapidated

Zimbabwe Business Media
Bulawayo, Zimbabwe

27 March 2010 - Zimbabwe's roads are more than 40 years old, the railway lines more ancient and the country's airport infrastructure badly needs to be upgraded if the transport sector is to be revamped towards a meaningful contribution to the country's stuttering attempts at economic revival.

Addressing the International Business Conference held at the Zimbabwe International Trade Fair in Bulawayo, Transport Communications and Infrastructural Development secretary Patson Mbiriri said the country's roads were long overdue for rehabilitation.

"Zimbabwean roads are over 40 years old and have outlived their usefulness. We have been patching them up but that is not working and we need a total revamp. The railway lines are even older than the roads, we now have to exercise a lot of caution on the railways where a train has to travel at 5 to 10 km per hour to avoid accidents," Mbiriri said.

He said there was need for infrastructure development partnerships with well-heeled foreign compaines because government has neither the capacity nor the financial resources to handle the projects, which include roads, railways and airport works.

He said government is netting US$1.3 million monthly from tollgates and disbursing it to the Zimbabwe National Road Authority (ZINARA) for patchworks on the roads but that is not enough.

He said the railways lines were very bad and short term rehabilitation programmes like those done in the past would only yield short term gains.

"We can rehabilitate the railways but still realise a short lifespan. This is more urgent, because at some point we will have to open up and allow other railway companies to operate," Mbiriri told the business delegates.

He said the Civil Aviation Authority of Zimbabwe (CAAZ) needs to urgently upgrade infrastructure at the country's three main airports, Harare International, Joshua Mqabuko, Victoria Falls.

"We only have US$4 million, which is enough to attend to the taxiways, Joshua Mqabuko needs a terminal building and a new tower."

The country's dilapidated transport infrastructure has been identified as a key impediment to economic revival. The roads are heavily pot-holed and have not been maintained for more than ten years. The results of a new toll-gate system which came into force on the roads last year are yet to be seen visibly on the roads.

Zimbusinessmedia 2010

Zim indigenisation law rattles German investors

Zimbabwe Business Media
Bulawayo, Zimbabwe

27 April 2010 - The German Africa Business Association (Afrika-Verein) says Zimbabwe's controversial Indigenisation and Economic Empowerment Act is making it very difficult to motivate German business to invest in Zimbabwe and forced them to adopt a wait-and-see attitude towards investing in the country.

In an interview at the just ended Zimbabwe International Trade Fair in Bulawayo, Afrika Verein representative to the Southern Africa Development Community Hienz Hoehmann said the law, which requires foreign companies to cede 51 per cent of their shareholding to indigenous Zimbabweans, is causing confusion and investor shyness among the 800 German businesses operating across Africa and those back home wishing to venture out.

"This laws is creating real confusion, and naturally, businesses that were willing to enter the Zimbabwean scene before are no longer willing to risk their way in now. We are finding it difficult to motivate German businesses to invest here. Maybe that will change but I do no think it will do so before there is clarity around this whole indigenisation business," Hohemann said.

However, Hoehmann said the business association, which facilitates business interactions and partnerships between African and Germanbusinesses, remains committed to doing business in Zimbabwe despite the contentions around indigenisation.

"Zimbabwe retains a great potential which can be built up easily. There are plenty of business opportunities whose utilization depends on the capability of the companies and the availability of a rewarding market. But for now the indigenisation law is holding investment back.

"The opinion among German business is that they don't do business where the environment is not conducive, and they do not take their investment to such destinations," Hoehmann said. Germany is one of the European Union countries which have taken the lead in criticising the
indigenisation law which has rattled local and foreign business interests alike.

Critics say the law amounts to a grab, particularly the phrase that says firms should 'cede' their shareholding to locals, which some believe implies forfeiture with the possibility of non-payment of the value of shares taken. The law has also divided the government with ZANU PF ministers defending it as necessary for local empowerment while MDC formations say the law will kill foreign direct investment.

Although the law remains deeply unpopular with local and international businesses, more than 400 companies have already complied with the government deadline for the submission of indigenisation plans to be implemented within the next five years.

Zimbusinessmedia 2010