The Sunday News
Nkosilathi Sibanda, Business Correspondent
THE partial shutdown of international markets and fall of mineral prices witnessed since last December, has dealt a blow on growth prospects of the country’s mining sector, with a record -4,1 percent performance expected this year.
Gripped by uncertainty brought by the impact of the Covid-19 pandemic, the local mining industry was faced with a number of drawbacks including shortage of foreign currency, spare parts and erratic electricity supplies, which heavily affected production.
In the past months, production and sale of minerals in the Platinum Groups of Metals (PMG) were on the decline compared to previous years but gold, nickel, coal and diamonds had better returns than expected.
PGM minerals include rhodium, palladium, ruthenium, osmium, iridium, and platinum. According to mining experts, these minerals occur in the same mineral deposits. Presenting the 2020 Mid-Year Budget Review statement last week, the Minister of Finance and Economic Development, Professor Mthuli Ncube said despite the low performance, mining was still the country’s top foreign currency earner.
He said mining receipts accounted for 55 percent, contributing US$2,9 billion in 2019 positioning the industry as the top foreign currency earner ahead of the agricultural sector. This comes on the backdrop of the Government’s plan for the mining sector to reach a US$12 billion contribution to the Gross Domestic Product (GDP) as outlined in the Transitional Stabilisation Programme (TSP) by year 2023. Currently, the mining sector contributes about eight percent of the total GDP.
“Growth for the mining sector is now projected to slow-down to -4,1 percent in 2020, reflecting the impact of Covid-19 and other challenges including perceptions around retention, erratic power supply and loss of skills in the mining sector,” said the Minister.
“The mining sector, which heavily relies on electricity supply and foreign exchange for the procurement of equipment, declined by 12,4 percent compared to the previous year.”
Prof Ncube said the Government was on course to put strategies in support of the envisaged goal to address challenges faced by the sector.
“Various initiatives, as well as investments are underway in various sub-sectors in pursuit of this vision. This is expected to set the sector on rebound in 2020, recovering from an estimated decline of 11,9 percent in 2019.”
He said it has to be noted the overall drop in earnings was largely attributed to foreign currency shortages that affected PGM minerals.
“The contraction of the sector is mainly attributable to low output of Platinum Group Metals. General performance of the sector was also adversely affected by shortages of foreign currency for spare parts and consumables compounded by the shortages of electricity,” he said.
In his address, the minister said gold, nickel, coal and diamonds made for better performance.
“Notwithstanding the weak performance, key minerals such as gold, nickel, coal and diamonds performed better than anticipated in 2019,” he said.
Prof Ncube cited the impact of prices on the global market for certain minerals as one of the key pointers to the low production records.
“Save for coal, most mineral prices were firming up from May 2020, with gold prices reaching as high as US$1 732,22, while nickel recovered from US$11 804 per tonne in March to US$12 727 per tonne by May 2020.
“International mineral prices were relatively high in 2019 compared to 2018. Average gold prices for the year improved by 10 percent to about US$1 392 per ounce from US$1 269 per ounce in 2018. Palladium prices firmed in 2019 by about 49 percent to all-time high of around US$1 538 per ounce from US$1 031 per ounce recorded in 2018 notwithstanding platinum prices decline by about 2 percent to US$868,” he said.
