For civil society working to influence policy and practice reforms tailored to strengthen linkages between mining and sustainable development, stakeholder engagement is a critical piece of the jigsaw puzzle. To gain a pulse feel of industry’s thinking concerning the current and future of mining, the Zimbabwe Environmental law Association (Zela) participated at the Chamber of Mines’s 2019 Annual Mining Conference. Themed Realising vision 2030 through resource led growth, the conference was held at Elephant Hills Resort, Victoria Falls, from May 29 to June 1, 2019.
Reaching upper middle-income status is the goal for Vision 2030.
The conference’s theme resonated well with the Africa Mining Vision (AMV), which envisages Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development. Realising that resource-rich Africa must not continuously squander the opportunity to industrialise and diversify its economy from mining, Africa Heads of State and Government adopted AMV in 2009. This article shares key highlights from the platinum symposium. Further, the article ventilates some of the main issues discussed to help citizens understand some pressure points when it comes to mining and sustainable development.
Technology redefining the future of mining
Unlike South Africa, Zimbabwe’s platinum industry is highly mechanised because of favourable geological characteristics. In light of the fourth industrial revolution, the industry must explore new technologies out there to “produce more with less.” The automation and modernisation of the industry is fundamental to drive production efficiency. Embracing technology becomes key to lowering the cost of production in order to gain a competitive advantage in addition to the comparative advantage that Zimbabwe enjoys. Cheap commodities have a future and expensive ones have a short life-span, said Stanley Segula, the Zimplats managing director.
Comparative advantage stems from the fact that in platinum, the country is endowed with a world class mineral asset which ranks second best after South Africa. In terms of platinum production, Zimbabwe is ranked number three, after South Africa and Russia, respectively.
Rightly so, industry is taking leadership to stimulate discussion on the impact of technology on mining. The government and civil society must not be late to get off the blocks on this one. As suggested by Vanessa Ushie in her recent blog titled New mining technologies and the fiscal space: Ensuring shared value and sustainable development, the government must explore options to give oxygen to mining linkages to development in the context of new technologies. Right now, the employment situation in Zimbabwe is quite unsustainable.
With technology set to drive platinum production growth, employment linkages are going to be further weakened. Even worse, there is a strong risk that retrenchments can occur as labour is substituted by machines. Poor mining agreements have always been a major challenge to unleash mining’s development potential, starting with the 1888 Rudd Concession. With secrecy around mining contracts, the public does not have a fair view picture of how mining agreements are primed to manage a technologically driven mining sector. Venessa suggested that the fiscal regime must be nimble to compensate for employment losses through equity participation or production sharing, among other options. Obviously, our outdated Mines and Minerals Act and the mining fiscal tools are not best primed to anchor a mining-led realisation of Vision 2030.
The status of the platinum industry
As part of its contribution towards the realisation of Vision 2030, the platinum sector is supposed to hit 50 tonnes annual production by 2030. Along with gold, platinum is one of the country’s top export earners. Although commonly referred to as platinum mining, it is crucial to note that the Platinum Group of Metals (PGMs) are produced – 10 minerals are a product of platinum mining. By volume, nickel tops the production list. The oldest platinum mine in Zimbabwe, Mimosa, started as a nickel mine and later shifted focus to embrace platinum mining. In terms of nickel production in Zimbabwe, the platinum industry’s production is favourable compared to primary nickel producers.
In 2018, production stood at 14,6 tonnes; marginal when compared to the 2017 production. Accounting for 60% of the country’s total platinum production, Zimplats is the largest player in the platinum industry. Mimosa is the smallest player in terms of both output and ownership of proven platinum resources. Mimosa owns about 3% of the country’s platinum resources.
“The industry is fluid and confusing” currently; palladium price has surpassed platinum. Palladium currently fetches around US$1 300 per ounce, a figure that roughly matches the gold price. “Platinum prices are in a long winter”, currently fetching around US$800 per ounce. It is important to flag that platinum and palladium production volumes are nearly equal.
Make hay while the sun shines
Platinum is mainly used to produce auto catalyst convertors that are critical in the reduction of carbon emissions from motor vehicles. With technology pointing to electronic vehicles, the platinum industry is under severe threat because auto catalyst converters account for 60% of the platinum market. The jewellery market accounts for 12%. However, technology also offers hope in that platinum can be used to generate electricity, and research is at an advanced stage. Equally so, other minerals like nickel, that are part of the PGMs are key in the production of electronic vehicles. The key lesson here is that Zimbabwe “must make hay while the sun shines”, quickly leverage on its platinum assets as future technologies pose risks which can sterilise the resource.
Indigenisation policy an albatross
In 2018, the Finance Act removed indigenisation requirements for all minerals save for platinum and diamond sectors. As it stands, foreign players in the platinum and diamond sectors are required to cede a minimum of 51% equity to indigenous partners. This is making Zimbabwe one of the least attractive investment jurisdiction. Whereas the President announced that government was fully removing indigenisation requirements for the platinum and diamond sectors, the law has not been changed. The industry’s position is that legal reforms to repeal the indigenisation framework must be expedited.
It is understandable that a conducive policy environment is a key enabler to attract the much needed investments in the platinum industry. But, the Constitution must not be undermined. As rightly stated by Hon Mukaratigwa, chairperson of the Parliament Portfolio Committee on Mines, the State is compelled to come up with measures to ensure that communities benefit from the resources in their areas. To that effect, the issue of Community Share Ownership Trusts (CSOTs) must not be affected by any changes to the indigenisation framework. Interestingly, a sterling example of the impact on CSOTs in terms of reducing infrastructure deficits in rural areas comes from the platinum industry. All three platinum producers contributed $10 million each to fund community development programmes in their areas.
Beneficiation and value addition
Industry expressed displeasure with the current stick approach, use of export taxes to compel local value beneficiation and value addition of platinum. Certainly, beneficiation and value addition are fundamental to generate more foreign currency earnings, create more jobs, widen the tax base and to promote industrialisation. The platinum industry, it must be noted, has lower ripple effects to the domestic economy compared to steel making, which can spur the construction sector and other downstream industries. Given that platinum is a “sexy mineral” and high valued mineral, government must not lose sight of low-valued minerals – development minerals which have strong linkages to other economic sectors, agriculture and construction, for instance. Despite its perceived challenges, the results of export taxes are encouraging in that Unki Mine recently commissioned a smelter. Gone are the days when Unki Mine used to export platinum concentrates. “Keep walking” there is room to achieve more – base metal refinery and finally precious metal refinery facilities.
To ensure that platinum industry growth plays a critical role towards the attainment of Vision 2030, industry is clear on critical success factors that must be addressed. It must be clear though, that any growth anchored on mining must not leave communities behind as required by the Constitution. Of course, the indigenisation framework as it stands is not attractive to investors, it must be tweaked, but not entirely scrapped to give legal teeth to CSOTs. Afterall, the sterling example of community-led development comes from the platinum industry in Zimbabwe. The impact of technology is another fundamental which government and communities must be alive to; policies and laws must be “nimble” to leverage better mining for the realisation of Vision 2030.
Mukasiri Sibanda is a programme officer at Zela. He writes in his personal capacity.