ZIMBABWE’S mining sector growth slowed down to 4.8% in 2023 from 10% in 2023 as weakening commodity prices continued to hurt the capital-intensive sector, latest figures from the Chamber of Mines of Zimbabwe have shown.
BERNARD MPOFU
Mining is the country’s top foreign currency earner, accounting for nearly 80% of export receipts.
“During the period under review, the mining industry grew by 4.8%, down from 10% in 2022, weighed down by weak output performance in key minerals that include gold, PGMs and ferrochrome,” the chamber says in its 2023 annual report released during the just-ended annual general meeting in Victoria Falls.
“The mining sector continued to perform below capacity on the back of foreign currency shortfalls, fragile power supply, capital shortages and high cost structure. The situation was worsened by softening commodity prices which impacted on mineral earnings. As a result, mineral exports declined to US$5.2 billion in 2023, down from US$5.6 billion in 2022. In the outlook, mining sector growth is projected to further soften to 4.5% on the back of further decline in commodity prices and infrastructure deficit including power supply. Mineral export earnings are expected at around US$5 billion in 2024.”
The weak commodity markets coupled with subdued global economic recovery and tight financial conditions, the chamber says, have undermined the potential growth of the domestic economy.
The report shows that mineral exports declined to US$5.2 billion in 2023, compared to US$5.6 billion in 2022, largely on the back of depressed commodity prices for most key minerals, with rhodium down by -60%, lithium, -75%, palladium, -41% and coal, -50%, the worst affected. In 2024, mineral exports are expected to further decline to average around US$5 billion as commodity markets are anticipated to remain weak throughout 2024, with mineral prices anticipated to be subdued on the back of sluggish global economic outlook worsened by tight financial conditions.
Mineral exports, at US$5.2 billion, accounted for around 78% of national exports in 2023. The contribution of mineral exports to the economy has progressively increased from 56% in 2011 to average around 78% of the past 5 years.
“As a result, the domestic economic growth declined to 5.5% in 2023, from 6.4% in 2022. In the outlook for 2024, economic growth is expected to further slow down to around 3.5% weighed down by El Niño-induced drought and subdued mining sector outlook on the back of softening commodity prices,” the report reads.
“The situation is expected to be worsened by other domestic structural bottlenecks that include infrastructure and power deficits, foreign currency shortfalls, high inflation, exchange rate volatility, and capital constraints.
“Commodity prices for most key minerals were predominantly subdued in 2023 on the back of sluggish global economic recovery, weak Chinese industrial sector and ongoing conflicts in Europe and the Middle East which introduced uncertainty in commodity markets. Gold prices, however, traded at historical peaks in 2023, largely driven by safe haven demand amidst global uncertainty. In the outlook for 2024, commodity markets are expected to remain depressed as the prevailing conditions are anticipated to persist for the rest of 2024.”
Average capacity utilisation for the mining industry increased to 84% in 2023, from 81% in 2022 in line with planned production targets.
“Notable increases in capacity utilisation were in respect of gold, ferrochrome and coal, while full capacity utilisation was maintained in the PGM [platinum group metals] sector. In 2024, average capacity utilisation is expected to increase to 90%,” the chamber says.
“Key sectors anticipated to drive the improvement in capacity utilisation are gold (84% to 95%), ferrochrome (80% to 87%), and coal (65% to 75%). Factors that constrained full capacity utilisation in some mineral subsectors included electricity outages, foreign exchange shortfalls, capital shortages and a high operating cost structure.”
