/ 29 November 2013

Zim: Mines lose their shine, worries govt

Zim: Mines Lose Their Shine, Worries Govt

There is increasing concern in ­government that the country's diamond production has dipped just as it has been given the green light to sell its diamonds in Europe, and is considering mortgaging its mineral resources in exchange for financial assistance from China.

Zimbabwe is keen to ensure that its turnaround strategy for the economy, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), is financed by proceeds from the Marange gemstones.

Western financial institutions such as the World Bank and International Monetary Fund have refused to give in to Harare's cash pleas until the country pays its arrears, estimated at nearly $12-billion.

Beijing is being held out as one of Harare's last hopes of a cash injection, with Mining Minister Walter Chidhakwa indicating at a meeting of industry executives in Bulawayo last month that he was amenable to the idea of mortgaging the country's mineral resources for "long-term" investments.

Fred Moyo, the deputy minister of mines and mining development, this week said that the government was "worried" that the diamond sector had announced forecasts it was unable to meet.

"Production targets are not being met and there is the issue of capital, mine planning and geological matters. Some things are not being done right. There seems to be a tendency to explore as they mine. We have therefore asked them to give us forecasts in line with Zim Asset. We expect concrete figures by the end of the month, and we hope that this time the figures will be sound and achievable."

The treasury is faced with the tough task of drawing up the budget, which it has postponed, and hopes to anchor partly on the proceeds of diamond sales. Finance Minister Patrick Chinamasa is now expected to announce the budget next month.

Under the previous government of national unity, former Finance Minister Tendai Biti expected to receive nearly $600-million of an initial $4-billion 2012/2013 budget from the Marange diamonds, only to revise budget projections downwards to $3.4-billion after diamond mining companies said sanctions were ­affecting sales.

Zanu-PF insiders say the party is wary of a repeat of non-remittance of diamond revenue to the treasury, as the ruling party is seeking to fulfil promises made during the election campaign, including increasing the salaries of 230 000 public servants .

"The reported depletion is likely to limit potential sources of government income. That increases the heat in an already deteriorating macro economic environment," said Trevor Maisiri, a senior analyst at the International Crisis Group.

A recent World Bank report on the country's gems, titled Zimbabwe Growth Recovery, in light of a tight liquidity environment, highlights the urgency of new investment in the diamond mining sector to increase production.

The World Bank said a $15-million investment could increase production by up to 15.2-million carats a year by 2018 from the estimated 12-million carats currently.