Zimbabwe's Mine Output a Shadow of Former Self

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Despite its natural endowment of resources such as gold, platinum, palladium and many other precious, rare metals, the Southern African state of Zimbabwe has not been able to profit from the decade-long boom in the metals markets. Though new data show that during the first nine months of this year, gold production increased by 22% (an 11-tonne increase on last year), consider that back in 1916, the country’s British colonial government was mining 30 tonnes of gold a year.

With such resource wealth Zimbabwe could be prosperous nation, yet it continues to suffer from a predatory political class that seeks to enrich itself at the expense of wider society.

During colonial times Zimbabwe – then known as Southern Rhodesia – was referred to as “the breadbasket of Africa.” Since Robert Mugabe’s theft of land from white farmers in 2000, food production has dropped by 70%, as Mugabe’s ZanuPF cronies ruin once productive farms. The Mugabe government’s cynical efforts to default on its foreign debts via money printing resulted in hyperinflation, with all the economic misery and impoverishment for ordinary Zimbabweans that implies. At the lowest point of the currency collapse in 2008 it was almost impossible to find petrol, replacement parts and other bits of essential equipment.

As a result most large mines were forced to halt production, and many highly qualified and experienced mine workers emigrated to neighboring countries (notably Zambia and South Africa). Though still slightly less than that produced during colonial times, at the turn of the millennium Zimbabwe was producing 27 tonnes of gold a year. But the country’s Chamber of Mines predicts that gold production will total just 13 tonnes this year.

The “brain drain” is still affecting Zimbabwe today. According to data from the country’s central bank, between 1998 and 2008 mining investments collapsed from $444.3 million to $50 million. Nevertheless, the introduction of the US dollar as an official currency towards the end of last decade has allowed a new price system to emerge. Furthermore, the implementation of tax-friendly laws in the mining sector should be encouraging a slow recovery in mining.

Alas, the government is again shooting itself in the foot. In the spring of 2011, officials in Harare started a nationalization campaign aimed at mining companies, which is forcing foreign mining companies such as Impala Platinum to transfer their majority shares (51%) to a specially-created nationalization fund. Faced with expropriation, many foreign companies had no other choice than to reluctantly comply with the government's demands.

But it is clear that foreign investors have no legal protection in Zimbabwe and are at the mercy of arbitrary decisions taken by Mugabe's government. Even South Africa's effort to mediate between Zimbabwe's government and the companies did not bear fruit. Given this situation, many doubt that any kind of recovery in Zimbabwe's mining sector is possible at the moment. Sadly, the country will continue to reap no benefits from the global mining boom.

About the Author
Roman Baudzus

Roman Baudzus is a contributing writer for GoldMoney.

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