HARARE – President Robert Mugabe’s threat to ban export of raw platinum is disastrous to Zimbabwe’s battered economy, analysts say.
They warned that while the move is ideal in the long run, currently it will ravage the country’s investment-starved economy — still struggling to take off from a decade-long recession — as it risks losing millions of dollars in revenue.
Last week, Mugabe hinted that government was seriously considering imposing a ban on all exports of raw platinum until companies in the sector build a refinery to ensure Zimbabwe gets maximum returns from its resources.
“Let us close our doors immediately and say no raw platinum will go to South Africa (SA). The former minister gave them two years and we must see them now arranging to build a refinery,” the 89-year-old leader was quoted as saying.
He added: “If they have not started, after that warning, building a refinery then when the time comes for us to demand that all refining has to be done here, they should not blame us.”
Zimbabwe does most of its platinum processing in neighbouring SA.
This comes as the country — with the second largest known platinum reserves in the world after South Africa — has pinned its economic recovery hopes on the mining sector, with platinum accounting for $424 million of the $1, 4 billion mineral exports in the nine months to September 2013.
“The move is catastrophic considering that platinum is our cash cow as a country not diamonds,” said a mining expert who preferred anonymity, adding that its takes at least five years to plan and build a refinery.
“The problem is about capacity, the amount being produced lacks the critical mass. Unless production is ramped up it is not going to be cost effective to do that,” the expert said.
Takunda Mugaga, an independent economist, also said that “the nation will lose out on proceeds from mining whilst ironically the sector is currently one of the largest contributors to Gross Domestic Product.”
“The risk is what if constructing a refinery will require funding which can be secured in not less than five years. What will be the opportunity cost to Zimbabwe of rising platinum prices on the international market,” he said.
He noted that, in fact, Zimbabwe needed to extract more platinum from the ground which will create forward linkages, including construction of refineries.
“It is capital intensive to build a refinery and who will want to inject funding?” queried Mugaga.
Recently, the Chamber of Mines of Zimbabwe (CoMZ) said platinum group metals producers — Impala Platinum Holdings (Impala), Anglo American Platinum Limited (Anglo) and Aquarius Platinum (Aquarius) — had to increase their total output to 500 000 ounces per annum from the current 365 000 ounces to justify a refinery.
Impala, through its local unit Zimbabwe Platinum Mines Limited (Zimplats), operates the Ngezi mine while it also runs Mimosa, a joint venture with Aquarius.
Anglo owns the Shurugwi-based Unki Mine.
The chamber said, to increase production to the targeted 500 000 ounces per annum — required for the operation of the refinery — there is need for investment of approximately $2,8 billion in mines, $2 billion in processing plants and between $200 and $500 million to ensure adequate power supply.