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Harare Bureau
SHRINKING international commodity prices, particularly gold and platinum, will continue to impact on export revenues as economic analysts express concern that the mining sector that has been driving the economy since 2009 could be losing steam. Minerals account for 65 percent on Zimbabwe’s exports. In five months to May, exports stood at $1,3 billion compared to $1,328 billion realised in the previous year, according to statistics from the Finance Ministry.
This represents a 2 percent decline in exports and reflects the overall slowdown in the real economy. Zimbabwe’s exports basket is largely dominated by minerals which are sold in raw form.
According to the Chamber of Mines of Zimbabwe, minerals revenue declined 18 percent in six months to June this year from $1,1 billion realised in the same period last year.
Gold was the biggest contributor although earnings fell 27,3 percent from $449 million to $326 million. Production also declined from 8, 6 tonnes a year earlier to 6,7 tonnes.
Platinum was second, with revenues amounting to $292 million, slightly up from $285 million while palladium earnings declined 31 percent from $149 million to $102 million.
Since the historic highs of 2011, gold has dropped by over 30 percent. The gold price started the year at just under $1 680 an ounce and was trading at around $1 280 early yesterday while platinum prices have dropped 5,6 percent during the same period.
“The fall in prices is a perennial problem in Africa,” economist Gift Mugano said. “For Zimbabwe, this is obviously going to negatively affect export revenue and put pressure on foreign exchange. This is why we must take value addition as a serious strategy to get out of this cycle of loss in export earnings caused by volatility of prices.”
Economist Mr Brains Muchemwa said considering the strategic importance of gold and platinum revenues to the current account and more importantly the fiscal linkages via royalties and corporate taxation, Government revenues and general economy-wide, liquidity levels were likely to be negatively affected by the fall in metal prices.
“Although this will cascade to dent the gross domestic product growth prospects, the fact that, to a large extent, most export proceeds by the big mining companies are banked offshore, means that the overall impact on the general liquidity levels will not be that grave,” he said.
“Equally, the fact that the economy is dollarised means that the shocks on the current account do not necessarily end up having pass through effects to the general price levels of goods and services in the broader economy as would possibly happen if we had local currency and had suffered exchange rate depreciation.”
Some local mining firms are already feeling the heat of volatile metal prices. Platinum producer Zimplats said revenue for the quarter ended June this year fell 26 percent to $125,8 million from the quarter ended March while taxes to Government were 6 percent lower due to a reduction in tax payments arising from lower prices.
Metallon Gold Zimbabwe, the country’s biggest gold mine, said it was considering cutting salaries by at least 50 percent as a result of volatile gold prices on the international market.
Outgoing Finance Minister Tendai Biti said last month the continued decline in gold prices weighed down on gold output volumes during the first four months of 2013.
Online Reporter