Caqital Equipment News October 2018

EDITOR'S COMMENT

IS ZIMBABWE OPEN FOR BUSINESS?

T hat there has been significant change in Zimbabwe since November 2017 – following the end of Robert Mugabe’s lengthy rule and Emmerson Mnangagwa’s subsequent ascendency to the top job – is no overstatement. However, the question remains: is Zimbabwe open for business? Although the recent disputed election left a damper on the averred reformation of the ruling party, the political change has somehow boosted business confidence. The change at the top, as well as the recent appointment of technocrats to the cabinet, has encouraged a unanimous sentiment that the country may be ready for business. It is the appointment of Professor Mthuli Ncube – an economist and vice-president

of the African Development Bank – to the Finance and Economic Development portfolio that has drawn plaudits. With his proven track record in the financial sector, he is expected to bring the much-needed fiscal discipline as the new dispensation seeks to resuscitate the economy. He has also made it clear that his immediate task is to provide a stable, competitive and optimal fiscal framework. One sector that is expected to play a major role in reviving the Zimbabwean economy is the mining industry. The development of a thriving mining sector hinges on three major components: prospective geology, human resources and capital. That Zimbabwe has abundance of the first two is no point of contention – a persistent shortage of capital and a hostile legislative regime have been some of the chief deterrents to the development of the sector over the past 10 years. However, it is encouraging to see that the government is prioritising the attraction of both domestic and international investment by implementing investor-friendly policies. For example, the repeal of a controversial indigenisation law passed under former president Robert Mugabe, which limited foreign ownership of local businesses to 49%, is definitely a step in the right direction. This is a key indicator that the new government is keen on reviving the mining sector after years of reticence by foreign investors. The mining ministry reports that, with a refocus on coal and coking coal, Zimbabwe has already attracted about US$300-million of investment this year. Elsewhere, the recent US$4,2-billion deal with Cyprus-based Karo Resources to develop a platinum mine and refinery – said to be the largest investment structure in the country’s mining industry – is testimony to the renewed investor confidence. Consequently, the Chamber of Mines of Zimbabwe (COMZ) expects the mining industry to grow by 10% in 2018. COMZ forecasts that the sector will generate

about US$3,7-billion from mineral exploits during this year. This follows a successful 2017, which recorded an overall growth of 8,5%. The industry is expected to reach US$11-billion by 2022, and US$18-billion by 2030. The mining body is encouraged by the recent rise in output volumes of 10 out of 14, or 71% of key minerals in the first three months of the year compared with the same period last year. Notable increases were recorded in gold, which went up 53%, coal 46%, cobalt 13% and nickel 18%. So what does this mean for the capital equipment industry? Zimbabwe seems to be the next interesting market for the supply chain. Unlike in construction, most of the mining projects are shovel-ready. As miners seek to boost volumes and return to profitability, they understand that fleet renewal is of utmost significance. Mining contractors and their clients have deferred their fleet replacement programmes over the past 10 years, and these assets are beyond their sustainable lifecycles. As you will see in this edition of Capital Equipment News , the renewed confidence in Zimbabwe is starting to manifest, with some capital equipment suppliers reporting improved business activity this year. A case in point is Scania South Africa’s recent sale of its eight mining tippers to mining contractor, R. Davis and Co. The contractor is looking at further boosting its fleet with four more Scania tippers later this year or in early 2019. Both Scania South Africa and Scanlink, its dealer in the country, report improving business conditions in Zimbabwe. Scania expects to exceed its annual targets for the country by this month. It is encouraging to see that Zimbabwe, once regarded as an economic force in southern Africa, is on a recovery path. However, it is worthwhile to note that the economic resuscitation programme will be a long-term initiative. In the short term, solving the liquidity crunch will be key, especially for capital equipment owners who are in need of immediate access to foreign currency to be able to purchase their mission critical assets.

Munesu Shoko – Editor

capnews@crown.co.za

@CapEquipNews

CAPITAL EQUIPMENT NEWS OCTOBER 2018 2