Zimbabwe mines unable to raise wages, hit by power costs

Zimbabwe mines unable to raise wages, hit by power costs

Increased power costs and low commodity prices are putting the mining industry in Zimbabwe under huge pressure, forcing savings to be made.

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Increased power costs and low commodity prices are putting the mining industry in Zimbabwe under huge pressure, forcing savings to be made.

Zimbabwe’s GDP (Gross Domestic Product) is currently listed as $14.20B. However because the total amount of money spent on imports continues to be over double the amount earned through their exports, the country has a “negative trade balance”. Whilst this can initially be a boost for a country as it indicates consumer confidence, stabilizes prices and reduces the threat of inflation, overtime it can result in the loss of local jobs and the closure of local businesses, as it becomes impossible for them to compete with the price of imported goods. A “negative trade balance” is also only possible if another country is prepared to lend the country in question money, this therefore means that the level of debt in Zimbabwe is continuing to grow year on year.

Mining exports

The income made from exporting the proceeds of the mining industry accounts for approximately 50% of Zimbabwe’s overall earnings, however this is currently in decline, dropping over 7% in the last four-years. The leading mining exports are; gold, nickel mattes, diamonds, ferroalloys and platinum, with gold alone being worth over half a million US dollars.

The effects of power cuts on the general population

Zimbabweans are currently having to deal with the disruption of regular power cuts, with many households now frequently only having power for 6 hours a day, meaning that they are without power for up to 18hrs a day. Those Zimbabweans who can afford it are trying to compensate for these shortages by using alternative power sources, however the vast majority of the population are not lucky enough to be able to afford this and as a result are just having to find ways of coping. These “load shedding hours” are also resulting in an increase in food bills as perishable goods can no longer by bought in bulk, making household budgeting even more challenging.

The impact of power shortages on businesses

These power shortages are obviously also having a significantly detrimental effect on local businesses, especially industry and mining. In fact, all major mines have been ordered to cut their power consumption with immediate effect by approximately 25%, as Zimbabwe’s electricity production continues to decrease. It is currently being forecasted that in the first few months of 2016, the amount of electricity being produced will drop by 50%, in turn pushing up the cost of what little electricity there still is available significantly. This decrease in production is currently being blamed on the continued dropping water levels in the countries only Hydro electrical plant due to recent droughts, however many people are blaming poor management and bad planning, in addition to the government’s failure to maintain the countries thermal power stations.

Savings have to be made

In addition to these increased power costs and shortages, the mining industry is also being hit with low commodity prices, in fact many mines are reporting that they are currently producing coal, gold and nickel at a loss. Due to the fact that almost a third of all costs incurred are employee wages, the payroll of these businesses is the first area to be targeted for savings. This has resulted in not just the inability of the mining companies to increase wages, but in a number of instances some companies have actually negotiated agreements with the workers to reduce their wages, in order to ensure that the mines can remain profitable and therefore open.

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