EDITORIAL COMMENT: Coal export arrangement must work

The Chronicle

Zimbabwe produces a maximum three million tonnes of coal per year but expects to increase the output to 10 million tonnes in the next five or so years.

On current output the country will take hundreds of years to exhaust its coal deposits, estimated at 25 billion tonnes.  This is according to known reserves yet there is a possibility that if more exploration is undertaken, additional deposits of the mineral will be found elsewhere in the country apart from the Hwange, Sengwa and Chiredzi sectors which are known to have them and are being extracted.  

All this is evidence that the country is blessed with abundant coal. Potential in terms of increased output, revenue and development is therefore immense in that sector.  

The Government realises this and so is seeking more investment into coal extraction and more interestingly, exports. In that respect, the Government signed an agreement with a Dubai-based company, Victoria Consulting, which will assist the country secure coal markets in India and Japan, two of the world’s biggest coal importers.

The deal, signed by Mines and Mining Development Minister Winston Chitando and Victoria Consulting chief executive officer Mr Vito Oliveira Sousa on Wednesday will also see the company capacitate local mines to meet production requirements.

President Mnangagwa, speaking at the signing ceremony, said Zimbabwe should take advantage of cordial relations with India to boost exports.

“Here’s an opportunity where you can grow the mining industry and the market is there. Fortunately, the relations with India are excellent. We have an excellent rapport with His Excellency Prime Minister (Narendra) Modi, and currently you can see that India now has the India-Africa Forum where India is putting billions of dollars to assist Africa in development.

“So we should take advantage of this India-Africa Forum to finance, capitalise our industry and the mining sector in particular and there are other areas which India is willing to support us but we have been lacking in responding to that goodwill because of other constraints like sanctions which have been burdening us for the past two decades. But India would like to support us in energy, in pharmaceuticals in railway construction and so on, and here now is one huge step in the area of coal mining. So I think the huge burden is on us to produce because the market is there,” President Mnangagwa said.

We see this as an important deal to help unlock Zimbabwe’s coal mining and exporting potential.      

Much of the coal that is being produced is consumed locally. Smaller amounts are being exported to Zambia but many more markets exist in the region and in Asia.  

Exports are an area that the local coal miners have not really got into yet countries like Mozambique are steaming ahead with coal exports. Mozambique’s total proven coal reserves at the end of 2016 were comparable to Zimbabwe’s at 25,6 billion tonnes.  In 2017 Vale-Mozambique, the Mozambican subsidiary of the Brazilian mining giant Vale and that country’s biggest coal exporter produced a record 11,2 million tonnes of coal from its open cast mine in Moatize district, in the western province of Tete.  

Apart from its huge reserves of coal Mozambique has an additional advantage of its location on the Indian Ocean shoreline which means that sea-borne exports to Asia and Europe are cheaper and faster.  The country hopes to increase output to 89 million tonnes per year in the next few years.

In May 2017, Mozambique commissioned the port of Nacala that has capacity to move export coal of up to 22 million tonnes per year. The mineral is moved to Nacala on a 912km railway line that runs through northern Mozambique, southern Malawi and the Moatize coalfield.

It is Mozambique’s biggest export, which contributed about US$2,9 billion of the US$6,4 billion raised in 2017.

The Victoria Consulting arrangement has potential to work. We say this because it seeks to cater for a large part of the value chain from supporting mining companies to ramp up production, putting in place logistics to market access. These are essential elements of any successful mining operation.  

However, we are under no illusion that a lot of money is required to capacitate companies to drive up output to levels comparable to Mozambique’s, for example.  They need capital to explore, to acquire new technology and skills.  

Large volumes of coal for huge markets such as India and Japan cannot be viably transported by road but by rail and then by sea. At this time the country’s rail network needs to be worked on. We therefore expect ongoing talks between the National Railways of Zimbabwe and the Diaspora Infrastructure Development Group/Transnet Consortium to be finalised as soon as possible so that work on the system can begin.  

These investments would be built upon the strong foundation of the huge coal reserves that are just awaiting extraction.