Essay Writing Service

Unki Platinum Mine In Zimbabwe Economics Essay

The main purpose of this report is to bring in your notice the risks of operating Unki platinum mine in Zimbabwe. The Unki report shows that the feasibility studies for the mine project were completed in 2001 and additional trial mining was done in 2002 followed by the official launch in August 2003 (The Standard, January 16, 2004, Anglo seeks govt nod for Unki project, Accessed 10/09/2012, // Also, Anglo American, the world’s biggest platinum producer is viewing this project as a long term investment with platinum reserves expected to be extracted until 2038, at an average extraction rate of 175,000 4E ounces per year (Anglo American, //, Accessed 10/09/2012). But, once regarded as one of the most prosperous countries in sub-Saharan Africa, Zimbabwe finds itself in the midst of the worst economic meltdown witnessed anywhere on the continent for a decade (1998-2008). Poor economic policies, violence and a corrupt government constitute the major factors behind the longest, deepest economic decline seen anywhere outside a war zone (CIA, 2012).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Find out more

This report presents information and analysis relevant to accessing the feasibility and development opportunities for Unki project, based on general analysis of the business environment in Zimbabwe followed by economic, social and political risks associated with the project. The report would present analysis based on widely available resources like journal publications, newspaper articles, economy projection reports, government websites, empirical evidences, mining risks indicators and other available studies.

However, Anglo American Unki annual report, 2011 is showing attractive figures followed by key achievements like timely transition of project, attainment of mining capacity, commitment and less rate of injuries. But, it would be naive to underestimate the instability that prevails in Zimbabwe that resulted a decade of contraction from 1998 to 2008 and could be a possible threat for any global company such as Anglo. Report has found few indispensable risks like diseases, low life expectancy and high mortality rates while operating Unki mine in Zimbabwe. Zimbabwe has high degree of infectious disease risks and stands 5th in HIV/Aids rate in the world (CIA, 2012). In monetary terms, report would present how government can misuse the revenue generated by mines to subsidize its huge outstanding debt and would turn into another chaos of loss in long term business projections. Also, Fiscal space in Zimbabwe remained constrained due to lack of full engagement of the inter-national development partners. Lack of transparency with respect to mineral revenues unstable government policies, violence within government parties, misuse of power, violation of local rules and undermining international alliances are almost attractive to understand the change of government mind, policies and rules for one or the other lucrative personal benefit.

Furthermore, based on business environment analysis and literature study on mining, report would suggest strategies like environmental program for example Wildlife & Environment Zimbabwe, health benefits programs, use of technology to reduce human loss, ventilation using fans to reduce diseases and government agreements in order to mitigate the risks for operating Unki mine in Zimbabwe. Report concludes with recommended areas like gaps to thread instability, alliance with Clean City program and focus on corporate social responsibility programs under recommendations.

Introduction (210-260) = 243

The Republic of Zimbabwe is a landlocked nation in Southern Africa. Zimbabwe’s prolonged crisis illustrates the consequences of short-sighted and inappropriate economic policies, as it continues to fail to realize its potential to become a strong, independent state. Triggered in part by the Minister Mugabe’s government’s poor leadership decisions to ignore fiscal constraints, and exacerbated by increased social unrest and ballooning inflation. Zimbabwe’s economic performance lags far behind that of neighboring countries. Anglo had started its one of the biggest platinum mine project- Unki Mine in Zimbabwe and viewing it as a long term investment with high profitable returns for its stakeholders and overall community. Government and Anglo American joined stakes in the project plays as important role for the Zimbabwean and world economy. The main purpose for this report is to present major issues such as political instability and poor economic reforms that could be possible threats for Unki mine project for Anglo American. This report would explore the instability in Zimbabwe that could affect the project and may end up with possible losses. Report would focus on the risks of doing business in Zimbabwe followed by general analysis of business environment. Further issues, such as health hazards related to mining, government policy instability and violation of alliances with international bodies. The report closes with a proposed strategy to mitigate the risks to operate mine project, based on general analysis of business environment of Zimbabwe and recommendations.

Analysis of Zimbabwe’s business environment (1200-1400) = 1510

Alas, Zimbabwe was topping in world’s worst economy with GDP of $ $6.206 billion (CIA, 2011 est.), ranked 174th in Doing Business (Doing Business, 2012), last in human development ranking (United Nations human development index, 2010) followed by political turmoil, high inflation rate, epidemic diseases and huge debt. This slippage is associated with the persistent downsized risks in the Zimbabwean economy. For instance, Anglo American has been involved in a number of assorted investments in Zimbabwe; however, one of the major business involvements can be counted to be the Anglo American Platinum Unki project. The major benefits of this project are geared towards improving the lives of more than a thousand families directly linked to this project and another 900 indirectly involved with this project (Valdez 2004).

Furthermore, some of the key benefits includes building of medical dispensaries, reforestation awareness, largely creation of employment as well as fighting for and protecting these families from exploitation as well as abuse of their basic human rights such as right to education, health, speech and a clean environment. These benefits have seen the living conditions of the immediate community improve, pertaining to the shareholders, though the Zimbabwean government seems to be uncomfortable with the Anglo American Platinum Unki project, but is paramount to assert that, by 2011 the shareholders began to reap the fruits of their investment. Also, this can be attributed to the fact that, the expansion of the Unki mine as forecasted will generate a viable commerce in the long term, an imperative aspect in the ultimate re-construction of the Zimbabwean nation. And this infers that, Anglo American Platinum shareholders would significantly benefit from being involved in provision of diverse minerals as well as technical know-how to the government (Card 2004- Card, D. 2004, New Economics, PUP, Princeton; Goodin 1985- Goodin, R E. 1985, The Vulnerable, UCP, Chicago).

For the long term success of Unki platinum mine in Zimbabwe, it is necessary to understand the factors such as political outlook, economic environment, hazards related to mining and policies that can be vulnerable. The Macro-environment and Global Forces analysis is attached as Appendix-1.

Political Outlook- Political risk is the likelihood of political forces causing change in business environment, thus impacting firm’s goals. Zimbabwe’s political outlook is full of violence, fight for power and uncertainty. Report aims to present both macro and micro level factors that could harm Anglo America business in Zimbabwe. The Zimbabwean government is working hard to attract international investors but lacked in commitment to guaranteeing that the rule of law is applied and adhered to without fear or favour. The frequent change of government and sudden changes in the constitution and policies is a crucial factor of poor governance. Early call of elections by President Robert Mugabe in 2012 very well supports the change of government and power. The historical controversial land reform program is Zimbabwe followed by riots and violence supports the frequent change of policies. The corrupt and poor leadership of two ruling parties, Morgan Tsvangirai’s, the Movement for Democratic change (MDC) and Zimbabwe African National Union-Patriotic Front (ZANU-PF) of President Mugabe deteriorated Zimbabwean economy and its overall attractiveness for almost all the sectors. The holding of early elections probably at the beginning of 2013 in line with the adoption of the new constitution, will probably result in a further deterioration in the political situation. ZANU-PF’s habit of stoking up violence during elections, particularly of an interethnic nature, would further deteriorate Zimbabwean economy. The business environment, characterised by a high level of violence and a restrictive and uncertain legal framework, is expected to deteriorate Zimbabwe (coface, Country risk, Zimbabwe, Sep 18, 2012, Accessed Sep 19, 2012, // According to Euromoney, none of Zimbabwe’s political risk factors scored more than 2.5 out of 10, which includes an institutional-risk score as low as 1.6 (Jeremy Weltman, From bread-basket to basket-case: Zimbabwe still high-risk, August 29, 2012, Accessed 18 Sep, 2012, // The Economist Intelligence ranked Zimbabwe under top vulnerable country under political instability. Its non-stability, inter-political party’s violence and regulatory issues were condemned internationally and thus affected alliances and collaborations. This resulted in continuous withdrawal of foreign investment by many handsome investors followed by rejection of aids by many other countries and agencies including IMF. Despite mining is a major source of exports, World Bank 2011 outlook report on mining in Zimbabwe states that legislation of indigenization of mining sector is expected to affect investment in Zimbabwe (Zimbabwe Prem Team, April 2011, Accessed 18 Sep. 12, Zimbabwe Economic Monitor, //

At micro level, the fight on Indigenisation Act in Zimbabwe and non-adherence of regulations further add essence to instability for day-to-day business purposes.

Anglo American group can be said to be one of the few organizations globally that have a proven record of impacting positively to the communities they are involved with. Their stance against human trafficking, child labor as well as their fight against corruption has made them to be a trusted organization across the globe (Jackson 2004, Jackson, K 2004, Reputational Capital, OUP, NY). Anglo supports Human Rights and Voluntary Principles d5and Code of Ethics. Such activities and codes could be taken as interference by many corrupt politicians and result in failure of Unki project. Anglo should consider the political outlook of Zimbabwe closely for its long term survival. The risk profile based on analysis is attached as Appendix-2.

Economic Environment – A country’s economic policies are a leading indicator of government’s goals and its planned use of economic tools and market reforms. Economic development directly impacts citizens, managers, companies, policymakers and helps to estimate how market trends and government policy influence the performance of their companies.

Zimbabwe has undergone worst hyperinflation rate of 6600 percent in 2006 with severe food and fuel shortages. It is noteworthy since dollar was adopted as a legal currency in 2009; Zimbabwean dollar has experienced hyperinflation and is essentially worthless (CIA, 2012). An economic crisis marked by high interest rates and inflation provokes riots in Zimbabwe. It is noteworthy that hundreds of companies are forced to shut down due to economic hardships and rising inflation. Collapse of industries leads to food shortages with 700,000 people lost their homes or jobs that raised unemployment and affected 2.4 million others. Variation in currency to accommodate inflation is also an issue in terms of measuring. Due to power fight Zimbabwe ruined its reputation globally with refusal of aid by World Bank and IMF in 1999 followed by condemnation. Rights abuses by the government, violence to win elections and land policy under Mugabe’s leads to huge debt issues (REUTERS, Sep 19, 2007, TIMELINE: Chronology of Zimbabwe’s economic crisis, Accessed 15 Sept, 2012, // BBC News, 31 May, 2012, Zimbabwe profile, Accessed 15 Sept, 2012, // ). ZIMBABWE’s penalties and arrears to bilateral and multilateral creditors continue to accumulate since long, with the external debt projected to grow to over US$ 8 billion by the end of 2012 ( KUDZAI CHINHANGWA, 22 APRIL 2012, All Africa, Zimbabwe: National Debt to Soar Above U.S.$8 Billion, Accessed 15 Sept, 2012, // One crucial indicator under doing business states that Zimbabwe takes 90 days to process applications and other procedures such as construction permits, property rights and getting electricity are time and cost consuming which could be a possible threat for Anglo projections (Doing Business, World Bank, 2012, Accessed 15 Sept, 2012, // ). Zimbabwe is in debt distress, with arrears to most of its creditors continuing to build up. At end-2010, total external debt is estimated at $8.8 billion or 118 percent of GDP with 50.1 (2006, CIA) under Gini index. Total public and publicly-guaranteed (PPG) external debt is estimated at $7.1 billion or 95 percent of GDP, with 77 percent of GDP in arrears. Most PPG external debt is medium- to long-term and owed to official creditors. Zimbabwe’s overdue financial obligations to IFIs include the World Bank ($807 million), African Development Bank ($510 million), EIB ($239 million) and the IMF ($134 million). While domestic public debt remains a comparatively small component of the total, it is, nevertheless, another source of vulnerability (IMF/World Bank, May 5, 2011, JOINT IMF/WORLD BANK DEBT SUSTAINABILITY ANALYSIS Report, Accessed 15 Sept, 2012, // Also, figures indicate that Zimbabwe’s GDP stands at an estimated US$11 billion while government is operating on a US$3.4 billion budget, excluding diamond revenues. Furthermore Zimbabwean authorities are actively debating an option of bringing forward mining revenues to repay external arrears on public and publicly guaranteed debt and obtain access to new financing. The analysis of external sustainability by IMF demonstrated that the economy as a whole would not be able to generate sufficient foreign exchange inflows to attain a sustainable external position without sound policies and debt relief. The analysis of the present value of the government’s in-take of mineral export receipts reinforces this finding and Anglo must watch this indicator very closely. (IMF, 2010, Zimbabwe: Challenges and Policy Options after Hyperinflation, Accessed 15 Sept, 2012, //

Zimbabwe stands 29th for airports and has 202 airports with good railway system. But poor conditions led the infrastructure less attractive for transportation. Zimbabwe’s 68% population falls below poverty line with an estimated unemployment rate of 95% with high numbers of people suffering from HIV/ Aids. It also stands 2nd in net migration rate which would affect Anglo to find skilled manpower which is a backbone of company. Furthermore negative current account balance of -$621.5 million (CIA, 2011 est.) adds essence to the financial position with poor or no investment plans on infrastructure for future upgrading. Both the trade and current account balances are foreseen to worsen in the medium-term on the back of rising imports. Also, African Economic Outlook 2012 showed less brighter growth rates and challenges facing the economy, including: limited capital sources and its high cost; uncertainties arising from policy instability, especially with respect to economic empowerment and indigenisation regulations; under developed infrastructure; obsolete technologies and machinery; quite frequent breakdown of the existing machinery, electricity power and water shortages (Zimbabwe Economic Outlook, 2012, Accessed 19 Sep, 2012, //

Overall Economic environment of Zimbabwe needs re-engineering from bottom to top. This re-engineering would take long time due to overall instability and Anglo should think for its Unki mine business proposition.

Strategies to mitigate relevant country risks (600 – 700) = 516

Environment Program – Welfare Economy

Mining involves risk, and some believe fatalities are inevitable, because mining is simply a dangerous business. As mining operations can have a huge impact on the environment and on the societies where they work, I propose a strategy that impacts the environment and falls under welfare economy. Zimbabwe has confronted by many critical environmental and ecological problems. This has resulted in environmental degradation, declining population of endangered species, destruction of indigenous forest and wildlife habitats, soil erosion, pollution in all its forms, and ruthless exploitation of natural resources for short-term profits. Report offers an environmental program like Wildlife & Environment Zimbabwe (WEZ). They fought for the conservation and protection of Zimbabwe’s environment. WEZ has been on the fore-front of conservation, lobbying for the establishment of National Parks, assisting in the management of these, and spreading knowledge on conservation and environmental issues through magazines, publications, and different environmental education projects (African Conservation, Wildlife & Environment Zimbabwe (WEZ), Accessed 20 Sep. 2012, //

The program must aim to encourage and assist all people of Zimbabwe to understand the importance of eco-friendliness, environment and to conserve Zimbabwe’s natural resources for the well being of current and future generations and to ensure that the utilization of these natural resources is fair and sustainable. This would raise the living standard and thus impact on its economy.

Use Of Technology

Literature work on mining suggests that there is lack of use of technology specially the use of computer applications for the mining purposes. At Unki, work takes place several hundred meters underground, where it’s dark, hot, wet, and steep. In some areas the miners have only enough room to kneel. Partnership with global computer company is another strategy that would help to create more sustainable future for long-term success of Unki project in Zimbabwe. Study conducted by Jawed & Sahu (1986), Ray (1989) and Jawed & Sinha (1989 a & b) listed several scope for applying techniques in various areas of mining and have demonstrated how even a sub-system optimization yields a larger benefit. Lai (1988) has used non-linear mixed integer programming model to design mine ventilation system such that minimum energy is consumed by virtue of having optimum number of fans. Thus promoting such techniques and application would considerably reduce the death rate of workers working in-depth. Also, use of fans for ventilation would protect miners from several diseases like lung and breathing problems. Use of applications such as GPS can also be used to track people working down and other computer applications could track the resources more efficiently with no loss of human life.

Clear Formation of Agreements to handle political instability

Anglo American would continue extracting minerals from the Unki mine till 2038. Seeing forth to back, Zimbabwe’s political structure and fight for power is a considerable factor with close eye. Anglo should undergo clear and well documented agreement/contract that would help in terms of legal formation of do’s and don’ts and could be another possible strategy. An article published by IMF has some traces that states Zimbabwe could use the profits from mine to pay its long term debts. While doing so, Zimbabwe corrupt politicians may fulfil their own benefits and may create some issues in terms of change in stakes seeing more profits in future. Currently Zimbabwe is under distress by its outstanding debt to the world. Also, its condemnation by international bodies for violation of human rights and killing of leaders of opposition parties is a factor worth considering understanding the local environment in Zimbabwe. I strongly suggest ‘considering political factor as the game changing factor for Zimbabwe’s business environment’.

Recommendations 1: Filling Gaps: Policies

The most important, government will have to find a way for the people of Zimbabwe to heal the wounds caused by decades of political violence and bad decisions- Anglo supports human rights and should raise it with government to find a consensus programs with effective regulatory system.

The nation will have to rediscover the rule of law and the sanctity of persons, property and formation of human rights- Anglo should discuss and take it up with government for the preset expected formation date of such laws and future investment plans of government on infrastructure.

The public discourse and the economy will have to be reopened with both wider open arms- Anglo should seek some Investment security plan or natural disaster compensation plan in return of huge investment in Zimbabwe.

Government to embrace more clear idea of government and its legislation that makes the operation of the private sector more lucrative- Critical eye on change of policies, constitution and national referendum, that are expected to change in 2013.

Find out how can help you!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

Agreement which can reduce tariffs for future either on exports or imports- Also a government bank agreement for floating/stable interest rates that may help Anglo and other stakeholders to reap more profits under high inflation times.

Recommendation 2: Investment

Investment in new technology- Anglo should invest in introducing and use of technology that make mine work easier for the miners.

Investment to create and sustain capable human capital- This relates with the building of new equipments and a sustained manpower for qualitative and quantitative output.

Investment in power sector- This would help Anglo to deal with the huge power cuts of Zimbabwe, which further would allow completing tasks on time.

Recommendations 3: Corporate Social Responsibility Programs

Help from other available sources/programs- A good recommended source would be joining programs like Clean Cities. The core goal of Clean Cities is to expand and stimulate alternative fuel and advanced technology markets.

Health sanitation and welfare program- Such program should focus on the health benefits specially to cure diseases such as HIV and Cholera. Further initiatives like education on health and awareness on symptoms and ways to cure harmful diseases.

Environmental sustainability program- Such program should aim on planting trees and plants (see Appendix) in order to overcome the issue of degradation and water table issues. Anglo should encourage use of renewable resources and proper disposal of wastes. Such program would also increase the engagement with the local communities.

Safety Program- which focuses on safe working environment, timely revise of safety standards and proper adherence of processes. ‘A strong safety performance translates into a strong business performance’ should be the mantra for Anglo American shift supervisors and mine managers.

· References

// (bottom peaceful)

// (Zimbabwe comes last in human development ranking

// (regulatory efficiency)

// (The World’s Worst Economies)

// (gdp rising)

// (multi currency growth)

// (IMF-Positive views)

// (mining revenues to pay debt, mining)

// (turmoil reasons)

// (Zim Eco Indicators)

// (coal issues)


Most Used Categories

With Our Resume Writing Help, You Will Land Your Dream Job
Resume Writing Service, Resume101
Trust your assignments to an essay writing service with the fastest delivery time and fully original content.
Essay Writing Service, EssayPro
Nowadays, the PaperHelp website is a place where you can easily find fast and effective solutions to virtually all academic needs
Universal Writing Solution, PaperHelp
Professional Custom
Professional Custom Essay Writing Services
In need of qualified essay help online or professional assistance with your research paper?
Browsing the web for a reliable custom writing service to give you a hand with college assignment?
Out of time and require quick and moreover effective support with your term paper or dissertation?