Miners surrender US$1bn

PHILLIMON MHLANGA

Zimbabwe miners have been forced to hand over more than US$1bn to the central bank through the contentious surrender requirements portion with executives warning that the status quo has triggered forex shortfalls thereby affecting expansion plans.

The tough retention regime compels the mining companies to surrender 40% of their forex earned from mineral exports to the RBZ, which is liquidated into Zimbabwe dollars at the prevailing official exchange rate.

The industry believed the surrender portion was crippling the miners as the contentious surrender requirements resulted in the miners retaining 60% of their export proceeds, which they said was inadequate to meet their operational requirements.

“Statistics show that about US$1bn was liquidated (from the mining sector) between January and October 2022. This is going towards an auction system, which is supplying the whole economy,” Reserve Bank of Zimbabwe governor John Mangudya said at the launch of the State of the Mining Industry report yesterday.

Previously, the miners were forced to hand over all unutilised export proceeds after 60 days.

But, RBZ scrapped the compulsory requirement in January this year.

Instead, the apex bank increased the surrender threshold to 40% from 30% with the central bank saying this would fund the forex auction system.

Miners say the surrender threshold was pushing them to the brink as it creates viability crisis.

The miners, which generate more than 60% of Zimbabwe’s foreign currency revenue, already face increased demand for payment in foreign currency from several service providers.

Miners said they were battling serious shortfalls in meeting their obligations that require forex as well as finding it difficult to sustain production.

The mining industry wants a retention threshold reviewed upwards and has been negotiating with the RBZ saying it prejudices the exporters.

They have been asking for an increase in the foreign currency retention levels to about 80%.

But, nothing has been done.

It comes at a time when the miners are struggling to access foreign currency from the auction system. Their bids are rejected on the basis that they are net exporters.

According to the report launched yesterday, mining executives are pessimistic about access to foreign currency in 2023. About 40% of the respondents indicated that they were facing difficulties in accessing adequate foreign currency to meet their operational requirements.The report said 90% of mining executives indicated that the current 60% forex retention was inadequate to meet their operational requirements. The report said 70% of the respondents indicated that they were facing foreign currency shortfalls to fund their expansion project.

Two out of five of the respondents said they had missed production targets for 2022 due to foreign currency shortfalls, the report said.

Mining executives say the current retention threshold is under pressure due to a 24% increase in electricity tariffs, the recent upward review in royalty for platinum and lithium. They say the anticipated implementation of beneficiation tax for PGMs would increase the forex required to pay for the increased taxes.

Mining executives say the current retention was also under pressure as the legislation of the multi-currency system has seen most suppliers and service providers demanding payments exclusively in foreign currency.