LIVINGSTONE MARUFU/ RYAN CHIGOCHE
The volatile environment is proving untenable to miners as the disparities between the parallel market exchange rate and official exchange rate have resulted in serious viability challenges, the Chamber of Mines CEO Isaac Kwesu has said.
The miners also said the export surrender requirement of 40% was adversely affecting mining operations.
Kwesu told Business Times that the authorities should review the policy, a situation which will help the miners improve viability.
“As long as miners are still paid the export surrender requirement of 40% at the official rate and not allowed to liquidate it on electricity, taxes and other statutory obligations, our intended goal [US$12bn revenue by 2023] will be missed.
“It is either the Reserve Bank of Zimbabwe should increase retention to 80% or further reduce the export surrender requirement to 20% to be viable as the mining sector battles the volatile environment,” Kwesu said.
He said local inputs were priced at parallel markets rates which resulted in loss of value in revenue about 20% hence for the greater part of the year miners were operating at 80% of their potential revenue due to disparities in the exchange rates.
The official exchange rate currently stands at US$1: ZWL$108.66 against the parallel market rate of US$1:ZWL$230.
This has also affected the miners’ ability to meet all their operating costs and some miners experienced the viability challenges against that backdrop.
The chamber said despite major minerals recording good outputs in 2021, the ground work remains shaky for 2023 targets hence there is need for a shift in the authorities mind-set like the good decisions in the gold sector where miners are at competitive rates.
Zimbabwe’s export receipts surpassed US$4bn by the end of October last year, with US$5.2bn expected by the end of 2021.
According to Kwesu, firm commodity prices saved the day for the country.
“…Most minerals have benefited from higher commodity prices albeit at low output levels the output was lower than their potential but they ended up recording higher values on the back of good prices experienced for the greater part of the year.
“At the beginning of the year I think mining recorded a lower output and values compared to the second of the year where we saw good performance especially of values.
“Gold did very well. We saw the bullion recording US$1.3bn in the first 10 months which is a record in years but when you look at the actual output in terms of volumes the volumes were below potential for the sector…,” Kwesu said.
He said these were the major issues affecting the potential of the sector so the mineral outlook is still good and there is a need to capitalise on this episode of good mineral prices.
“We are engaging all stakeholders including the government to ensure that miners are able to produce at full capacity and maximise earnings from these high prices.
“As I have said both export earnings will go up and everyone will benefit from these attractive prices if issues that affect both small and large scale miners are addressed and we are positive 2022 remains a better year if the prevailing challenges are addressed we will be able to maximise not just the mining sector but Zimbabwe at large,” Kwesu said.
The apex bank remained at the surrender threshold at 40% despite calls by miners to reduce it.
Miners say they are already battling serious shortfalls in meeting their obligations that require forex as well as finding it difficult to sustain production.
The auction system, several miners say, was failing to adequately supply the greenback to the miners.
The ministry of Mines and Mining Development is working on a plan to transform mining into US$12bn by 2023 from about US$5bn.
This would be achieved through the creation of an enabling environment, removal of restrictions, increased exploration, expansion of existing mining projects, and resuscitation of closed mines, opening of new mines and mineral beneficiation and value addition.