ZIMBABWE’s mining industry has warned that a Reserve Bank of Zimbabwe (RBZ) directive early this month pushing foreign currency retention thresholds to 40% will trigger viability problems in the industry.
Previously, mining houses were required to surrender 30% of their export earnings to the central bank, which was transferred into firms’ Zimbabwe dollar accounts at the prevailing official exchange rate.
Still, miners complained that this was too high for the viability of the industry, which was already suffering from high taxes and fees, as well as steep production costs.
Mining is one of Zimbabwe’s key industries, generating about US$2 billion per annum, with projections to increase this to US$12 billion by 2023.
The industry accounts for 70% of the country’s export receipts.
In a letter sent to the RBZ on January 19 seen by NewsDay Business yesterday, the Chamber of Mines of Zimbabwe (CoMZ) warned that the new retentions thresholds could force companies to cut production and trigger “a viability crisis”.
But if mines cut production, implications would be felt across industries, including in government where State revenues will take a knock.
The country is already facing potential recession after COVID-19-induced lockdowns grounded industrial production.
“On average, 60% of gross export proceeds are now taken by government departments and agencies, leaving inadequate forex resources for the mining firms to sustain operations,” the CoMZ said.
At is sitting early January, the RBZ’s Monetary Policy Committee (MPC) also resolved to scrap the 60 days that exporters were given before that liquidate their export proceeds.
“The MPC resolved to remove the compulsory requirement to liquidate all unutilised export proceeds after 60 days with immediate effect and increase the export surrender requirement from 30% to 40 % on all export receipts,” the RBZ said.
The committee agreed to maintain the foreign currency auction system, which has been credited with improving the availability of foreign currency on the market, as well as stabilising the domestic currency.
Zimbabwe has struggled to forestall a dire foreign currency crisis since 2000, where radical changes were made to its agricultural policies.
A capital flight that followed political turbulences since the start of the millennium compounded the crisis.
Reacting to the miners’ concerns yesterday, RBZ governor John Mangudya told Bloomberg that there were critical national requirements that require enough foreign currency stocks.
“The retention rules are made always in mind with the foreign currency situation and needs of the country to source fuel, wheat and to pay for other goods and services,” the RBZ chief said.
“Foreign currency retention is not a right, but a privilege.” Newsday