eBusiness Weekly
Middlemen emerge n Accused of paying low prices…Producers call for tight regulations
Martin Kadzere
Failure by government to capacitate Applebridge Investments, its special purpose vehicle charged with marketing chrome ore, has resulted in emergence of middlemen whom producers are accusing of paying low prices for their commodity.
Created in 2015, the ABI was expected to facilitate exports from small-scale miners and explore chrome ore refining through tolling arrangement to promote value addition.
This was to be done through consolidating small parcels produced by small scale miners and sell to the international buyers.
Zimbabwe Miners Federation, an association representing small-scale miners, said their members are getting a raw deal from the middlemen underpaying them.
“The miners are being short-changed because they sometimes get ex-works price between 50 and 60 percent lower than the prevailing price,” ZMF spokesperson Dosman Mangisi said.
“The ex-work prices are heavily inflated and there is need for regulation of the activities of these middlemen.”
The ex-works prices is arrived at when buyers factor in logistics costs, taxes and royalties, said Mangisi. But there is no template which buyers use to ensure transparency.
“We need a regulated system to avoid our producers falling prey to these middlemen. Their costs are not justified and producers are losing out,” Mangisi said.
Zimbabwe earned nearly $50 million from raw chrome exports in the first five months to May this year, according to the Minerals and Marketing Corporation of Zimbabwe,
Apple Bridge undercapitalised
ABI was created by the government to facilitate exports of raw chrome following lifting of the export ban on the commodity in 2015. The 2011 ban was meant to encourage beneficiation of the mineral. While the ban was meant to encourage beneficiation of the mineral, the suspension had a negative impact on producers, particularly the small scale miners, some who were forced to shut down.
Small scale miners could not sell their produce due to low smelting capacity in the country, leaving them with stocks of chrome ore and no alternative source of revenue.
ABI director Masimba Chandavengerwa told Business Weekly that the special purpose vehicle would require at least $10 million to effectively deliver its mandate.
“The small scale miners might be feeling short changed but these middleman are playing an important role to bridge the financing gap because we don’t have the capacity,” he said.
“But we will always make sure is that the country is not prejudiced by making sure that our prices are in line with those prevailing on the international markets,” he added. He said the middlemen were helping in funding the local producers.
“Even if we were to get money to buy from producers, they still need working capital and we have allowed these middlemen to fill that gap,” said Chandavengerwa.
Lost confidence
Prior to the ban on exports, international buyers could pre-finance their orders, but some had their hands burnt after local producers failed to deliver. According to the MMCZ, local producers had failed to deliver about 100 000 tonnes of chrome pre-financed by external buyers prior to the ban on exports.
“Some local producers cannot be trusted anymore and the international buyers prefer to get the commodity through us,” said a local buyer, who requested not to be identified.
Direct sales to international buyers also helped producers to bargain for better prices.
Zimbabwe, alongside South Africa, hold about 90 percent of the world’s chrome reserves, according to the U.S Geological survey. The major producers are ZimAlloys, currently under reconstruction and Zimasco, owned by China’s Sinosteel Corp.
Small scale miners participated in the chrome industry only as tributors to these two multinational companies. To ensure wider inclusion of indigenous players in the chrome sector the Government then directed that 50 percent of the claims held by the two companies to be released small scale players
