eBusiness Weekly
Martin Kadzere
The Reserve Bank of Zimbabwe has rejected a request from platinum and chrome producers to have their foreign currency retention threshold increased from 20 percent, but assured them of timely disbursements of hard currency upon request to facilitate external payments.
Last month, the RBZ directed the miners to surrender 80 percent of their earnings to the central bank as the country continues to struggle with a shortage of hard currency. Platinum and chrome miners used to retain half of their foreign currency earnings.
The central bank said the move was to ensure effective allocation of foreign exchange, as well as spread liquidity to guarantee equity in foreign exchange distribution. Zimbabwe generates about 60 percent of foreign currency earnings from mineral exports.
A meeting between the RBZ and the miners was held last week where the latter expressed concerns over the threshold they are allowed to retain, arguing the 20 percent was not enough to meet their operational requirements, sources told Business Weekly. “During the meeting, the miners submitted their foreign currency requirements, saying the 20 percent was not enough.
However, the central bank said it was not going do an upward review, but made a commitment that shall there be any requirement of foreign currency by the miners, the central will ensure guaranteed allocations.”
Zimbabwe Platinum Producers Association president Winston Chitando told Business Weekly that the producers would continue engaging the RBZ “to see if we can meet half way”. An official with the Confederation of Chrome Miners said they were hoping the RBZ would “stick to its promise and ensure the miners get adequate allocation of foreign currency”.
The miners had already raised a red flag, warning the policy measure was likely to hurt production at a time when some local companies, including gold miners and manufacturers were also struggling to access foreign currency to meet operational requirements.
“We already have gold miners struggling because foreign payments are not moving and this move will worsen the situation,” said an executive with a platinum firm last month. “The delayed payments (of consumables) means production will be severely affected and this will in turn affect foreign currency generation. It will be regressive.”
Mining analysts say that instead of the central bank imposing retention thresholds, it must ensure that the miners get timely allocations of forex to maintain viability of the industry. “For me the threshold is not an issue,” said a mining analyst with a local research company.
“What matters is the allocation of foreign currency for critical imports. The usage of foreign currency is cyclical; it is not constant. It should be based on fundamentals that is production rather than a static threshold. Some companies are expanding their operations and they obviously require more than 100 percent of their earnings. “The RBZ must be flexible to accommodate the industry’s needs to keep them in production.
Analyst Rekayi Nhare said the outcome of the policy should not harm the viability of the sector. “The problem will only arise when there is need of foreign currency and if it is available,” he said. “We need an implementation framework that will guarantee generation of foreign currency.”
Zimbabwe holds the world’s second largest platinum reserves after South Africa and two of the world’s largest mining companies, Anglo American Platinum and Impala Platinum Holdings, have operations in the country. Zimbabwe also holds the largest chrome reserves after South Africa, with the bulk of the deposits found along the Great Dyke.
