Forex shortfalls choke miners
A SIGNIFICANT number of large-scale mining houses, particularly those undertaking expansion projects, are hamstrung by foreign exchange shortfalls to meet their capital expenditure and operations, the Chamber of Mines of Zimbabwe (CoMZ) has said.
The mining industry is Zimbabwe’s major economic centerpiece accounting for 73 percent of Foreign Direct Investment, 83 percent of exports, 19 percent of Government revenue, two percent of formal employment, and 11 percent of individual incomes.
In 2019, the Government launched the US$12 billion mining industry by the end of this year underpinned by the re-opening of closed mines, expansion of existing operations as well as the opening of new investments.
But headwinds are making it difficult to reach that target.
According to the Exchange Control directive issued on February 3, 2023, RBZ increased the ratio of foreign currency retention from 60:40 to 75:25.
In terms of the directive, 75 percent of the export proceeds will be retained by the exporter including those in the mining industry while the remaining would be liquidated at the prevailing interbank market rate.
However, this upward adjustment is not enough according to the miners.
The CoMZ chief executive officer Mr Isaac Kwesu said this is causing the mining houses to suffer foreign exchange shortfalls to meet their capex and operational requirements.
“Of late, a significant number of mining houses especially those on expansion drive are experiencing some foreign exchange shortfalls to meet their capex and operations requirements.
“The situation has been worsened by the requirement to pay 100 percent electricity bill in foreign currency while there has also been a disproportionate increase in the demand for payment by local suppliers and labour,” he said.
“The Chamber of Mines is currently engaging RBZ and other relevant stakeholders on the matter.”
Recently, Zimbabwe witnessed significant investment in mining sub-sectors such as gold, platinum, diamond, platinum, chrome and coal among others by companies such as Prospect Lithium Zimbabwe, which has invested US$300 million towards its lithium processing plant at the Arcadia Mine in Goromonzi District.
Other initiatives being developed include the platinum project by Great Dyke Investments in Darwendale, Mashonaland West Province, and the US$130 million lithium investment by Sabi Star Mine in Buhera District, Manicaland Province.
There is also increased interest from foreign investors.
According to the Zimbabwe Investment and Development Agency (ZIDA) second-quarter report for 2023, Zimbabwe’s mining industry attracted the highest number of investors with 130 licences issued and projects valued at US$544,4 million.
In the corresponding period last year, ZIDA issued 47 investment licences to the mining industry with a total value of US$277,3 million .
The investment licences were issued to investors from across the globe largely from countries such as China, America, Egypt, Hong Kong, Australia, Canada, South Africa, Netherlands, Turkey and Singapore, among others.
“In 2022, licences were issued to investors from 22 countries including Zimbabwe. In the first half of 2023 the agency managed to draw investors from 32 countries. During both periods, China had the highest number of investors and investment value by a considerable margin with mining being the most preferred sector followed by the manufacturing sector,” said ZIDA.-ebusinessweekly
