Coal miners seek upward price review
Local coal miners are seeking an upward review of the price of coal used for power production citing high operational costs arising from the wide disparity between the official and black market foreign currency exchange rates.
The price of coal is fixed at US$30 per tonne paid in local currency at the prevailing official exchange rate.
The miners argue that the price has become sub economic given that local businesses are pricing their goods and services using black market rates currently at about $175:US$1.
Zimbabwean dollar sold at $87, 6:US$1 at the last auction. Power coal is a controlled product given its strategic importance to the economy.
“It’s a tough situation,” Coal Producers Association chairman Mr Linos Masimura said in an interview. “But the cost of shutting down is bigger than the costs of trying to remain afloat.”
This week, the Reserve Bank of Zimbabwe blacklisted 30 people suspected to be involved in illegal foreign currency trading using mobile phones and social media platforms after the black market rates, widely used for pricing of goods went spiral.
The central bank’s Financial Intelligence Unit instructed banks, mobile money operators and other financial service providers to identify and freeze any accounts operated by the blacklisted individuals and, further, to bar them from accessing financial services for a period of two years.
The FIU also requested the Postal and Telecommunications Regulatory Authority of Zimbabwe to bar the said individuals from operating mobile phone lines.
On Monday, eight institutions namely Titanium Capital (Pvt) Limited, Access Finance Private Limited, Dream High Investments, Terrerati Private Limited, Vision Credit Source Private Limited, Capital Profit Financial Service, Raymond Mudonhi Investments, Justice Mahuni, Kudzai Mudonhi and Juso Global Limited appeared before the Harare Magistrates court charged with illegal foreign currency dealings through the EcoCash platform.
“The gap between the official and black market rates are chocking businesses and individuals because goods and services are being charged using parallel market rates. So while the price for coal in US dollar terms seems to be viable, the fact that miners are being paid in local currency at the official exchange rate negatively affects their operations,” Mr
Nicholas Musara, a mining analyst said.
No comment could immediately obtained from the Ministry of Mines and Mining Development.
Zimbabwe has five coal companies in Hwange, in Western Zimbabwe where Zesa Holdings, the state owned power utility owns Hwange Thermal Power Station, the country’s second largest power plant.
The plant has capacity to produce 930 megawatts but is currently producing around 300 due to frequent breakdowns. Recently, the coal producers obtained temporary permits to export excess stocks of power coal that had build up due to low uptake by ZESA.
Mr Masimura said the miners were also lobbying to retain 100 percent of export proceeds to help meet the costs of critical imports and to be prioritised on the auction market. “… 100 percent forex retention will guarantee our viability,” said Mr Masimura. He said operations were being hamstrung by a shortage of foreign currency to import consumables
and spares.
“In 2020, ZESA agreed to pay 50 percent of coal supplies in foreign currency but ZESA “seems to have reengaged” on the agreed position.
The deal was hammered to support coal producers, who badly need forex to sustain operations. ZESA is being paid in foreign currency by some exporters in return of guaranteed supplies and the deal entailed that coal producers also partly paid of forex to sustain viability.
This relates to continuous recapitalisation, procurement of spares and explosives.
Without ongoing maintenance and replacement of machinery and equipment, guaranteed supplies of coal would be impossible. “The money is not coming and no one is answering,” said Mr Masimura.- The Herald
