Miners decry low forex retention

Harare – Amid shifting economic fundamentals, miners are calling for a further review of the retention threshold by the RBZ in order to ensure operational viability.

Late in 2018 after several miners had halted production while some cutback same with others understating or side-marketing produce, government through the Central Bank was forced to review upward forex retention levels which had in some instances drastically dithered to levels below 15%.

Forex retention is the allowable amount of export receipts, an exporter is allowed to access from his foreign sales. Zimbabwe’s exports are predominantly raw minerals and agric produce.

The system was designed early in dollarization to allow for what government perceived to be a more efficient allocation of resources and escalated in later periods as import pressure grew against the growth in money supply.

In an interview with Equity Axis, BNC Managing Director, Batsirai Manhando said the 50 percent retention threshold is no longer viable to meet production costs and other obligations.

“The 50% foreign currency retention by BNC is no longer enough for the Company’s requirements. The need for a higher foreign currency retention threshold stems from the fact that many local suppliers from whom we purchase a significant portion of our production inputs, are now demanding to be paid in foreign currency.

“Through the Chamber of Mines as well through direct lobbying, BNC will appeal to the Exchange Control authorities for an upward review of the level of the foreign currency that we retain from our nickel export proceeds.”

Suppliers of key inputs such as processing chemicals, spares and other equipment now demand foreign currency, and the few that still accept local RTGS payments have raised their prices significantly.

In November last year, the Mines Ministry, called on the RBZ to increase foreign currency retention for minerals producers to 70 percent from the current levels if the country is to achieve its Transitional Stabilisation Programme targets.

TSP key performance indicators state that Zimbabwe need to re-open closed mines, reclaim and start working on dumps, expand on existing mines and the need to open new mines – all these things need a chunk of foreign currency given the state of our economy currently.

Mining is a heavily mechanized business. One of the major complaints with regards to the foreign currency retention issue is how it affects the ability of operators to buy new equipment or spare parts for repairs.

As a consequence some companies claim they have been forced to revert to use of inefficient equipment or mining methods. This increases their production costs.

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