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Business Reporter
ZIMBABWE gold and diamond miners risk four months loss of production due to delays in approval lead time to pay foreign suppliers currently ranging between 10 to 20 days. The retention of 100 percent gold and diamond proceeds set by the Reserve Bank of Zimbabwe implies that the producers have no buffer to fund immediate foreign input payments for production requirements and must apply through the central bank for every cent they need to pay out to foreign suppliers.
Moreover, due to the current cash shortages, the central bank has introduced a priority list for imports. This is done to channel scarce resources first to critical sectors of the economy. It serves also to screen the importation of locally available goods.
But Chamber of Mines president Toendepi Muganyi told a parliamentary portfolio committee on Finance and Economic Development Monday that the implementation of the priority list has caused some challenges to miners.
“Suppliers of the mining industry are currently not treated as priority in the allocation of foreign exchange, consequently facing payment delays ranging from 20-30 days and exacerbating the operations of the industry,” said Mr Muganyi. Whilst suppliers are not exporters, they remain critical in the mining value chain and therefore should be included under Priority 1 in the RBZ implementation guidelines,” he said. Mi, who said were overlooked during consultations ahead of the introduction of the new policies, are engaging the monetary authorities with a view to finding common ground to rectify these issues.
The 100 percent retention has also affected small scale miners who are failing to access funds to finance input requirements such as cyanide and other consumables.
To that extent, miners want Nostro accounts for gold producers to be funded as is the case with other mineral categories and that Fidelity Printers and Refineries play an agent role just like what happens with the Minerals Marketing Corporation of Zimbabwe.
Mr Muganyi said while the RBZ retention for other minerals is 50 percent, the Chamber is of the view that it is not adequate to cover all foreign payment requirements for the mining industry with a cost/revenue ratio of above 80 percent. Foreign payments consume a huge chunk of the miners’ costs.
“In this regard, producers will also face challenges in securing immediate solutions to as much as 20 percent of their input requirements with adverse impact on mineral output,” said Mr Muganyi.
For other minerals, the retention of export proceeds for all minerals by RBZ should be scientifically determined based on the understanding of the cost structure of the mining industry wherein up to 80 percent of revenues generated are largely consumed by production costs. In this regard, retention levels not exceeding 20 percent of proceeds are recommended to avoid delays in procurement of inputs,” he said.
With regards to the measures setting withdrawal limits due to the current cash shortages the miners’ umbrella body said the majority of mining houses are located in remote areas, some as far as 500km from town. Traditionally the affected mining houses used to withdraw cash to pay their workers’ wages.
“The current measure will mean workers have to travel long distances to access cash for their daily expenditures and thus there have been reported production disturbances. The Chamber recommends a special dispensation for the mining industry to be allowed to withdraw reasonable amounts of cash in light of the location of mining houses as well as the demand for cash in mining operations,” said Mr Muganyi.
On the introduction of an export incentive scheme of up to five percent of export proceeds to be effected through bond notes/export vouchers, the Chamber recommended that the facility should be benefited at the point of production or on incremental volume or extended to assist the resuscitation of closed mines.
The Chamber is also of the view that the facility could be used as capitalisation of existing entities in light of the capital needs of the industry.
“By incentivising at the point of sale, the facility maybe promoting inefficiencies as it rewards even underperformers,” said Mr Muganyi.
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