Online Reporter
Business Reporter
THE Chamber of Mines Zimbabwe (COMZ) says it will continuously engage the Government to have more areas where local obligations such as tax, licences and royalties are payable in the local currency, Zimbabwe Gold (ZiG), in response to the reduced retention threshold by the central bank.
COMZ is a private sector voluntary organisation established in 1939 by an Act of Parliament and members include mining companies; suppliers of machinery, spare parts and chemicals; service providers, including banks, insurance companies and consulting engineers; and various mining-related professional bodies and individuals.
The chamber has been responsible for advancing members’ issues to the Government and other regulatory bodies on matters that affect both parties in order to find common ground.
In a recent Monetary Policy Statement, the Reserve Bank of Zimbabwe (RBZ) reduced foreign currency retention from 75 percent to 70 percent in order to guarantee continued stability in the interbank foreign exchange market by augmenting the supply of foreign currency, as well as building the critical foreign currency reserves needed to anchor ZiG.
The review implies that the effective surrender portion of export proceeds has been increased from 25 percent to 30 percent and the central bank believes this is consistent with the increased use of ZiG in the economy.
The RBZ also noted that the additional 5 percent will ensure that exporters mobilise sufficient ZiG to meet local currency obligations and other expenses, including tax payments, going forward.
However, COMZ chief executive officer Mr Isaac Kwesu, in an interview on Thursday, said the miners will be engaging the authorities since they now have an increased portion of the local currency.
Mr Kwesu said at 75 percent, the retention threshold was fairer than anything else, with the understanding that other sectors and the Government require foreign currency.
Treasury has since granted authority for taxpayers to settle their obligations in ZiG and foreign currency on a 50-50 basis, while maintaining the legal provisions for economic agents to pay their taxes in the currency of trade.
The Ministry of Finance, Economic Development and Investment Promotion indicated it is still working on a comprehensive plan for a seamless transition from exclusive payment of taxes in the currency of trade to the domestic unit of account.
According to Mr Kwesu, miners are net exporters and a huge chunk of their requirements, including equipment and consumables, are imported.
“Their import bill is equally significant and relies heavily on foreign currency, and this is the premise why miners retain a portion of their foreign currency so that they can reduce the turnaround time in their business.
“But also, given a changing economic environment, the local suppliers and also other requirements, such as Zesa (Zimbabwe Electricity Supply Authority), need to be met 100 percent through foreign currency payments and miners are intensive energy users. Part of royalties and other Government payments is also done in US dollar terms,” he said.
The mining sector remains one of the key foreign currency earners for Zimbabwe and in 2024, the country’s foreign currency inflows increased by 21 percent to US$13,3 billion from US$11 billion in 2023, largely driven by growth in export proceeds.
On the other hand, the country’s import bill rose by 4,9 percent, from US$8,7 billion in 2023 to US$9,1 billion in 2024, driven by increases in imports of food, fuel, raw materials, vehicles and manufactured goods, as the economy continued to expand.
Industry lobby group Confederation of Zimbabwe Industries (CZI) said businesses should be allowed the freedom to trade the additional 5 percent export surrender on the open market before being made to sell to the central bank or investing in the US dollar-denominated deposit facility.
CZI said concerns remained regarding the reduction of the retention portion and the exchange risk associated with the parallel market premium, which was a moving target that made business planning difficult, leading to the discontinuation of export business in certain cases.
On its part, CZI suggested that Treasury should support increased surrender requirements by stimulating demand for ZiG through measures such as mandating 20 percent of pay as you earn (PAYE) and value-added tax (VAT) payments in ZiG.
Horticultural Development Council (HDC) chief executive officer Linda Nielsen said adjusting local utility pricing to ZiG will help mitigate pressure on exporters and support the broader transition towards the use of the local currency.
“HDC urges policymakers to engage with the sector to explore solutions that balance the need for foreign currency reserves with the long-term sustainability of Zimbabwe’s horticulture industry.
“Ensuring a stable and predictable policy environment is critical to maintaining Zimbabwe’s position as a key player in regional and global horticulture markets,” she said.
The horticulture sub-sector is also a key export segment of the economy and has been making inroads in various European Union markets and Asia.
Ms Nielsen said some farmers may pivot to alternative crops and shift focus to local cash markets, which do not provide the same foreign currency inflows or long-term economic benefits as exports.
In an interview, financial analyst Mr Malone Gwadu said for the Government, it is about looking at the broader picture of enhancing foreign currency availability in the foreign exchange market and widening the pool for it to purchase foreign currency for the fiscus as and when the need arises.
Economist Dr Prosper Chitambara said the reduction in the retention of foreign currency is a double-edged sword in the sense that it is an indirect tax on exports and it is actually a disincentive.
“On the other hand, the central bank has highlighted that it is going to bolster the foreign currency reserves, which is also critical in terms of ensuring the smooth operation of the interbank market, and also in terms of providing sufficient cover to ZiG.
“Therefore, building reserves or bolstering reserves is critical given that our reserves are still below the expected thresholds of at least three months’ import cover,” he said.
Stockbroking and equities research firm FBC Securities said the new measure creates foreign currency liquidity for the Government, which can be channelled to critical economic sectors such as health, energy and humanitarian assistance.
Tinaye Agere