THE new currency retention measures introduced by the central bank last week could significantly turn around the fortunes of the ailing gold sector if adopt
ed as long-term policy, the Chamber of Mines president said this week.
Jack Murehwa, also an operations director with platinum producer Zimplats, said the policy by Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono, would help restore confidence in the troubled mining sector, but investors would wait to see if the policy was durable.
“Working on the assumption that this is a long-term policy, gold miners can now seriously look into recapitalising their plants and reviving development plans that were not viable under previous monetary arrangements,” said Murehwa.
“Our request to the authorities is that these positive moves stay in place for the long-term as we continue to drive towards a market economy,” Murehwa said.
Although other issues relating to confidence in the mining sector were outside the central bank’s domain, it was a “quantum leap” for the RBZ to allow gold to be treated like other minerals, Murehwa said.
Zimbabwe’s mining sector has experienced stunted growth over the past six years due to an economic recession characterised by acute fuel and foreign currency shortages.
Mines’ viability has been hampered by the lack of movement on the exchange rate front despite hyperinflation eroding profitability in the sector whose products are mainly for external markets.
Multi-million dollar projects in the country’s mining sector had been shelved in the past few years after players and investors lost confidence in the economy and economic policies, particularly those related to mining activities.
Miners, particularly gold producers, were facing viability problems due to poor foreign currency retention policy and a static interbank exchange rate.
The situation was further worsened by the government’s decision to compulsorily take over 51% empowerment stakes in all foreign-owned mining concerns in the country.
Murehwa also said the 60% devaluation of the Zimbabwe dollar last week would have a positive impact on industry, but said such devaluations should be undertaken periodically to ensure viability in the mining sector.
Gono announced last week that exporters and miners would retain 70% of all their foreign currency proceeds in foreign currency accounts.
Previously, exporters retained the 70% for 30 days before disposing of it on the official market.
Gold producers only retained 40% of their receipts in foreign currency accounts.
Gono also devalued the Zimbabwe dollar to US$1:$250 000.
The rate had been stuck at US$1:$101 195 since January this year.
However, the gap between the interbank and parallel market exchange rates remains wide as the greenback is trading at around US$1:$600 000 on the parallel market.