THE Reserve Bank of Zimbabwe has ordered platinum miners to surrender 80% of their export earnings to the apex bank, up from 50%. This raised fears that this could paralyse the operations of the miners as foreign currency shortages continue to bite cripple the economy and people.
According to a central bank directive dated August 4, despite depressed prices of platinum group metals, the foreign currency-starved government has squeezed platinum producers and chrome producers to fund other sectors.
The directive also instructed chrome miners to surrender 80% of their export earnings to the central bank, underlining the chronic liquidity crunch and deepening cash crisis.
The Reserve Bank has negotiated for an enhanced nostro stabilisation facility of US$600 million from Afreximbank to manage the cyclical nature of Zimbabwe’s foreign exchange receipts.
Miners have received the move with scepticism, saying this could be a government ploy to raid the foreign currency accounts of exporters.
Exporters are also likely to have limited access to the much-needed foreign currency as a result of the directive.
Official figures show that the increase in platinum revenues from US$185 million to US$396 million in the first half of 2016 was on account of output gains which were at 7 968 kg in the first six months of 2016, up from 4 919 kg registered during the comparable period in 2015.
Cumulative platinum output for the first two months of the year stood at 2 418 kg, against the total annual target of 15 500 tonnes. Production growth is anticipated from primary producers, bolstered by firming international prices, and is expected to surpass the US$1 000/ounce mark in 2017. In addition, the export incentives are also expected to stimulate production.
“In order to ensure effective administration of foreign exchange, as well as spread liquidity to guarantee equity in the foreign exchange market, with immediate effect, 80% of all foreign exchange receipts from Platinum Group Metals (PGM) and chrome shall be transferred to the Reserve Bank nostro account on receipt. The Reserve Bank shall immediately transfer an equivalent amount through RTGS to the authorised dealer for the account of the exporter,” reads the central bank directive.
“The remaining 20% of foreign exchange receipts shall be retained in the authorised dealer’s nostro account for the exporter and the rest of the market’s requirements.”
Industry experts who spoke to the Zimbabwe Independent say the 20% retained by the miners is not sufficient for the capital-intensive industry. They say this could put miners in a rut as they queue at the central bank, seeking more foreign currency to meet their import needs.
Platinum miners are at various stages of constructing smelting facilities after government in 2015 imposed a 15% tax on raw platinum ore exports to encourage local processing of the metal. Government suspended the tax after the miners agreed to support the beneficiation exercise. Zimbabwe has the second largest platinum reserves in the world after South Africa and is hard processing the metal in the neighbouring country.
According to the latest Chamber of Mines of Zimbabwe survey last year, total payments to government and state-related institutions (based on survey respondents) averaged around 13% of revenues and 16,9% of total costs.
Highest proportions were found in the gold sector, with as high as 22% of revenue and 38% of costs, while the lowest were recorded in nickel and ferrochrome. Platinum and ferrochrome committed 14% of its revenue to government in 2016, while gold remitted 13% to government.
Zimbabwe’s chromium industry has 12 smelters and other treatment plants for the production of high-carbon ferrochrome, low carbon ferrochrome and ferrosilicon chrome. The industry produces metallurgical raw materials and products as well as a wide range of equipment.
The World Bank says Zimbabwe’s cash crisis, which began two years ago, is set to persist due to excessive government borrowing. This comes amid concerns the central bank’s interventionist policy measures could crowd out private sector lending.
The country’s unsustainable trade deficit, poor balance of payments position as well as revenue leakages are behind the current cash shortages affecting the economy.
Given Zimbabwe’s ongoing fiscal challenges, liquidity shortages are expected to continue into the foreseeable future and exports are projected to grow modestly, according to the World Bank report.