IN our new pages today, we report the Reserve Bank of Zimbabwe (RBZ) has ordered platinum and chrome miners to surrender 80% of their export earnings to the apex bank, up from 50%, in a move that could have dire implications for the economy.
“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.”
What this essentially amounts to is killing the goose that lays the golden egg. The central bank could paralyse the operations of the miners as foreign currency shortages continue to bite.
The importance of platinum mining to the economy cannot be underestimated. Platinum, gold and tobacco are the top export earners. Playing Russian roulette with any of the three is a dangerous adventure that can only backfire spectacularly.
The central bank directive dated August 4 shows that despite depressed prices of platinum group metals, the foreign currency-starved government is now squeezing producers of platinum and chrome to fund other sectors. Such ill-advised actions are further denting investor confidence. Policy inconsistency is one of the major factors contributing to Zimbabwe’s deep-seated economic malaise. Policy instability, which ratchets up the risk of investing in this country, is the surest way of spooking foreign investors. It beggars belief that the government and its economic advisors have not learnt from past blunders. The indigenisation and economic empowerment disaster should have taught the authorities plenty of lessons. Most level-headed analysts agree that Zimbabwe is not facing cash shortages per se, but a productivity problem. In that connection, how on earth is a mine, in such a capital-intensive sector, expected to ramp up production when 80% of its earnings are raided by the authorities?
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. All this is now in jeopardy. Last year, the RBZ marketed bond notes as a performance-related export bonus scheme. The promise was that the adoption of bond notes, whose initial stock amounted to US$200 million, would help Zimbabwe to ramp up exports from US$3 billion to US$6 billion, and narrow down the trade deficit through increased domestic production. In reality, of course, the outcome has not inspired much confidence. In the darkest of days, platinum mines have helped keep the lights on. The latest central bank directive which takes away 80% of their export earnings in one fell swoop will destabilise the sector, with dire consequences for the wider economy.