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‘Mining sector to reap from liberalised inter-bank rates’

ZIMBABWE’S economic crisis continues to deepen, with no signs of recovery in the short to medium term. This has had a devastating impact on industry, resulting in the closure of companies and massive job losses. The mining sector has not been spared. The Chamber of Mines will next week hold its annual general meeting in the resort town of Victoria Falls to discuss the state of the mining sector and the economy at large. Zimbabwe Independent business reporter Cloudine Matola (CM) this week spoke to Chamber of Mines chief executive Isaac Kwesu (IK, ) to find out how the sector has been doing and the challenges it faces, among other issues. Below are excerpts of the interview:

CM: As the chief executive of the Chamber of Mines, what have been your challenges during your term in office?

IK: It has been challenging, but we feel that we have achieved quite a number of milestones in terms of legislative, policy as well as operational issues. My term of office came at a time when things were on the extreme side. The relations between industry and the government were polarised. I feel my principals have done enough to support us as the secretariat to resolve most of the issues that were undermining our engagement strategy. Therefore, we have done a lot but there is still a lot of work to be done to make sure that we will get an ideal viable mining industry in line with our mandate.

CM: What are the main issues up for discussion at your annual general meeting?

IK: This year, our mining conference comes at a time when the government expectation from the productive sectors is growth so as to contribute to the attainment of Vision 2030, where Zimbabwe is targeting to be a middle-income country by 2030.

The mining sector is expected to play a significant role, that is why this year our conference is running under the theme Realising Vision 2030 Through Resource and Growth. Most of the issues that will be discussed have something to do with growth and contribution of the sector to the social and economic development of the country. For instance, to what extent can we leverage on the resource base we have? We need to increase production so that we attain an upper middle-income status. So, there are a lot of questions and issues that need to be addressed if we are to attain it. Specifically, these are the issues that will addressed at the conference.

CM: How has the official inter-bank exchange rate affected your operations?

IK: If one has to look backwards, the 1:2,5 rate (US$1 to RTGS$2,5) was better than the 1:1 rate, where the mining sector was surrendering huge part of their export earnings at 1:1, which was not reflective of the core structure of the industry, and the development in the economy.

When it was reviewed to 1:2,5, it was not ideal, but it was better than where we were coming from and we were still getting negative returns on the proceeds that we were surrendering at that 2,5 RTGS because it was not in line with the fair market exchange rate. but, again, we have seen this number moving from 2,5 RTGS to 3,2 and of late to 4,1.
It is our hope that the exchange rate will become reflective of the fundamentals and we, as export earners, we will also become relatively cushioned against the negative effects of the sub-optimal exchange rate.

CM: Zimbabwe Electricity Supply Authority (Zesa) recently introduced a load shedding programme. What impact will it have on the mining sector?

IK: Obviously, reduction of electricity, which is a critical input for mining, has a severe bearing on the output. It is our prayer and we are engaging on that front to ensure that in the interim the industry will remain guaranteed the scarce electricity that is available.

We are a critical sector and we need to continue playing our role in generating foreign currency that is required to import electricity, which may also be required to import critical goods and services for the country, so we are engaging the authorities. We are also talking to Zesa, so that we can work together in assisting them just like in the past when we supported them on the importation of electricity.

CM: Your members have bemoaned the low foreign currency retention threshold by the central bank. What progress have you made in having this issue resolved?

IK: I think there has been some significant improvement. For gold, initially they were not considering the exporters. they were not paying them any retention. It moved from 25% to 30% and now it is around 55%. So there has been some marked improvement though it may remain lower than what the mining entity may require. We will continue engaging with a view of making sure that we get the ideal forex threshold. But to just inform those who may circumstantially find themselves requiring more than is available, they will be submitting the company’s specific request, especially those who require retooling and equipment importation.

CM: Can you give me the breakdown of how the sector has performed in the first quarter of 2019?

IK: We are still collating and validating the data, but generally, the indications, as the minister of Finance alluded in parliament recently in his statement, the sector generally recorded a decline in the first quarter. We are expecting that there would be a decline and gold has had a significant bearing to the downside performance of the first quarter. However, we feel a number of legacy issues which have been addressed may see the output picking up and recovering in the second quarter.

CM: Mine workers have called for a further increment in their wages after being awarded an 80% increase. What is the position of the Chamber of Mines on this issue?

IK: The mining industry has remained cautious on the need to have a motivated workforce and our relations with workers and workers’ unions when we compare with our peers in the region. I think we have good cordial relations and we have been responding to workers’ need at industry level when we compare with our other sub-sectors. While the sector has not been spared from the economic challenges affecting other sectors, we have every year tried to award our workers increments and every year we negotiate and agree based on our ability to pay, bearing in mind the cost of living which the worker will be demanding. We have always seen convergence of mines when it comes to how much we pay and we remain open to negotiations. Whatever affects the workers, the unions will always get in touch and, where possible, negotiations will be held.

CM: Unki Mine last week commissioned its smelter plant. How will this benefit the platinum sector?

IK: That is a big milestone in our industry’s achievements. Our mining industry subscribes to beneficiation and value-addition, which we feel has a significant upside contribution to mineral value that the dollar retains. This means Unki, who used to export platinum concentrate, will be exporting a beneficiated platinum in the form of a matte, which is a second level of beneficiation. It is a marked improvement and this will mean a lot not just to mining but also to Zimbabwe at large.

CM: Government has taken steps to liberalise the fuel sector. What effect will this have on your sector?

IK: The issue remains on when they liberalise. Will the fuel be available or not? We think this will improve the availability of fuel and as it is liberalised, we have seen also the forex exchange market being liberalised. This may also mean that those who export may be able to afford the fuel that could have been charged in RTGS$ and those who have foreign currency will still afford to pay at almost the same prices. We feel that as long as the fuel is available and affordable to the industry, this is something that might not have much bearing on us.

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