Zimbabwe miners in urgent plea for forex
The Chamber of Mines of Zimbabwe says it is engaging authorities to come up with mechanisms that can accommodate the foreign currency requirements for the sector as shortages are weighing down the sector’s potential driven by ongoing expansion projects.
The sector is cash intensive, driven by high power costs while government raised royalties for Platinum Group of Metals; lithium by 180% from 2,3% to 7% and by 150% from 2% to 5% for lithium in the coming year. It also faces a retooling nightmare and a restive labour force because of high inflation and a weak domestic currency.
Chamber of Mines chief executive officer Isaac Kwesu last week told NewsDay Business on the sidelines of the Association of Mines Managers of Zimbabwe annual general meeting and conference in Victoria Falls that for 2023 alone the sector required US$1 billion for retooling at a time when the sector is on an expansion drive.
“The retention threshold debate only comes when you have a shortfall. You may have noticed that mineral production has been going up and there has been a lot of expansion in terms of projects, new projects coming on board, mines increasing their capacity utilisation, others increasing their export capacity,” he said.
They need equipment, spares and all other operational requirements. Increased electricity tariffs, additional taxes and royalties that have to be paid in forex and all this means that the available chunk of foreign currency will have to be shared among other emerging demands. We have also seen sectoral inflation, we have seen the USD inflation as suppliers and service providers are increasing their charges, all those things have resulted in increases in costs.”
Kwesu added that for some mines, the need to expand had resulted in shortfalls to meet the operational requirements.
“We have been engaging authorities to accommodate this expansion drive in the sector. The biggest issue has been growth which requires additional funding and more forex which have resulted in those spiking shortfalls,” he said.
Kwesu said the shortfalls varied from one mine to another depending on the projects but stressed that without new interventions, the forex was far from adequate, threatening the viability of mines.
He said many miners were not able to access foreign currency from the centeral bank auction system because they were not exporters, adding that the concept of willing-buyer-willing-seller had improved the situation as financial institutions were stepping in to assist.
The mining sector is currently working with a 60% retention threshold which Kwesu said was inadequate to meet operational requirements.