RioZim says it will sue Zimbabwe’s central bank for failing to remit gold export earnings to the resources group, highlighting the acute dollar shortages blighting the southern African country’s economy.
US dollar shortages in Zimbabwe have worsened since 2016 and last week, the central bank reintroduced foreign currency accounts in a bid to safeguard exporters’ funds from the local electronic transfers whose value is much lower on Zimbabwe’s active black market than their book value.
Gold mines are required by law to sell their produce to Fidelity Printers, an arm of the Reserve Bank which then exports the mineral.
From the beginning of this month, they are allowed to retain 30 of the export earnings, down from 50 percent before that while the balance is transferred to their local accounts via electronic transfers.
RioZim says it has, on average, only received 15 percent since 2016 and that it is “facing severe challenges arising from the company’s inability to access its foreign currency earnings that are required to fund its operations and sustain its growth”.
“The Company has engaged the Central Bank on numerous occasions over the issue and minimal progress has been made in improving the situation. Therefore in addition to the other measures that the Company is considering to address the situation, the Company has proceeded to formally serve the Reserve Bank of Zimbabwe with its notice advising it of its intention to file legal proceedings against the Reserve Bank of Zimbabwe for a claim demanding that the Central Bank complies with its directives and policies, and also, for compensation for any losses that the Company has suffered as result of the Central Bank’s non-compliance with its directives from 2016 to date,” RioZim said in a cautionary statement.
RioZim’s plight lays bare the challenge faced by local exporters wrought by the currency distortions in the economy with authorities insisting that its local bond notes and electronic dollars retain the same value as the USD.
“The Company is required to deliver all gold produced to Fidelity Printers and Refiners who in turn, credit the Company through the local RTGS system notwithstanding the fact that they have a contractual obligation to pay in foreign currency,” says RioZim.
“The impact of this on the Company’s operations has been that the Company is unable to pay its external suppliers and consequently, the Company’s costs have escalated as the price of locally available consumables and spares has increased exponentially when compared to the prices quoted by external suppliers for the same products.
“In some cases, the prices quoted by local suppliers is more than 300% the prices quoted by their international counterparts. Furthermore, the effect of the Central Bank’s inability to allocate the Company adequate foreign currency is that the Company has in effect been receiving a fraction of the true value of the international market price of the gold that it has been delivering to Fidelity Printers. The situation is thus unsustainable and prohibits the Company’s ability to operate viably and maintain its production.”
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