Zimbabwe central bank forex directive to hit miners hard

In a research note on Zimbabwe last year, leading research firm, Exotix noted that the government has effectively been using the RTGS system as some form of currency, using it to settle due payments without hard cash.

“As the principal and interest payments on these government securities are settled on the RTGS, it is clear that the government has been using the issuance of this debt to effectively print money. This money printed and placed in the RTGS has helped keep the RBZ liquid in local US dollars,” Exotix said.

This means that the central bank will give miners their dues in phantom money, putting the sector at risk.

Zimbabwe’s Chamber of Mines, a grouping of mining houses, is on record stating that production is already under threat because of delays by local banks to process payments to foreign suppliers.

In March, the mining houses told Parliament that they were facing delays of up to three months to make foreign payments despite being categorized as a high priority item on a list issued by the RBZ to local banks to manage allocation of the little available foreign currency.

Given that some five months down the line the foreign currency shortage has become even much more severe, it is logical to assume that the payments are taking much longer to process.

The recent directive is reminiscent of similarly controversial policy initiatives made by the apex bank during the hyperinflation era when the then governor Gideon Gono centralised all Foreign Currency Accounts (FCA) directly putting them under the purview of the central bank. FCA’s belonging to corporates and non-governmental organisations were raided to fund ‘government programmes’.

It was a difficult time, the local currency was worthless, rules were broken, savings were lost, many companies went under and never recovered.

Meikles is still in protracted battle with the RBZ over money that was looted during that period.

Some analysts point out that Zimbabwe’s mining sector has remained resilient, surviving the numerous headwinds bedevilling the country’s frail economy.

Despite being starved of capital and being subjected to a brutal tax regime, high labour and power costs mining remains the single largest earner of foreign currency contributing 62 percent of total exports in 2016.-The Source

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