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New forex rules to lift mining

The Chamber of Mines says the removal of the 60-day cap on unused export receipts will support relatively longer mining production cycles

Ishemunyoro Chingwere

Business Reporter

The Chamber of Mines of Zimbabwe (CoMZ) has welcomed the removal of a statutory requirement that compelled exporters to sell their foreign currency earnings in 60 days, saying this will go a long way in affording miners the leeway to plan.

The new measures, announced by the Reserve Bank of Zimbabwe last week, allow exporters to hold foreign currency beyond immediate requirements, instead of battling to spend it as they get it on things they might not need.

The switch in policy of buying more of the export earnings up front while allowing exporters to keep the bulk indefinitely if they wish is to ensure the auction system remains adequately funded, while ensuring exporters retain an incentive to expand business.

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The central bank introduced the foreign exchange auction system in June last year, resulting in improved access to forex by importers, while ushering palpable price stability across the market and bringing previously rampaging inflation under control.

CoMZ chief executive Mr Isaac Kwesu said in an interview the removal of the 60-day cap was a welcome development as this will support relatively longer mining production cycles.

The mining industry accounts for about 65 percent of Zimbabwe’s export earnings.

In lobbying for the removal of the 60-day cap, miners argued that there was a misalignment between compulsory liquidation of unused foreign currency and production cycles of mining companies.

It said the working capital cycle for mining companies average between 60 to 90 days, ordinarily implying that mining companies may require excess balances in their nostro accounts beyond 60-days.

“It’s clear the removal of a cap on the time exporters can keep their foreign currency is a very welcome development because this is exactly what we have been clamouring for,” said Mr Kwesu.

“You obviously expect positive results from such a policy position because the production cycle in mining is quite long-term so you need to keep export proceeds longer than previously stated,” he added.

Under the new regulations, exporters are now required to sell 40 percent of export earnings to the central bank, from 30 percent.

“I am not sure about the 40 percent threshold because you will have to note that this is coming against the background that we have been asking for an upward review from the previous 70 percent retention,” said Mr Kwesu.

“So I think as chamber we will need to go back to membership and consult on the severity of the new requirement before we can give an informed comment.

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“But even as we consult, it’s important for you to note that the miners are not even retaining the 60 percent as it appears on paper; there are other obligations such as Zesa, taxes and other statutory requirements, which are pegged in US dollars.

“However, whatever the impact, there is always room to fine tune these things and we will continue to engage Government because at the end of the day it’s a common goal of improved production and improved exports that we are all chasing,” he said.

Dr Mangudya has previously noted that the mining sector has played a critical role in sustaining the country’s exports which have in turn given a firm foundation to the foreign currency auction system.

Speaking at last year’s launch of the Chamber of Mines of Zimbabwe 2020 mining sector survey, Dr Mangudya noted that the mining sector and diaspora remittances had compensated for losses in other sectors of the economy.

In the case of the mining sector, he noted that it had registered a 14 percent growth in the first nine months of 2020 compared to the same period in 2019 and thus contributed to the country’s overall exports’ growth of 12, 7 percent to US$4,8 billion in that period.

HERALD