Mines engage RBZ over forex liquidation period

Isacc Kwesu

MINING firms have engaged the Reserve Bank of Zimbabwe (RBZ) over the exchange control requirement that compels the miners to liquidate their foreign currency if not utilised after a 30-day period, which they say is too stringent.

The Chamber of Mines of Zimbabwe  (CoMZ) chief executive Isacc Kwesu said mining projects had long gestations and required time to execute, which may still be in process when the liquidation period falls due.

Notably, the 30-day foreign currency liquidation period was already in place but was not being enforced after its introduction by the central bank in February last year, through the 2019 Monetary Policy.

Mr Kwesu also said mines were under pressure from exchange control laws that compel liquidation of unused forex after 30 days, a period miners feel is too short.

The bank’s monetary policy committee resolved to reinstate, with effect from July 1, 2020, the 30-day limit of liquidating surplus foreign exchange receipts from exports to ensure that more foreign exchange was released onto the market.

Responding to questions by The Herald Business & Finance, Mr Kwesu said the new framework on exchange liquidation had presented challenges for mines.

“Miners are given 30 days to utilise their money or liquidate it on the auction market, which is a very short period indeed given the gestation for their usage goes beyond.

“So, the miners are compelled to liquidate their forex in 30 days, while they still have commitments relating to operations.

“The processing of invoices takes longer, probably requiring an extra two weeks . . . so you find that miners may not be in a position to liquidate their forex holdings and some suppliers are paid only after delivery.

“And because of logistical challenges relating to Covid-19, some orders for inputs and consumables are taking as long as 90 days to be delivered so you only pay them afterward,” he said.

However, the RBZ is on record saying it would allow exporters to keep most of their forex for periods longer than 30 days in exceptional circumstances where such need arises to avoid choking companies.

Mr Kwesu also said mining firms were experiencing inadequate forex to meet their requirements.

The CoMZ chief executive also pointed out that even gold miners were under pressure for limited capital and working capital funds with some of the major minerals experiencing a decline in production volumes.

Mr Kwesu said discussions were ongoing with authorities to iron out sticking issues, especially regarding compulsory liquidation.

“Miners are engaging authorities on the issue, this (liquidation in 30 days) is a new and revised policy, which is less than 30 days old.”

He said with regards to rules for the compulsory liquidation of forex, miners are under pressure to pay for goods ahead of delivery because they risk having the funds converted into local currency.

Mr Kwesu’s remarks also come amid concern of lukewarm participation of exporters on the auction, despite the country holding over US$1.1 billion of hard currency in nostros.

Mr Kwesu said mines participate on the forex auction by the 30 percent surrender requirement which they are required to liquidate at the market rate upon receipt. The balance is also liquidated if not used in 30 days.

Minerals are the biggest earners of forex in Zimbabwe, followed by tobacco exports. Gold raked in US$1.3 billion last year.

Minerals earn Zimbabwe more than US$3,5 billion a year.