Zimbabwe’s mining sector faces a debacle as a skewed exchange rate and heavy borrowing hit an industry that has become the top foreign currency earner, the mining chamber said on Thursday.
Mining is the only sector that still has foreign investors after the collapse of the main agriculture sector — which coincided with a deep recession — and now generates half of all export revenue.
Zimbabwe miners, except gold producers, surrender a third of their foreign earnings to the central bank at a rate of Z$250 to the greenback, far less than the Z$16 000 fetched on a thriving black market.
The Chamber of Mines said miners faced heavy local costs with domestic suppliers charging for their services using black market rates and with increased wage demands from workers.
”The official exchange rate … continues to cause viability challenges,” the chamber said in a statement.
”The shortage of foreign currency for suppliers of goods and services to the mineral sector is impacting on the determination of prices. It is no secret that in the absence of foreign currency on the official market, the parallel market is the only other source,” the chamber said.
Inflation in Zimbabwe has spiralled past 1 700% — the highest in the world — and caused shortages of food, fuel and foreign currency while unemployment has rocketed higher.
The chamber said gold producers, accounting for 52% of total mineral production and a third of gross domestic product, were affected by delays in payment by the Reserve Bank of Zimbabwe (RBZ).
It said that as of the beginning of April most producers had not been paid for gold delivered in January.
Gold miners surrender their gold to sole purchaser and refiner Fidelity, a wholly owned RBZ firm, and are paid mostly in Zimbabwe dollars. Under the arrangement, they get only 40% in hard currency.
Chamber of Mines data on Thursday showed gold output falling 17% to 1 587kg in the first two months of this year compared with the same period in 2006.
”Most producers are heavily borrowed, have exhausted their lines of credit and have limited input in stock,” the chamber said. ”It will not be surprising if the gold sector were to collapse under the existing heavy debts and non availability of inputs.”
President Robert Mugabe’s government has forecast a 4,9% growth in the mining sector this year after a 14,4% in 2006, but the chamber said this was unlikely without expansion in a sector worried by proposed new empowerment laws.
The Mines Ministry last year said the Cabinet had approved changes to the mining law ”to indigenise 51% in some instances of all foreign owned companies”.
The proposals were later withdrawn for further consultations but Mugabe has insisted that locals should take control of the country’s rich mineral resources. – Reuters