100 percent forex retention to gold miners bad for the economy
The government gazetted on the 24th of June 2019 the Statutory Instrument 142 of 2019 in which banned the use of foreign currency for any transactions within Zimbabwe. However, miners were exempted from the policy citing a genesis of high-level mineral leakage.
By Rudairo Mapuranga
In 2018 Zimbabwe imported US$6.3 billion worth of goods from international suppliers, down -1.9 per cent since 2014 but up 26.1 per cent from 2017 with mining machinery such as bulldozers, excavators, road rollers munching US$76.9 million 106 per cent from 2017, mining machinery parts were at $43.4 million up 27.8 per cent from 2017. Since Zimbabwe is not producing any equipment, mining operations require foreign currency since most of the equipment they use is sourced outside Zimbabwe. The operation of mines requires from 70-90 per cent foreign currency which means that at the moment in time miners should be paid in some of their returns in foreign currency to improve the industry.
Withdrawing foreign currency from miners is not advisable and it is catastrophic to the performance and improvement of the economy of Zimbabwe. The measures would be self-destructive and regrettable, however, giving miners 100 per cent foreign currency retention is also not advisable and may lead to the flooding of black market foreign currency trading since some miners were part of the group accused of funding the operations of the illegal foreign currency dealings.
Despite the banning of foreign currency transactions within Zimbabwe, miners have been clamouring to receive 100 per cent forex retention from the country’s sole gold buyer and exporter, Fidelity Printers and Refiners.