The Victoria Falls Stock Exchange-listed Caledonia Mining Corporation has reported a net foreign exchange loss of US$9.7 million in 2024, up from US$6.8 million the previous year, marking a 30% increase. The rise in these losses reflects the ongoing depreciation of the local currency, which continues to impact the mining industry’s financial performance.
By Ryan Chigoche
At the center of the crisis is Zimbabwe’s new monetary policy requiring exporters to convert 30% of their foreign currency earnings into the Zimbabwe Gold (ZIG) currency at the official interbank rate.
While the government insists that the policy will stabilize the economy, businesses argue that it is accelerating financial losses. The continuous decline of ZIG means that every forced conversion results in an immediate loss of value, reducing the real earnings of exporters and increasing their exposure to currency risk.
For the mining sector, which relies on predictable revenue flows to fund operations and expansion, this depreciation is a major challenge.
With key costs, including wages, fuel, and locally sourced inputs, rising due to the weakening currency, miners are struggling to balance their books in an environment where their retained earnings lose value almost immediately.
The Chamber of Mines of Zimbabwe has repeatedly warned that the current 70% forex retention threshold is inadequate and that businesses need a higher percentage of their earnings protected from currency fluctuations.
The issue is further compounded by inflationary pressures, which continue to drive up operational costs. As the local currency depreciates, suppliers adjust their prices upward to hedge against losses, creating a vicious cycle that raises the cost of doing business.
This instability threatens to derail the mining industry’s ambitious plans to invest US$600 million in capital projects and increase mineral exports from US$5.5 billion to US$6 billion in 2025.
While authorities remain firm on the new policy, industry players warn that unless measures are taken to address the rapid loss of value in the local currency, foreign exchange losses will continue to rise.
Without a reversal or adjustment to the retention framework, mining companies and other exporters could see profitability further eroded, dampening investor confidence and slowing economic growth in a sector that remains crucial to Zimbabwe’s economy.
