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The Zimbabwe mining sector, the country’s largest export earner, suffered a significant setback when the Reserve Bank of Zimbabwe (RBZ) decided to devalue the ZIG currency by 40% in September 2024, Mining Zimbabwe can report.

By Ryan Chigoche

This decision led to a staggering loss of US$800 million for the sector, further highlighting the fragility of Zimbabwe’s economic situation.

The impact of the devaluation was keenly felt across the industry, which already faced numerous challenges, including inflation and exchange rate instability.

At the recently concluded CEO Roundtable event, renowned economist Eddie Cross took the opportunity to address the economic damage caused by the RBZ’s monetary policies.

He criticized the central bank’s lack of foresight and its failure to support business and production, highlighting the disastrous consequences for key sectors, particularly mining.

In September 2024, Zimbabwe’s central bank made the controversial decision to allow the newly launched, gold-backed currency to fall over 40% against the US dollar.

This came after weeks of sustained pressure on the ZIG, which had only been introduced in April. Despite the promise of stabilizing the economy through this currency, the reality was quite different—currency depreciation continued to worsen, adding to the financial strain on businesses and individuals alike.

Speaking at the event, Cross said, “To be honest, the RBZ is not serious at all. They are at the root of many of the problems the economy faces today. The mining sector alone lost a staggering $800 million during the Zim-dollar devaluation—a massive blow to the sector. This not only undermined productivity but also severely damaged investor confidence, contributing to the ongoing economic crisis.”

The devaluation of the ZIG is not just an isolated issue for the mining sector—it represents a larger, systemic problem that has shaken Zimbabwe’s economy. According to analysts, the devaluation exacerbated Zimbabwe’s economic instability, affecting every sector that depends on foreign currency, including agriculture, manufacturing, and services.

The Reserve Bank justified the devaluation as a necessary step to address “resurgence in exchange rate pressures,” which had been reflected in the widening gap between the official exchange rate and the parallel market exchange rate. Inflationary pressures also rose significantly during this period, further eroding purchasing power for businesses and households.

During the September devaluation, miners were only allowed to retain 75% of their foreign currency earnings, with the remaining portion being converted into the ZIG.

However, this move proved disastrous as the currency was devalued, leading to massive exchange rate losses. Miners, already grappling with inflation and rising costs, found themselves in an even more precarious financial position, significantly harming their ability to reinvest and expand operations.

In a recent development, the RBZ has further reduced the foreign currency retention threshold for exporters, including miners, from 75% to 70%. This new policy diverges from the expectations of businesses, which had anticipated being able to retain at least 85% of their foreign currency earnings to weather the ongoing economic challenges.

Since its introduction in April 2024, the ZIG currency has faced numerous hurdles. The Reserve Bank has been forced to intervene multiple times by injecting USD into the market, trying to stabilize the situation.

However, these interventions have had limited success, as inflation continues to rise and the value of the ZIG continues to fluctuate erratically, hurting miners severely.

Meanwhile, over the years, Zimbabweans—both citizens and businesses—have become accustomed to the volatility of the country’s currency. Over the past two decades, the value of savings, pensions, and insurance policies has been effectively wiped out, leaving individuals with diminished purchasing power.

The constant devaluation of the currency has led to a cycle of reduced confidence in the economy, with many citizens choosing to move their assets into foreign currency or gold, further straining the local currency.

In the mining sector, a critical part of Zimbabwe’s export-driven economy, the challenges are even more pronounced. Foreign investors have been wary of Zimbabwe’s economic volatility, leading to decreased investment in mining projects.

Zimbabwe’s state-owned miner, Kuvimba Mining House (KMH), is gearing up for a new round of financing to revitalize several key mining projects, just a year after the government took full control of the company through the Mutapa Investment Fund, the country’s sovereign wealth fund, Mining Zimbabwe can report.

By Rudairo Mapuranga

Under the leadership of GCEO Trevor Barnard, Kuvimba is seeking to raise US$950 million from development banks, mining companies, and international traders. This funding will support the development of lithium, platinum, and gold assets, Barnard said in an interview.

“Access to all the large development banks, to all the funding, to all the major traders has just opened up,” said Barnard, praising the company’s change in ownership structure. He noted that the restructuring has significantly boosted Kuvimba’s credibility and ability to attract investment.

A major portion of the capital—more than half—will be directed toward building an underground platinum mine at the long-delayed Darwendale project. Barnard, who assumed the CEO role in December, emphasized the importance of this platinum project but also pointed out that a US$275 million lithium venture may come online sooner due to faster development timelines.

Kuvimba has already secured a joint venture with Chinese mining companies to develop its lithium assets, with plans to finalize the deal by March 2025. The first phase of the project, known as Sandawana, will commence production within 15 months of signing, eventually producing 500,000 tons of lithium concentrate annually. The Chinese partners will finance the development and hand over the project to Kuvimba once the loan is repaid, a process expected to take less than five years.

Barnard also revealed that the company is exploring further development of the Sandawana area and has already attracted interest from international investors, including Cluff Africa Ltd. and a major European commodity trader. Additional Chinese investors have expressed interest, and a deal could be finalized within six to 12 months.

In terms of platinum, Kuvimba is planning to begin with a smaller open-pit mine at the Darwendale deposit this year. The open-pit project will require an investment of about US$50 million, with the company intending to partner with another miner to process the extracted ore. Simultaneously, Kuvimba is in discussions with development banks for loans to finance the larger underground platinum mine and processing facilities, which are expected to be operational within the next three years.

Zimbabwe boasts the world’s second-largest platinum reserves after South Africa and has emerged as Africa’s leading lithium producer, positioning Kuvimba as a key player in the country’s mining sector. The company is now 70% owned by the Mutapa Investment Fund, with the remaining shares held by entities controlled by the Ministry of Finance, including state pension funds, power utilities, and a deposit insurance fund.

This ambitious fundraising initiative marks a significant step forward for Kuvimba as it seeks to unlock the potential of Zimbabwe’s vast mineral wealth and contribute to the country’s economic growth.