Mineral economist Lyman Mlambo has issued a stark warning over Zimbabwe’s 30% foreign currency retention policy and the government’s delayed settlement of more than US$609 million owed to platinum group metal (PGM) producers for the first half of 2025.
By Ryan Chigoche
The combined effect, he says, risks stifling growth in one of the country’s most critical sectors and weakening Zimbabwe’s standing as an investment destination.
The Reserve Bank of Zimbabwe (RBZ) mandates that exporters surrender 30% of their foreign currency earnings, known as retentions, in exchange for payment in local currency at an official exchange rate often significantly lower than market rates.
This policy aims to bolster local currency liquidity but has instead resulted in a massive backlog of payments to miners, particularly in the PGM sector.
PGM mining in Zimbabwe accounts for a substantial share of the country’s foreign currency earnings, supporting thousands of jobs and generating export revenues critical to the economy.
However, the sector is capital-intensive, requiring continuous imports of mining equipment, spare parts, chemicals, and specialist technical services.
Mlambo emphasised the disconnect between government policy and industry realities:
“In the first place, the forex retention level is too high considering that the PGM industry (like other mining sub-sectors) is capital intensive and imports most of its capital equipment, spares, consumables such as chemicals, and some technical expertise. The industry is busy trying to establish base metal and precious metal refineries in line with government’s beneficiation and value addition thrust. Thus, holding such a huge cumulative amount is punitive to the PGM industry and self-defeating for the government’s transformative industrial agenda.”
Zimbabwe’s beneficiation push aims to move mining beyond raw export by processing minerals locally, increasing value addition, and generating more jobs.
Yet, Mlambo argues that withholding retentions undercuts these ambitions, restricting the cash flow necessary to invest in such downstream projects.
Compounding the sector’s challenges is the official exchange rate used for converting retentions, which is significantly lower than the parallel market rate miners face when paying for local costs.
“It would be fair if the government were to concede to the miners’ demands that they be allowed to use the converted retentions to meet their statutory and local utility bills in local currency, with the bills also converted at the same official rate. I understand these bills are being settled in foreign currency,” Mlambo said.
Delayed payments have another hidden cost: inflation. With no adjustment for the time value of money, miners receive funds whose purchasing power has eroded by the time they are eventually paid.
This scenario reduces the real benefit of the payments and further squeezes operational liquidity.
The consequences of these policy inefficiencies ripple beyond immediate financial strain. Mlambo warns of potential long-term setbacks:
“This inefficiency on the part of government, which seriously affects the industry’s cashflows, increases the country’s risk profile. It could negatively impact plans by current producers to invest into new mining projects, expand their current operations, and to implement plans on beneficiation in the medium- to long-term.”
Zimbabwe competes with other mineral-rich African countries such as Botswana, South Africa, and Zambia for mining investment capital.
According to Mlambo, the country’s unattractive retention and payment policies risk deterring investors who have more options elsewhere:
“Most importantly, it makes the country a less competitive investment destination compared to other mining jurisdictions. Zimbabwe does compete with other countries, especially mineral-rich African counterparts, for global mining investment capital.”
Industry stakeholders have previously expressed frustration over liquidity constraints caused by the retention policy and delayed payments.
Without urgent government intervention to clear arrears and reform the payment framework, Zimbabwe risks losing momentum in a sector crucial to its economic recovery.
The RBZ’s foreign currency retention policy, introduced to manage liquidity in the local market and stabilise the Zimbabwean dollar, faces a delicate balancing act.
While ensuring currency stability remains vital, Mlambo’s observations suggest that the cost may be too high if it throttles the mining sector’s growth and investor confidence.
