Zimbabwe tobacco, gold producers set for windfall payouts

GOVERNMENT, through the Reserve Bank of Zimbabwe (RBZ), will soon make windfall payouts to exporters, particularly tobacco farmers and gold producers, from earnings accruing from the export incentive scheme unveiled by the central bank in May, it has been learnt.

The incentives range between 2 percent and 5 percent of the export value and will be paid in the form of bond notes.

It is understood that tobacco industry regulator, the Tobacco Industry Marketing Board (TIMB), is presently compiling data from the country's auction floors in preparation for the payments.

Tobacco exports have so far generated US$254 million since tobacco auction floors opened in February.

It is forecasted that more tobacco will be exported, especially after the end of the tobacco marketing season.

But the impact of the bonus incentive scheme has been more noticeable in the gold mining sector where weekly gold exports have increased by 33 percent to US$16 million from US$12 million since the announcement.

Gold exports for the half year ending June rose to US$381 million from US$339 million in the same period a year ago.

However, inclusive of gold directly exported by the country's three platinum mines — Mimosa, Unki and Zimplats — who take their ore to neighbouring South Africa for processing, gold raked in US$412 million in the review period.

Last week, RBZ Governor Dr John Mangudya told The Sunday Mail Business that exports are forecasted to record a much stronger performance during the second half of the year.

"We are happy with the performance of our exports since the introduction of the export incentive scheme. I can safely say the scheme is now paying dividends.

"You see, when you talk to people, they say 'we want the US dollar to stay' but you ask them 'where do we get the US dollar?' they say from exports. But they don't want us to incentivise exporters so that we get more of the US dollars.

"So this export incentive scheme is meant to encourage exports to sustain the multiple currency system. If you ask gold miners and tobacco farmers, they will tell you that they are happy with the export incentive," said Dr Mangudya.

It is also believed that the incentive scheme has helped plug leakages as more artisanal gold miners are now selling their gold to Fidelity Printers and Refiners (FPR).

The RBZ boss said due to the export incentive, more artisanal gold miners are now selling their gold through FPR, resulting in lower leakages than in the past.

The central bank says if the current trend continues, the country will not only be able to guarantee uninterrupted power supplies, but will have the ability to source raw materials for the local manufacturing sector.

Bonus payments to exporters will be used as a conduit through which the bond notes will be introduced into the market.

Although there has been anxiety in the market surrounding the introduction of bonds in October, the surrogate currency will be anchored by a US$200 million facility from the Cairo, Egypt-based Africa Export and Import Bank (Afreximbank).

The bond notes are currently at the design and origination phase.

Printing will resume thereafter.

Dr Magudya said the market is still haunted by the lack of trust and skepticism which affected the RBZ during the hyperinflationary era.

He however indicated that "no one wants to go back to the 2008 scenario".

"People are afraid that the (RBZ) Governor will print more. But that is not our intention at the RBZ, there is no appetite to go beyond the US$200 million.

"No one wants to go back to the 2008 scenario but we just want to ensure that this economy becomes an export economy.

"We are in a multiple currency system and since we want to continue with this system, we need to export and the bond notes will help to mitigate capital flight through encouraging local exporters to bring back their export proceeds," said Dr Mangudya.

There are plans to safeguard the bond notes to ensure accountability. For example, no bond notes will be issued where there are no exports.

The RBZ is also considering establishing a board to monitor and evaluate the issuance of bond notes on a daily or weekly basis.