Chrome export ban sends tremors

GOVERNMENT'S shock decision to ban the export of raw chrome has sent shivers across markets, with mining industry players and leading experts calling on authorities to roll out incentives to stimulate domestic processing.

They said while the ban announced last week was informed by significant investments into smelting facilities, the existing 22 processing plants fell far short of market requirements, which could lead to the exploitation of small scale producers.

They spoke as government announced its second chrome export ban, five years after lifting another, which had been in force between 2011 and 2015.

For many, last week's dramatic developments demonstrated government's struggle to come up with a solid policy during a period when rocketing mineral prices on the international markets have given other producing country opportunities to unlock value.

In 2015 Zimbabwe, which holds the second largest chrome ore reserves in the world after South Africa, lifted the ban and scrapped a 20% export tax.

But last week, Cabinet said the new ban came after massive investment into processing capacity.

It said continuing with exports could suffocate domestic smelters of feedstock and trigger a fresh wave of bankruptcies.

Zimbabwe Prospectors Union president Samson Dzingwe said the ban could affect small scale chrome miners.

"The move of banning the exportation of raw chrome is in the right direction in terms of what needs to be done or what should have been done," Dzingwe told Standard Business.

"But it was inconsiderate of the impact that it might cause to small scale chrome miners.

"They should have lured investors in the manufacturing sector in the smelting industry first and then ban the export whilst giving small scale chrome miners a wide option with regards to value addition and beneficiation.

"This will affect more families in the chrome business. I don't know if there could be a better way to do it with lesser impact on small scale chrome miners livelihoods, that would be mostly welcomed."

Dzingwe's views were backed by economist, Clemence Machadu, who said he was worried by government's flip flopping with regards to chrome policy.

Machadu said significant effort should be devoted to scaling up the chrome value addition strategy to keep the industry running.

"It is my hope that government will this time take a bold stance because these bans have been enforced and lifted several times since 2007 without really increasing smelting capacity,"hesaid.

"So the ban should be accompanied by concrete measures to increase the capacity utilisation of already existing smelters or ensuring that new smelting establishments are fostered, while also ensuring that the price of ore will be competitive to incentive local producers."

Machadu said chrome ore miners might be forced to produce far beyond domestic processing capacity to earn the right to export to lucrative markets.

"The likely effect might be that raw chrome miners looking for lucrative ore prices abroad will overproduce to breach local uptake and find reason to export," he added.

"It is imperative that the policy shift concretely ensures that all raw chrome should be utilised locally and that local smelting capacity is also beefed up to be in a position to add value to all locally produced chrome.

"Some countries that are buying our chrome are just stockpiling it for future use, while we are selling it without realising full value to fulfil short term gains.

Another economist Takudzwa Chisango said: "A ban alone devoid of an effective corresponding plan will be another dummy," Chisango said.

"This was done before but the targeted results were not realised."