News / Local
Zimbabwe govt squeezes miners for more forex
4 hrs ago | Views
Zimbabwe's mining industry is facing increased strain as government departments intensify demands for miners to pay taxes and fees in foreign currency-on top of the mandatory 30% surrender of export earnings-further squeezing the sector's already limited forex inflows, the Chamber of Mines of Zimbabwe (COMZ) has warned.
The mining sector, particularly gold, urgently requires substantial capital investment, with gold alone needing an estimated US$1 billion for expansion projects and beneficiation facilities, according to COMZ chief executive Isaac Kwesu.
The government's push for higher gold deliveries this year-targeting 40 tonnes-has seen initiatives such as offering small-scale miners, who produce over 60% of the country's gold, a 5% bonus for every 500 grammes delivered to the Fidelity Gold Refinery. Despite these efforts, the sector remains under severe foreign currency pressure.
"The foreign currency retentions are under disproportionate pressure as suppliers of goods and services, including some government entities like Zesa, are demanding payments exclusively in foreign currency," Kwesu told the Zimbabwe Independent.
He explained that mining companies must juggle ongoing expansion projects while grappling with insufficient foreign currency. "The available foreign currency falls far short of the requirements of the mining industry. Mining companies are adjusting operations to available forex, with some capital projects being reconsidered due to foreign currency shortfalls," Kwesu added.
The mandatory 30% surrender of export earnings, paid at the official exchange rate, loses value against the parallel market rate, effectively acting as an implicit tax on miners. "Mining companies receive the surrender portion at the official rate at a time local inputs are priced at a depreciated parallel market rate," Kwesu said. "The parallel market premium negatively impacts mining project viability."
The Chamber of Mines is engaging government authorities to ease the pressure on foreign currency retentions by aligning payments for electricity bills and taxes with the forex retention framework. Proposals also seek to allow mining companies to procure inputs from suppliers at the prevailing official exchange rate.
Suppliers often use "forward pricing"-setting prices based on anticipated future costs-due to ongoing exchange rate volatility, adding another layer of financial uncertainty for miners.
Kwesu stressed the need for a competitive fiscal framework benchmarked against regional and international best practices to restore project viability and improve Zimbabwe's investment appeal in mining. "There is significant opportunity for reviewing the current fiscal framework to align with best practices," he said.
Mining, alongside agriculture, remains one of Zimbabwe's main foreign currency earners, despite recent declines linked to massive public debt, exchange rate volatility, corruption, and liquidity shortages.
A recent country brief by the African Export-Import Bank highlighted mining's contribution to the economy, with mining accounting for over 60% of Zimbabwe's export earnings in 2024. Gold generated approximately US$2.5 billion, platinum around US$1.8 billion, and diamond mining about US$420 million. Emerging sectors like lithium saw exports reach US$210 million amid growing global demand for battery minerals. Coal production, mostly for domestic use, contributed about US$150 million and bolstered energy security.
The brief also noted Zimbabwe's strategic pivot in diplomatic and economic relations toward China, Russia, and South Africa, in response to Western sanctions. "China has become a key partner, providing significant investments in infrastructure, mining, and energy projects," the bank said.
As government demands for foreign currency payments increase, Zimbabwe's mining sector faces mounting challenges that could affect its critical role in the nation's economy unless urgent policy adjustments are made.
The mining sector, particularly gold, urgently requires substantial capital investment, with gold alone needing an estimated US$1 billion for expansion projects and beneficiation facilities, according to COMZ chief executive Isaac Kwesu.
The government's push for higher gold deliveries this year-targeting 40 tonnes-has seen initiatives such as offering small-scale miners, who produce over 60% of the country's gold, a 5% bonus for every 500 grammes delivered to the Fidelity Gold Refinery. Despite these efforts, the sector remains under severe foreign currency pressure.
"The foreign currency retentions are under disproportionate pressure as suppliers of goods and services, including some government entities like Zesa, are demanding payments exclusively in foreign currency," Kwesu told the Zimbabwe Independent.
He explained that mining companies must juggle ongoing expansion projects while grappling with insufficient foreign currency. "The available foreign currency falls far short of the requirements of the mining industry. Mining companies are adjusting operations to available forex, with some capital projects being reconsidered due to foreign currency shortfalls," Kwesu added.
The mandatory 30% surrender of export earnings, paid at the official exchange rate, loses value against the parallel market rate, effectively acting as an implicit tax on miners. "Mining companies receive the surrender portion at the official rate at a time local inputs are priced at a depreciated parallel market rate," Kwesu said. "The parallel market premium negatively impacts mining project viability."
The Chamber of Mines is engaging government authorities to ease the pressure on foreign currency retentions by aligning payments for electricity bills and taxes with the forex retention framework. Proposals also seek to allow mining companies to procure inputs from suppliers at the prevailing official exchange rate.
Suppliers often use "forward pricing"-setting prices based on anticipated future costs-due to ongoing exchange rate volatility, adding another layer of financial uncertainty for miners.
Kwesu stressed the need for a competitive fiscal framework benchmarked against regional and international best practices to restore project viability and improve Zimbabwe's investment appeal in mining. "There is significant opportunity for reviewing the current fiscal framework to align with best practices," he said.
Mining, alongside agriculture, remains one of Zimbabwe's main foreign currency earners, despite recent declines linked to massive public debt, exchange rate volatility, corruption, and liquidity shortages.
A recent country brief by the African Export-Import Bank highlighted mining's contribution to the economy, with mining accounting for over 60% of Zimbabwe's export earnings in 2024. Gold generated approximately US$2.5 billion, platinum around US$1.8 billion, and diamond mining about US$420 million. Emerging sectors like lithium saw exports reach US$210 million amid growing global demand for battery minerals. Coal production, mostly for domestic use, contributed about US$150 million and bolstered energy security.
The brief also noted Zimbabwe's strategic pivot in diplomatic and economic relations toward China, Russia, and South Africa, in response to Western sanctions. "China has become a key partner, providing significant investments in infrastructure, mining, and energy projects," the bank said.
As government demands for foreign currency payments increase, Zimbabwe's mining sector faces mounting challenges that could affect its critical role in the nation's economy unless urgent policy adjustments are made.
Source - Zimbabwe Independent
