News / National
Refineries under threat as RBZ gulps more forex
30 May 2025 at 12:18hrs | Views
Zimbabwe's biggest mining companies have sounded alarm bells over the potential suspension of crucial expansion projects - including refineries valued at over US$432 million - following the Reserve Bank of Zimbabwe's (RBZ) indication of tighter foreign currency retention rules.
The warning comes just weeks after the RBZ announced it may further increase the mandatory surrender thresholds on foreign currency earnings by exporters, deepening a funding crisis in the country's top export-earning sector. Mining firms have long complained about significant portions of their foreign exchange revenues being siphoned off into government coffers, undermining their operational capacity.
At the Chamber of Mines of Zimbabwe (COMZ) annual conference last week, industry executives acknowledged record revenues of US$5.9 billion in 2024 - up from US$5.4 billion in 2023 - buoyed largely by a 24% surge in gold prices. However, they warned that the positive headline figures mask mounting financial and operational challenges.
Instead of consolidating growth, miners said the RBZ's tightening grip on foreign exchange is eroding confidence and liquidity in a sector that requires stable forex access to fund government-mandated projects such as local refining, beneficiation, and capacity expansion.
Notable projects at risk include Zimplats' US$190 million plan to restart its idle base metal refinery and Sandawana Mine's US$28 million lithium concentrate plant slated for completion by March 2026. Overall, about 20 mining ventures face uncertain futures pending the central bank's monetary policy direction, executives cautioned.
"Government, through the 2025 Monetary Policy Statement, reduced foreign exchange retentions for exporters from 75% to 70%," said Isaac Kwesu, COMZ CEO.
"This comes at a time when forex demands from suppliers - including some government departments - have intensified, requiring payments exclusively in foreign currency. With many companies investing in expansions and beneficiation, available forex is insufficient and risks forcing project suspensions with negative impacts on the industry."
While exporters must surrender 30% of foreign currency earnings at the official exchange rate, the Zimbabwean dollar (ZIG) they receive quickly loses value in the parallel market, effectively acting as a stealth tax that is draining mining capital, industry leaders explained.
Minutes from a closed-door meeting held on May 12 between the RBZ and the Zimbabwe National Chamber of Commerce (ZNCC) - obtained by the Zimbabwe Independent - reveal business leaders' warnings that increased forex surrender requirements would erode export incentives and distort forex markets.
"The chamber advocated rolling back the surrender threshold to 25%, cautioning that higher rates discourage export production and disrupt formal forex markets," the ZNCC noted. However, the RBZ dismissed these concerns and hinted at plans to raise surrender thresholds further, citing Tanzania's move to outlaw US dollar transactions as a model aligned with Zimbabwe's goal to return to a mono currency by 2030.
Analysts warn this approach is out of touch with the realities mining firms face, including chronic power outages, overlapping tax burdens, and a lack of capital - all while being expected to meet beneficiation targets or face punitive export taxes.
The industry faces policy contradictions: aggressive beneficiation deadlines are enforced, yet access to necessary forex is restricted.
"Lithium producers have been permitted to export concentrates without paying the beneficiation tax for now," Kwesu said. "The Ministry of Mines and producers agreed that lithium sulphate, not lithium carbonate, will be the minimum beneficiation threshold, reflecting Zimbabwe's hard rock lithium resource. A timeline for refinery construction is being finalized, though concerns over royalty and Special Capital Gains Tax (SCGT) persist."
Regarding platinum group metals (PGMs), a temporary reprieve has been granted.
"The export tax on unbeneficiated PGMs was deferred to January 2025 following successful engagement," Kwesu added. "All PGM concentrates will now be smelted locally, with some producers already toll-processing at Zimplats."
Still, mining companies complain about inconsistent policy enforcement and an unpredictable tax regime disconnected from value addition. The COMZ criticized the 20% tax applied on the full asset value rather than the value added, while welcoming the government's decision to limit retrospective application of SCGT on mineral rights to deals after December 31, 2023.
Ironically, these setbacks coincide with a global mining upswing driven by lithium demand and high bullion prices. Instead of capitalizing on the boom, Zimbabwe risks missing the opportunity - hampered by a central bank relying on exporters to fill fiscal gaps.
Mining executives argue that sustaining investment momentum is impossible under a regime demanding forex-fueled growth while simultaneously confiscating the forex needed to power it.
The government has yet to make firm funding commitments to support refinery construction deadlines or offer alternative financial instruments to shield exporters from currency volatility.
Without urgent recalibration from the RBZ, analysts warn that the US$432 million refinery and expansion projects could stall - jeopardizing Zimbabwe's beneficiation ambitions and putting billions in annual mining revenues at risk.
The warning comes just weeks after the RBZ announced it may further increase the mandatory surrender thresholds on foreign currency earnings by exporters, deepening a funding crisis in the country's top export-earning sector. Mining firms have long complained about significant portions of their foreign exchange revenues being siphoned off into government coffers, undermining their operational capacity.
At the Chamber of Mines of Zimbabwe (COMZ) annual conference last week, industry executives acknowledged record revenues of US$5.9 billion in 2024 - up from US$5.4 billion in 2023 - buoyed largely by a 24% surge in gold prices. However, they warned that the positive headline figures mask mounting financial and operational challenges.
Instead of consolidating growth, miners said the RBZ's tightening grip on foreign exchange is eroding confidence and liquidity in a sector that requires stable forex access to fund government-mandated projects such as local refining, beneficiation, and capacity expansion.
Notable projects at risk include Zimplats' US$190 million plan to restart its idle base metal refinery and Sandawana Mine's US$28 million lithium concentrate plant slated for completion by March 2026. Overall, about 20 mining ventures face uncertain futures pending the central bank's monetary policy direction, executives cautioned.
"Government, through the 2025 Monetary Policy Statement, reduced foreign exchange retentions for exporters from 75% to 70%," said Isaac Kwesu, COMZ CEO.
"This comes at a time when forex demands from suppliers - including some government departments - have intensified, requiring payments exclusively in foreign currency. With many companies investing in expansions and beneficiation, available forex is insufficient and risks forcing project suspensions with negative impacts on the industry."
While exporters must surrender 30% of foreign currency earnings at the official exchange rate, the Zimbabwean dollar (ZIG) they receive quickly loses value in the parallel market, effectively acting as a stealth tax that is draining mining capital, industry leaders explained.
Minutes from a closed-door meeting held on May 12 between the RBZ and the Zimbabwe National Chamber of Commerce (ZNCC) - obtained by the Zimbabwe Independent - reveal business leaders' warnings that increased forex surrender requirements would erode export incentives and distort forex markets.
"The chamber advocated rolling back the surrender threshold to 25%, cautioning that higher rates discourage export production and disrupt formal forex markets," the ZNCC noted. However, the RBZ dismissed these concerns and hinted at plans to raise surrender thresholds further, citing Tanzania's move to outlaw US dollar transactions as a model aligned with Zimbabwe's goal to return to a mono currency by 2030.
Analysts warn this approach is out of touch with the realities mining firms face, including chronic power outages, overlapping tax burdens, and a lack of capital - all while being expected to meet beneficiation targets or face punitive export taxes.
The industry faces policy contradictions: aggressive beneficiation deadlines are enforced, yet access to necessary forex is restricted.
"Lithium producers have been permitted to export concentrates without paying the beneficiation tax for now," Kwesu said. "The Ministry of Mines and producers agreed that lithium sulphate, not lithium carbonate, will be the minimum beneficiation threshold, reflecting Zimbabwe's hard rock lithium resource. A timeline for refinery construction is being finalized, though concerns over royalty and Special Capital Gains Tax (SCGT) persist."
Regarding platinum group metals (PGMs), a temporary reprieve has been granted.
"The export tax on unbeneficiated PGMs was deferred to January 2025 following successful engagement," Kwesu added. "All PGM concentrates will now be smelted locally, with some producers already toll-processing at Zimplats."
Still, mining companies complain about inconsistent policy enforcement and an unpredictable tax regime disconnected from value addition. The COMZ criticized the 20% tax applied on the full asset value rather than the value added, while welcoming the government's decision to limit retrospective application of SCGT on mineral rights to deals after December 31, 2023.
Ironically, these setbacks coincide with a global mining upswing driven by lithium demand and high bullion prices. Instead of capitalizing on the boom, Zimbabwe risks missing the opportunity - hampered by a central bank relying on exporters to fill fiscal gaps.
Mining executives argue that sustaining investment momentum is impossible under a regime demanding forex-fueled growth while simultaneously confiscating the forex needed to power it.
The government has yet to make firm funding commitments to support refinery construction deadlines or offer alternative financial instruments to shield exporters from currency volatility.
Without urgent recalibration from the RBZ, analysts warn that the US$432 million refinery and expansion projects could stall - jeopardizing Zimbabwe's beneficiation ambitions and putting billions in annual mining revenues at risk.
Source - NewsDay
