ZIMBABWE - Without warning, and with immediate effect, Zimbabwe’s central bank has restricted platinum and chrome mining companies from sending 80% of earnings out the country.
These companies were previously able to remit 50%. This move by the Reserve Bank of Zimbabwe (RBZ) will paralyse some companies, according to insiders in the mining sector and echoes events of Zimbabwe’s 2008 financial crash. Mining companies operating in Zimbabwe say they must have access to external funds to import essential goods.
Industry insiders, according to financial web site, The Source, said the restrictions imposed at this time on Zimbabwe’s platinum and chrome mining companies will have a “catastrophic” effect. The central bank says its move will “ensure effective administration of foreign exchange, as well as spread liquidity to guarantee equity in the foreign exchange market.”
In return for their foreign currency, the central bank says it will deposit funds into the platinum and chrome miners’ local bank accounts via electronic cash, known in Zimbabwe as Real Time Gross Settlement System, RTGS. Exotix, a leading international research company quoted by The Source, said the RTGS deposits into mining companies’ accounts was “phantom” money and exposed the sector to risk.
Economist John Robertson said the restrictions on remittance of export earnings by Zimbabwe’s platinum and chrome miners was “a threat to the viability” of several major companies. Zimplats, Zimbabwe’s main platinum mining company, would be seriously affected. He said the 80percent restriction by the central bank was “in breach of a long-standing agreement signed with the South African government to formalise arrangements made by South Africa’s Impala Platinum” which invested more then $1billion in Zimplats - the largest investment since Zimbabwe’s 1980 independence.
He said this sudden and dramatic restriction of remittances would halt plans to double production of platinum and would “further discourage any other mining companies contemplating new or additional investments.” Zimbabwe does not export enough to cover its imports which come mainly from South Africa. There are almost no real cash notes in Zimbabwe’s banks, neither US dollars, the preferred currency, nor its latest, locally-printed currency, known as Bond Notes, introduced late last year as a 5percent bonus to exporters.
Because of the chronic shortage of cash notes, most people have to shop and settle bills, wages, etc, via debit cards, or other plastic money. The central bank says it is settling some internal debts by issuing Treasury Bills, to cover the budget deficit as well as debts incurred after hyper-inflation. Mining contributes more then 60% to Zimbabwe’s foreign currency earnings.
- Independent Foreign Service