Three-tierpricingsystemforcesminerstodigdeeper
THE prevailing cash shortage in the country and an increase in the price of mining machinery and consumables are likely to fuel rampant mineral leakages, especially gold.
Zimbabwe Miners Federation ( ZMF) first vicepresident Mr Ishmael Kaguru said most mining equipment and consumables manufacturers and suppliers have introduced a three-tier payment system.
A three-tier pricing model is whereby one is charged differently depending on the mode of payment used thus meaning different prices for debit card swiping, cash (bond notes) and hard cash (foreign currency).
“When bond notes were introduced we were being paid 40 percent in bond notes and 60 percent in foreign currency for gold deliveries but now we are facing problems from mining equipment and consumable suppliers as most of them are charging 25 to 100 percent more for the purchasing of their products using bond notes,” said Mr Kaguru.
The three-tier pricing system is being attributed as the biggest reason the demand for cash is so high in the country.
“We are also facing the same predicament where we buy chemicals such as cyanide as they claim that they are sourcing foreign currency from the parallel market at an exchange rate of 25 to 30 percent for the bond notes thus they factor this in their pricing system,” said Mr Kaguru.
The rate of bond notes on the resurgent parallel marketing has over the last few months been tumbling with $100 currently being exchanged for 125 to 135 bond notes.
Bond notes, a token currency which is circulating within a basket of multiple currencies, was introduced in November 2016.
It hoped the bond notes, which are supposed to be trading at par with the greenback, would help ease a shortage of bank notes blamed on a widening trade deficit and the smuggling out of physical US dollars.
“Of course we are being allocated 60 percent in foreign currency for gold deliveries but due to the prevailing situation whereby suppliers are using a three-tier payment system we are appealing to the RBZ (Reserve Bank of Zimbabwe) to facilitate a 100 percent payment allocation in foreign currency. As it is we are even failing to access the 40 percent in bond notes due to cash shortages,” said Mr Kaguru.
Gold is currently Zimbabwe’s main export mineral and, along with tobacco and platinum, accounts for the bulk of the country’s foreign currency earnings.
“We don’t want a situation whereby the current scenario will create unnecessary leakages. We are trying to avert this at all costs. So as long as gold deliveries are made miners should be promptly paid. The problem is being exacerbated by the big suppliers and manufacturers and we suspect some form of sabotage and we are therefore calling for these companies to be thoroughly investigated because some of them are totally refusing to accept bond notes,” said Mr Kaguru.
Zimbabwe has lost billions in US dollars to illicit financial outflows, with mineral leakages constituting the biggest chunk of this money.
However, Acting Chief Government Mining Engineer, Tapererwa Pasikwavaviri said there was need to review some sections of the Mines and Mineral Act so as to decriminalise the handling and trading of gold.
“The current regulations criminalises possession of bulk gold and because most of the people are not entitled to be in possession of the gold they end up smuggling it and thus there is also need to reduce the numerous fees required to trade in gold. Above all people should have confidence in our systems and that way they will offload their gold through the official channel,” he said.
Eng Pasikwavaviri however, said the Government was putting in place various measures to curb smuggling of gold out of the country.
“We have gold monitoring and surveillance routines which are done after every three months and we have even put surveillance systems such as CCTVs and metal detectors at all border posts. Fidelity Printers and Refiners have also tried their best to pay competitive prices but there have been challenges due to the shortage of foreign currency,” he said.
Mr Kaguru however, said miners were satisfied with the price of gold offered by Fidelity Printers and Refineries.
“We are more than happy with the price we get for gold deliveries, which is $44,5 per gramme because it’s actually more than the international price,” he said.
ZMF spokesperson Mr Dosman Mangisi acknowledged that the price of mining equipment and consumables had risen by 60 to 100 percent.
“Foreign currency shortage has hit hard on the mining sector with prices of mining equipment and consumables going up to as much as 60 to 100 percent. For instance a hammer mill which was costing $1 800 is now costing $3 000 while a de-watering pump now costs over $400 from $200.
“The suppliers are claiming that they are buying forex on the parallel market at 25 to 30 percent for the exchange of the bond note and thus are pushing the cost on their products. The situation is affecting the ease of doing business in the mining sector and hampering production,” said Mr Mangisi.
He said there was a need for the Government through the central bank to incentivise and increase foreign currency allocation to manufacturers of mining equipment.
“There is still a need to incentivise mining equipment manufacturers by way of giving them preferential treatment such as specific tax exemptions so as to cushion them as well as increasing their foreign currency allocation just like what has been done to fuel supplying companies because if such measures are not taken this sky rocketing of mining equipment and consumables will cripple production in the mining sector,” said Mr Mangisi.
The Government was forced to revise downwards its gold production target of 28 tonnes to 24,5 tonnes for this year due to loss of production in January and February largely as a result of heavy rains that flooded most mines.