Caledonia in a fix over dividend repatriation
Zim is just a tough place to do business: Executives
CALEDONIA Mining Corporation top executives are casting doubts of repatriating first quarter dividends to foreign shareholders citing acute foreign currency shortages stalking the economy.
The New York Stock Exchange-listed Caledonia controls 64% shareholding in the Gwanda-based Blanket Gold Mine, with the remainder owned by a community share trust and the Zimbabwe government.
The company board declared a US$0,12 quarterly dividend this week, which translated to US$1,5 million in shareholder earnings for the quarter ended March 31, 2021.
But in an exclusive interview with businessdigest, chief executive officer Steve Curtis, together with his chief financial officer Mark Learmonth, said dividends repatriation was a mammoth task.
They said contrary to the situation 14 months ago, there had been a shortage of foreign currency, making it a nightmare to remit dividends.
“In February 2020, the situation in terms of repatriation of dividends and management fees for us was okay, but it is no longer the case,” Learmonth said.
He said the foreign currency auction system introduced by the Reserve Bank of Zimbabwe (RBZ) last year has failed to satisfy Caledonia’s requirements.
“We had to participate in the weekly auction system which is cumbersome for a company of our size. We can’t operate on weekly cash disbursements,” he said.
However, RBZ governor John Mangudya said in an interview with businessdigest some entities were coming to the auction system to bid for funds to meet their dividend requirements while others met their dividend requirements from their foreign exchange retentions.
He said the central bank was committed to ensuring prompt repatriation of dividends and other fees to foreign shareholders in order to keep the country attractive to foreign capital.
“Our strategy is to ensure that we sustain these various channels for paying dividends so as to enhance investor confidence. Our offices are open to deal with challenges that investors may be facing on the remittance of dividends,” Mangudya said yesterday.
The central bank chief said recently an agreement reached with lenders in February to improve the flow of funds allotted at the forex auction system had moved the markets, with most banks releasing funds within a fortnight.
He said the strategy meant banks should tighten due diligence processes to reduce delays in releasing allotted funds. To enable banks to meet their positions, 40% of companies’ exports proceeds are retained under the central bank’s retention system, with exporters immediately receiving 60%.
A few delinquent firms that breached central bank regulations were reported to the RBZ.
The foreign currency auction system has been credited for stabilising Zimbabwe’s volatile exchange rate. Several listed firms have confirmed that the system was a game changer.
Curtis said while gold prices had improved, firms continue to suffer huge losses if the foreign currency situation remains unsolved.
“The false belief that the higher gold price eradicates the loss of United States dollars is just not true,” he said,
“We have hurdles to collect enough US dollars; it just gets harder. Working with authorities to pay dividends and legitimate debt can be done, but it’s a process. It just makes Zimbabwe a tough place because if you do not understand all the rules and you do not follow the process you won’t get satisfaction.
“The economy has not stood still. Our need for US dollars has not stood still. There is a massive demand for us to pay people in US dollars, including creditors, staff and suppliers because Zimbabwe is a dollarised environment now.”
Caledonia is one of a few foreign firms that have kept faith in Zimbabwe despite the challenges and it recently blasted off its first gold ore at the US$67 million Central Shaft at Blanket Mine.
Central Shaft represents one of the most recent significant gold mining investment projects in Zimbabwe that is seen as a game changer to Caledonia’s local interests.
In a shareholder update, Curtis said commissioning of the shaft was key to fulfilling the firm’s Zimbabwean ambition.