Miners more bullish, but . . .

MINING companies are more bullish of prospects this year as compared to 2021, raising expectations of another robust performance from the sector.

However, they say they are losing half the value of the portion of export earnings they sell to the Reserve Bank of Zimbabwe (RBZ) in exchange for local currency at the ruling official exchange rate.

Overall, they claim to be losing about 20 percent of the gross value of their export earnings, which they say is negatively impacting viability.

Electricity shortages and the high cost of capital are some of the challenges the sector is grappling with.

Last year, mining, which grossed more than US$5,5 billion, generated about 75 percent of the country’s export earnings.

It currently accounts for roughly 16 percent of gross domestic product (GDP).

The Chamber of Mines of Zimbabwe (CoMZ) said while miners liquidated 40 percent of their earnings at the official auction exchange rate, they buy inputs priced above the parallel market rate.

The gap between the auction exchange rate — at $124/US$1 at the last session — and open market rate has widened to about 100 percent from 20 percent previously.

“Mining houses are losing more than 50 percent of the value of the surrendered portion of export proceeds that is liquidated at the official auction market rate at a time they face local input costs priced at premiums above the parallel market rate,” CoMZ said last week.

An industry survey by CoMZ released in October last year established that the value of the surrender portion liquidated at the official auction rate was being significantly eroded due to the negative impact of the parallel market rate, which is used for pricing goods and services by local suppliers.

The mining sector rebounded by 3,4 percent in 2021 after a 9,4 percent decline the prior year, spurred by strong global commodity prices.

The sector is expected to grow 8 percent this year, as a number of mining houses are anticipated to ramp up production, while global prices are forecast to remain strong.

Mines and Mining Development Minister Winston Chitando earlier this year said Zimbabwe earned at least US$5 billion from mineral exports in 2021.

He said investments by mining entities in recent years boosted output and placed the country on course to meet its target of a US$12 billion mining industry target by next year.

“The industry was US$2,7 billion in 2017 and the milestone to earn US$12 billion by 2023 was set. The fact of the matter is every day we are moving towards the attainment of US$12 billion by 2023; it will be achieved and it is being achieved every day,” he said.