The Ministry of Mines and Mining Development has called on the Reserve Bank of Zimbabwe to increase foreign currency retention for minerals producers to 70 percent from the current levels if the country is to achieve its Transitional Stabilisation Programme targets.
Speaking at the presentation of the State of the Mining Industry 2018 Report, Mines and Mining Development Deputy Minister Polite Kambamura, said key performance indicators in the Transitional Stabilisation Programme requires availability of more foreign currency if they are to be achieved.
“The Transitional Stabilisation Programme key performance indicators state that we need to re-open closed mines, reclaim and start working on dumps, we need to expand on existing mines, we need to open new mines, all these things need a chunk of foreign currency given the state of our economy currently.
“So we feel this amount (the retention ratio) needs to be further reviewed in phases to between 65 percent and 70 percent,” he said.
Deputy Minister Kambamura said while treasury had separated nostro accounts, “there is still a lot more to be done in that area”.
He said the price distortions in the market has seen prices of equipment becoming cheaper outside our borders and the Ministry of Industry and Commerce should look into this issue “so that we do not cripple our industry”.
This comes as the miners themselves pointed monetary policy issues as among top challenges faced by the industry. The miners said low foreign exchange retention by the mining industry; exchange rate disparities resulting in mismatch between revenue and the costs and high interest rates on the market makes it difficult for mining companies to raise capital.
As a solution, the miners called for FCA allocations to be reviewed in line with the actual US$ costs that are obtaining on the market for inputs.
Meanwhile, the State of the Mining Industry 2018 Report, has revealed that mining executives are optimistic about the growth of the mining industry in 2019, with more than 52 percent of respondents expecting the mining industry to grow in 2019, while only 13 percent are expecting contraction in mining sector activities.
The growth prospects index for the mining industry for 2019 had a score of +25. The index scale ranges from -100 to +100, with the lowest score representing least level of confidence and the biggest score representing the highest.
On another positive note, mining executives are positive about employment prospects for the mining industry in 2019, with 60 percent of respondents indicating that they may hire additional employees in 2019.
The investment commitment index for 2019 is at a score of +10, which means mining executives are committed to inject capital in 2019, with more than 60 percent of respondents indicating that they are going to spend on investment projects in the year ahead. Overall, the mining industry expects the 2019 market outlook to be relatively positive with an index of +20, compared to +22 in 2018.
About 50 percent of respondents indicated that they expect the outlook for 2019 to be better than 2018, while 25 percent are pessimistic about market trends in 2019. At least, 51 percent of respondents are anticipating profits in 2019, while 39 percent expect marginal growth, with the remaining 13 percent indicating that profitability will remain the same as 2018. The sector is, however, not without its challenges, with the overall Mining Business Confidence Index (MBCI) for 2019, though still positive, is lower than what it was in 2018.
The 2019 index at (+8), is somewhat lower than that recorded for 2018 which stood at +21,9.
One of the challenges, is the overall view of the economy in the coming year, with 63 percent of respondents pessimistic about economic prospects in 2019.
These respondents, at 63 percent, are expecting the economy to contract, while 37 percent anticipate marginal economic growth in 2019.
The majority of respondents indicated that policies relating to fiscal issues, monetary, beneficiation and environmental are among policies undermining the performance of the mining sector.
Survey findings show that all respondents were of the view that the fiscal framework for the mining industry remained predominantly suboptimal in 2018. All respondents recommended that royalty should be deductible as a tax expense in line with best practice in other mining jurisdictions.
Respondents also indicated that the 2 percent tax, which is paid up front, will be an additional burden to the mining industry, which is already operating in a punitive fiscal (tax) framework.
The majority of respondents felt that the cumulative impact of tax, (which is levied on transaction across the entire mining value chain and is not based on ability to pay), is more than 30 percent.
As a recommendation, all respondents underscored the need to review and streamline mining fees and charges in line with those obtaining in the region, in order to restore viability of the mining sector.