November 7, 2019 / 10:38 AM / 12 days ago

Hamstrung Zimbabwe miners call to keep export earnings in dollars

HARARE, Nov 7 (Reuters) - Zimbabwean mining firms want to retain all of their export earnings in foreign currencies, saying they are disadvantaged by having a proportion paid to them in Zimbabwe dollars.

President Emmerson Mnangagwa’s government is pinning its hopes on the mining sector, which generates Zimbabwe’s biggest export earnings, to drive the recovery of an economy grappling with power cuts and acute shortages of U.S. dollars and fuel.

Zimbabwe is home to the second largest known platinum reserves and large lithium, gold and diamond deposits, but many investors fret over whether they can take money out.

The Chamber of Mines said shortages of power and foreign exchange remain the two biggest problems facing the sector, which was operating at 70% capacity, down from 75% last year.

Mining companies are only allowed to keep up to 55% of their foreign exchange sales and the central bank pays them in local currency for the balance at the official interbank rate.

A survey by the Chamber of Mines showed that mining companies wanted to retain all their forex earnings and settle all obligations, including taxes and power purchases in dollars.

Isaac Kwesu, chief executive of the Chamber of Mines, said on Thursday that local suppliers had increased prices by up to 30 times this year, which meant the Zimbabwe dollar payments at the official exchange rate were inadequate.

“Our miners are now paid at a deep discount, which makes us uncompetitive when compared with our neighbours,” Kwesu said during a presentation of the survey’s results in Harare.

Mines Minister Winston Chitando said the government was looking at the request but could not say when it would respond.

The southern African nation, which ditched its currency at the height of hyperinflation in 2008, re-introduced it in June, ending a decade of dollarisation.

Mines, including those producing platinum, gold and nickel, are paying Zimbabwe’s state power company in U.S. dollars to guarantee uninterrupted supplies but still face power cuts, affecting production by up to 20%, the mining chamber said.

The miners also called for the electricity tariff be capped at 9 U.S. cents per kilowatt/hour from 14 U.S. cents. (Reporting by MacDonald Dzirutwe; Editing by Alexander Smith)

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