Chamber of mines agnry with central bank over non-payment of its debts (29-06-07)

By Mercy Mujuru

ZIMBABWE'S mining industry is faced with an imminent collapse due to a plethora of problems which are going unchecked.

In a statement on Friday (today), the Chamber of Mines said among other problems, the industry was being negatively aff

ected by lack of foreign currency, an unviable exchange rate and failure by the Reserve Bank of Zimbabwe to pay out debts it owes the industry.

The chamber revealed that the central bank was struggling to pay out more than US$17million it owes various mining companies owing to a serious foreign currency crunch.

It is understood that although the RBZ has convinced gold producers to continue delivering gold to its subsidiary, Fidelity Printers and Refiners on the strength of assurances of prompt payments for deliveries,payment to the producers has infact been erratic since November last year.

Said the chamber, “These promises have not been honoured.Most gold producers are operating at below 20 percent capacity with some having suspended operations completely.

“Although some payments were made in June,the amounts were small, in the region of US$50000 per producer for a few producers”.

The chamber added that some external creditors have resorted to charging interest on outstanding debts principally owed for goods delivered while others are insisting on cash before delivery.

“This has eroded all the good will created over the years between gold producers and external suppliers,” the chamber said.

The chamber also called for an upward review of the gold support price,arguing that the $35 000 per gram support price gazzeted by the central bank in April has since lost its value, adding that paying it in Z$ made it insufficient to even cover local debts.

“The hyperinflation currently prevailing has pushed operating costs to levels where the price needs a huge adjustment considering that in the absence of US$ payment,gold producers are forced to buy all inputs on the local market (if they are available).

“The support price, at US$650\oz international gold price, translates to US$1:Z$16747.77 (and) the gap between the revenue rate of exchange and that for costs has become too wide to be managed through borrowings or support from principals. If a support price is not adjusted within days, the collapse of the gold sector is highly likely”.

The chamber also said erratic power supply by the government run power utility,Zimbabwe Electricity Supply Authority was also negatively affecting production.

“Some mines are experiencing upwards of 12 hours of daily interruptions.Besides losing production time,there are issues of damage to equipment such as electric motors and gear boxes.Some mines have resorted to working whenever power is available”.

Additional challenges included the 100 percent increase in power costs for June,55percent month on month inflation in April and that for May likely to be much higher and labour costs which went up by 25 percent in May, another 20 percent in June.

The chamber added that spares and chemicals have shot through the roof, with some commodities having gone up by as much as 818 percent in less than two months.

The chamber said for other mineral producers, shortages of foreign currency in the official system has meant that they are forced to deal with the parallel market to stay in business adding that RBZ’s failure to honour its promise of adjusting the acceleration factor regularly has also exposed exporters to viability challenges arising from high input cost movements- CAJ News.

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