Downstream producers are likely to be hardest hit by a Zimbabwean Reserve Bank directive that platinum and chrome mining companies submit 80% of their foreign direct earnings to the central bank.
While the companies will receive electronic currency which is worth the same amount of money in Zimbabwe, it is worthless outside of the country – impacting on a company’s ability to pay for imports.
A spokesperson for one of the Zim-based platinum producers told FTW Online off-the-record that his company spent about 80% of its revenue in Zimbabwe but that most downstream players – the very local industrialists the government claims it wants to protect – would be “heavily impacted” as they import most of their goods from South Africa and abroad. “It could cripple the downstream industry,” he said.
Zimbabwean economist John Robertson pointed out that this move by the Zimbabwean government – along with the previous directive asking for 50% of foreign earnings – was in direct contravention of an agreement between the Zimbabwe and South African governments.
“When Australian company BHP withdrew its platinum interests in Zimbabwe, a major South African company decided to invest, but on the proviso that it keeps its foreign earnings to plough back into the development of the local mining interests – which it has done,” he commented.
Investing in Zimbabwe’s platinum resources had “made sense at the time” as it required a lot less to get the metal out. “South Africa’s platinum reserves are buried very deep whereas Zim’s reserves are closer to the surface,” Robertson said.
He agreed that the Reserve Bank had a “huge need” for foreign currency but said that it was “short-term thinking” on the part of the government. “Zimbabwe also desperately needs investors but the government’s backtracking on deals shows it cannot be trusted and that the country is hostile to foreign investors.”
