Zim platinum forex directive will hit suppliers hard - Implats

Harare – According to Impala Platinum [JSE:IMP], a new directive by Zimbabwe to platinum mining firms will have a severe effect on suppliers.

The Reserve Bank of Zimbabwe has directed the miners to give up 80% of their foreign currency receipts to the bank, which will in turn electronically credit the miners' local accounts with bond notes.

The bond notes are officially supposed to be equal in value to the US dollar, but have been trading at premiums of between 3% and 5% to the US$ on parallel markets, which companies have resorted to in a bid to obtain forex for key imports.

Zimbabwe is battling to obtain foreign currency amid a worsening liquidity crunch that has started to impact on businesses and company operations. The platinum miners are now only allowed to retain 20% in their foreign currency accounts.

“We spend some 80% of revenue locally; (there) is a material risk that downstream suppliers will be severely affected as they, in turn, mostly import goods and spend far less locally,” said Impala Platinum spokesperson Johan Theron by email.

Other companies affected by the new central bank directive include units of Anglo American Platinum [JSE:AGL] and Sibanye Gold [JSE:SGL] as well as all chrome miners in Zimbabwe. Minerals such as platinum, gold and chrome as well as tobacco are the top foreign currency earners for Zimbabwe.

Earlier this month, the Zimbabwean central bank issued a directive to the platinum and chrome miners which read: “With immediate effect, 80% of all foreign exchange receipts from Platinum Group Metals (PGM) and Chrome shall be transferred to the Reserve Bank Nostro Account on receipt.”

This is seen by experts as driving down sentiment in Zimbabwe’s sincerity to ease the business environment. Economists said this will ultimately impact on investment decisions and prospects for existing investors to expand production.

Companies in Zimbabwe have already been unable to remit dividends to international stakeholders. Others have encountered hurdles in paying for foreign supplies and raw materials, owing to a tightening liquidity squeeze.

Governor of the Zimbabwean reserve bank John Mangudya said in his 2017 mid-term monetary policy review that “foreign investment” into Zimbabwe declined to $6.8m during the first half of 2017.

The country’s earnings from exports were however 14% up at $1.6bn, although remittances into the country declined by 8% to $714m as worries over cash shortages persist.

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