Zimbabwe News and Internet Radio

RBZ bails out mines from tobacco sales

By Shame Makoshori

Payments to mining industry’s foreign suppliers have improved since the tobacco marketing season kicked off in February, according to industry sources.

Reserve Bank of Zimbabwe building in the background

This comes after the sector lurched into crisis due to failure to pay foreign suppliers as a result of foreign currency shortages which worsened at the end of last year after the introduction of bond notes by the Reserve Bank of Zimbabwe to fund export incentives.
Imported raw materials in other industries have also run out.

In the mining industry, inputs like explosives and other critical supplies have been difficult to purchase as suppliers have been demanding cash up front.

Payment backlogs had extended to about four months. And even though the situation remains volatile, sources said there had been an improvement.

CoMZ chief executive officer, Isaac Kwesu, was not available for comment.

Over US$200 million has so far been generated by tobacco since auction floors opened in February.

While the crisis remains, with long queues in banks, foreign cash holdings by local banks, which fund imports, were reported to be improving.

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“There has been a marked improvement since the tobacco selling season started. This tobacco marketing season is usually good for the country,” an executive said, noting that problems usually start after the marketing season.

He said the injection of US$100 million by the central bank to ease the foreign currency crisis last week would help ease payment problems.

Foreign suppliers discontinued credit facilities to Zimbabwean customers following the emergence of payment problems late last year, which worsened at the beginning of this year.

The CoMZ last year wrote to the RBZ, pleading with the central bank to act on international payments.

Mining industry revenue averages US$2 billion per year and contributes the bulk of liquidity in the country.

Under the RBZ’s foreign currency allocation priority list introduced last year, exporters who import raw materials and industrial machinery to boost exports are supposed to get preference ahead of importers of luxuries such as cell phones and other goods.

Non-exporting importers of raw materials and machinery for local production or value addition are also supposed to be on top of the list, provided the raw materials are not available locally and their products support import substitution.

C&M reported recently that the world’s largest airlines had started tightening screws on Zimbabwe owing to the worsening foreign currency crisis that had resulted in a huge backlog of unremitted payments for local ticket sales, with some now outstanding for over five months.

At least five global airlines namely Qantas Airways, Lufthansa, KLM Royal Dutch Airlines, Air France and Delta Airlines have informed their travel agents that they have to bill their passengers in cash or stop accepting bookings altogether to avoid non-settlement of obligations from Zimbabwe’s banks, which are battling an acute shortage of foreign currency.

The RBZ said last week airlines would be among those prioritised for payment on the US$100 million facility. Financial Gazette