Zimbabwe’s Mines Minister, Winston Chitando said the dollar shortage that has infuriated the mining companies operating in Zimbabwe is a “short-term problem” that will be remedied by a stronger economy.
Acute shortage of dollars has deterred foreign capital from helping the country’s ailing economy recover after 20 years of economic hardship under former president Robert Mugabe.
Chitando said “the situation at the moment is demand for foreign currency is bigger than supply and essentially as the economy advances you will find that there will be interest in foreign currency generation”. He added that “it’s a short term problem and it is going to work itself out as the economy grows”.
The mines minister noted that companies are allowed to retain 30 percent of foreign currency they earn, and can make an application to the Treasury if they need more. Zimbabwe, which holds the second largest deposits of platinum and chrome after South Africa, has the potential to be a major lithium supplier.
Since President Emmerson Mnangagwa’s election, interests of foreign investors have risen, but projects are still constrained by lack of funding. Chitando confirmed in May 2018, that the country needs up to $11 billion to upgrade its mines.
An economic plan released by the government, said Zimbabwe will back initiatives by mining houses operating in the country to float syndicated bonds offshore “as part of companies’ efforts to raise capital offshore to finance re-tooling of antiquated mines”. The document said the bonds will “initially target raising $1 billion, with the instrument guaranteed by the government”.
As a result of the dollar shortage, mining investors pleaded with the Zimbabwean government to ensure regulatory certainty and endorse the removal of foreign exchange restrictions that limit how much money companies can take out of Zimbabwe.
An industry source told Reuters that dollar shortages are so severe, that there is the risk of some mines shutting down.
Zimbabwe, which abandoned its currency in 2009 in favour of the US dollar, is currently being plagued by an acute dollar shortage as a result of a widening trade deficit, lack of foreign investment and a decline in remittances by Zimbabweans abroad.