Zim mining sector faces collapse

Zimbabwe mining sector faces collapse Friday 13 April 2007

By Edith Kaseke HARARE – The mining industry in Zimbabwe could collapse under the weight of heavy debts and an unsustainable exchange rate, ironically at a time when world metal prices are booming, which would be another blow to the foreign currency starved country, the Chamber of Mines said. The mining sector is the biggest foreign currency earner in a country battling its worst ever economic crisis and its collapse could bring more misery to the majority who are squeezed by the world’s highest inflation rate of nearly 2 000 percent, unemployment above 80 percent and shortages of hard cash and food. With the agriculture sector in turmoil, mainly as a result of President Robert Mugabe’s government’s seizures of farms from whites, mining had become the largest employer and earned more than half of the country’s foreign currency. The Chamber of Mines said an official rate of $250 which miners are paid for a third of their earnings was unviable as this could not meet their Zimbabwe dollar costs, noting that for example suppliers of goods and services were pricing at black market rates. The United Stated dollar is trading around $17 000 at the black market. Miners are forced to liquidate nearly 33 percent of their forex receipts at the central bank at the official rate. "The official exchange rate of US$1:Z$250 continues to cause viability challenges," the chamber said on Thursday. "The shortage of foreign currency for suppliers of goods and services to the mineral sector is impacting on the determination of prices. It is no secret that in the absence of foreign currency on the official market, the parallel market is the only other source," it added. According to the Chamber of Mines, gold producers were hit by payment delays by the central bank, adding that at the beginning of this month, most producers had not been paid for gold delivered in January. Gold producers account for 52 percent of total mineral production and a third of gross domestic product.