Chidhakwa sleeps on the job


Mines and Mining Development Minister Walter Chidhakwa

DAGGERS have been drawn against Mines and Mining Development Minister Walter Chidhakwa for abetting the unending cash crunch by failing to put in place measures that will allow licensed chrome producers to resume chrome ore exports, undermining a potentially profitable export base that could inject liquidity into the economy.
Raw chrome exports, which were expected to resume in June after the lifting of a ban that had been in force since 2011, were anticipated to rescue the country from a prolonged liquidity crisis that has ruined the economy.
When Chidhakwa announced the lifting of the ban in June, he said chrome exporters would sell 30 million tonnes of chrome ore to the global market, over and above the exportation of processed chrome, known as ferrochrome.
One of the major producers announced it would generate US$225 million from ore exports. This is only a fraction of the projected combined sector export revenues, but significant in terms of its effect of the liquidity in the country.
All in all, major chrome exporters are said to be sitting on chrome worth US$500 million, enough to oil a cash starved economy.
Three months after lifting the export ban, government still has not put in place measures to ensure the exportation of chrome resuscitates the country’s economic fortunes.
In the past month, Chidhakwa has said a Statutory Instrument (SI) would soon be gazetted to formalise the new export regime.
This week, he told the Financial Gazette that he had assumed in June that his predecessor, Obert Mpofu, had put in place a SI banning chrome ore exports in 2011, but it turned out this was not the case.
In the absence of a SI which would have required amendment, he would now simply put in place a framework for the resumption of chrome ore exports.


Raw large-raw chrome diopside

“We have been looking for the Statutory Instrument to repeal and replace it with the one lifting the ban,” the minister said.
“All we are now going to do is sign the export permits. It is the Special Purpose Vehicle (SPV) and the 12 licenced exporters who will export. The condition for them to export is that they must fulfil their local quota before they export. If they were producing 100 000 tonnes, they must produce that first,” he said.
Chidhakwa said chrome producers were ready to resume exports and had a stockpile of 100 000 tonnes ready for shipment.
Government also scrapped a 20 percent levy on raw chrome exports.
Chamber of Mines president, Toendepi Muganyi, told the Financial Gazette this week that chrome producers and government were still trying to agree on a number of issues, including the establishment of the SPV that would handle chrome ore exports.
The SPV, which would comprise the Ministry of Mines and Mining Development, the Minerals Marketing Corporation of Zimbabwe (MMCZ) and Zimbabwe Revenue Authority (ZIMRA), would be carefully structured to encompass various interest institutions, particularly the revenue collector, which has been operating under difficult circumstances to keep government business afloat.
Muganyi said government had also set special conditions that included producers meeting certain chrome ore to ferrochrome ratios before exports could begin.
“I am aware that there is an SPV they are trying to set up,” Muganyi told the Financial Gazette on telephone from a mining expo in Europe.
“There is also a proportion of raw chrome to ferrochrome that must be achieved. There are special conditions that must be met because some of the chrome can be processed here. This is what the miners and government are currently working on,” he said.
Zimbabwean firms currently have a chrome ore production capacity of about 1,5 million metric tonnes per annum, with a smelting capacity of 455 000 metric tonnes per year.
If chrome exporters continue to extract ore without exporting, they would suffer from increased cash flow problems that could further damage their businesses.
But government will have to act because the revenue collection base has been shrinking on the back of firm closures and retrenchments.
In most sectors, the economic environment has deteriorated.
Government had hoped that the chrome exports would kick in immediately after the end of the tobacco season to keep the country’s liquidity situation in check.
But this has taken too long to take effect.
Impeccable sources said Vice President Emmerson Mnangagwa, who was instrumental in the lifting of the ban was livid over the delays in getting chrome miners to export their product.


Vice President Emmerson Mnangagwa

All the blame is now being heaped on Chidhakwa who is being accused of sleeping on the job.
An industry executive who declined to be named for fear of victimisation said the delays were against the spirit of creating jobs and saving mines from collapse.
“More than three months down the line the lifting of the ban is yet to produce results. There appears to be discord between the four major stakeholders about its implementation; ZIMRA, MMCZ, the Reserve Bank of Zimbabwe (RBZ) and the Ministry of Mines. The chrome producers are meeting the stakeholders each time without a solution in sight. Why is the Ministry of Mines procrastinating over such key decisions when the economy is on the brink of collapse? The delays to start exporting are against the spirit of creating the much-needed jobs etc,” he said.
Nearly all companies have been struggling to stay afloat due to depressed demand and the ability by customers, most of them without a reliable income, to pay for goods and services on time.
Government and industries have been feeling the heat.
The country’s revenue collector, ZIMRA, has said factors that include liquidity constraints, limited lines of credit from financial institutions, power shortages, retrenchments and company closures saw net collections falling below target at US$1,66 billion, from a target of US$1,76 billion, resulting in a negative variance of six percent during the first half of this year.
This week, the central bank said the country must move with speed to remove all hurdles delaying chrome ore exports.
RBZ governor, John Mangudya, told the Financial Gazette that the benefits of chrome ore exports would be multi-pronged.
The resumption would create downstream industries to feed into chrome operations and bolster the development of a solid transportation system to ship ore to ports in Mozambique and other countries, destined for exports.
“Zimbabwe needs to increase its export base in order to enhance liquidity into the economy,” said Mangudya, who was locked in meetings with a visiting International Monetary Fund delegation currently in the country to review the performance of the country’s economy.
“The export of chrome ore should therefore be viewed as an essential, pragmatic strategy to promote export diversification,” Mangudya said.
“The downstream positive effects of such a great move (are) quite apparent. The transport sector would definitely benefit and so will employment.”
The country holds about 20 percent of global chrome resources, the second after South Africa.
Government has been increasingly looking into the mining sector to spearhead ongoing efforts to drive the economy out of crisis and propel it to growth.
But the country’s chrome mines have struggled under huge operational costs, which have rendered them uncompetitive compared to producers in South Africa, which holds about 80 percent of global chrome reserves.