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Mining constituted US$2 billion of the US$3,3 billion total exports in 2012, meaning the lion’s share oiled foreign economies

Golden Sibanda Senior Business Reporter
mining companies are banking a mere 3 percent of the billions of dollars from their export proceeds with the balance kept in offshore accounts amid the crunching liquidity bite pervading the entire economy, banking sector sources said.
Banks, through their umbrella body the Bankers’ Association of Zimbabwe, are said to have made innuendos for Government to intervene through measures that compel miners to bring home export revenues.

Efforts to get a comment from BAZ and Chamber of Mines presidents Mr George Guvamatanga and Mr Alex Mhembere, respectively, were fruitless yesterday as both were not answering their mobile phones.

While mining firms bank only 3 percent of their export revenues locally, individuals contribute a staggering 16 percent of the total bank deposits. Tight liquidity in the economy is constraining efforts at rebuilding the economy after the hyperinflation battering of the decade to 2008.

Banking sector sources questioned where the mining firms kept their money if they did not bank the export revenues with local banks. Last year, mining constituted US$2 billion of the US$3,3 billion total exports, meaning most of it oiled foreign economies. And this is particularly the case when you consider that the nature of material and equipment used in mining operations is by and large sourced in foreign countries.

“BAZ has been talking to Government about challenges facing the economy and why the country is illiquid and one of the points they raised was that deposits are mostly demand deposits.

“They said of the total deposits 16 percent comes from individuals, transport and distribution about 1,7 percent and mining 3 percent, yet mining accounts for close to 20 percent of our GDP,” said a source.

“The banks are also questioning how Government can account for the export proceeds from mining when the mines are not banking locally.”

With Government relying on a thin revenue base due to a myriad of challenges affecting industry, which has seen quite a number of companies collapsing and thousands of people losing jobs, the economy needs to benefit a significant chunk of the billions of dollars generated from its natural endowments.

Retaining export proceeds offshore as is being done by mining companies, banking sector sources said, was akin to externalising liquidity and sabotaging collective efforts to mend deep scars and rejoin detached limbs of an economy battered by sanctions during the largely forgettable decade to 2008.

The behaviour does not help the cause for mining companies, who should offer a good explanation why it makes more sense for them to think their money is safer in foreign countries, after exporting a local commodity, than their investment back home. For a country in need of the collective might of its people and resources the practice does also not help miners’ credibility amid already existent suspicions they understate their exports.

Considering Zimbabwe does not print its own currency, but uses a basket of currencies dominated by the greenback, exports, foreign direct investment and donor support are critical in creating liquidity.

But there have been little inflows in the form of FDI, donor support and international lines of credit to Zimbabwe over a decade, leaving export revenues the main avenue the country can manoeuvre for liquidity.

Mining is central to Zimbabwe’s economy, accounting for 65 percent of the country’s total export earnings. Government anticipates the sector to anchor economic growth in the medium term period, 2014 to 2018.

Against this background, sources said banks were considering lobbying parliamentarians and Government to adopt measures that compel mining firms to bank onshore their revenues to enhance liquidity.

The BAZ is also said to be concerned about issues regarding the high level of non-performing loans, which is now hovering around 15 percent in that is feared could limit the amount loans to productive sectors.

The majority of borrowers said to be defaulting on bank loans are corporate, which could further whittle down loan advances to industry.
Banks have also reportedly called on Government to define its priorities in terms of loan advances amid concerns that agriculture is not getting enough support. According to BAZ, the sector gets 25 percent of loans.

In addition, BAZ has made representations for Government to expedite recapitalisation of the central bank to enable it resume its lender of last resort function as well as to demonetise the local currency balances held by banks to enhance confidence in the sector.

“There also is concern about the role of the Reserve Bank of Zimbabwe as the lender of last resort. BAZ said they want the its lender of last resort to be restored and for its capacity to supervise to be rebuilt. The other issue relates to the Deposit Protection Corporation. Bankers feel that the Deposit Protection Corporation has taken over the legitimate role of the Reserve Bank and feel that its creation was not very relevant,” the source said.

Other issues said to be of concern to the bankers’ lobby group include the fact that 65 percent of total bank deposits are controlled by a few big banks while the majority of banks, have the smaller share of the  35 percent balance making survival in an illiquid market close to impossible.