RioZim sues RBZ over illegal forex withholding

RioZim Ltd says it is strongly considering instituting legal proceedings against the Reserve Bank of Zimbabwe to compel the central bank to comply with its directives and policies on foreign exchange retention and compensation for losses emanating from their actions.
In a statement Tuesday, RioZim said the company had taken the steps after various engagements with the monetary authorities since 2016.
“The Company has engaged the Central Bank on numerous occasions over the issue and minimal progress has been made in improving the situation,” the company said.
“Therefore in addition to the other measures that the Company is considering to address the situation, the Company has proceeded to formally serve the Reserve Bank of Zimbabwe with its notice advising it of its intention to file legal proceedings against the Reserve Bank of Zimbabwe for a claim demanding that the Central Bank complies with its directives and policies, and also, for compensation for any losses that the Company has suffered as result of the Central Bank’s non-compliance with its directives from 2016 to date.”
The Company says it continues to engage the central on the matter.
In the circular, RioZim Ltd also announced that the Company was currently facing severe challenges stemming from the company’s inability to access its foreign currency earnings to fund its operations and sustain its growth.
Although the central bank’s policy from April 2016 to September 2018 entitled gold producers to 50% of their receipts in foreign exchange automatically in their nostro account, the company said it has not received even the first 50% let alone the balance notwithstanding its own directives.
This policy of 50% forex retention has changed to 30% with effect from 1 October 2018.
“Since 2016 to date, the Company has only been allocated an average of circa 15% of the foreign currency that it has generated. The Company is required to deliver all gold produced to Fidelity Printers and Refiners (Private) Limited (“Fidelity Printers”) who in turn, credit the Company through the local RTGS system notwithstanding the fact that they have a contractual obligation to pay in foreign currency,” RioZim said. “The impact of this on the Company’s operations has been that the Company is unable to pay its external suppliers and consequently, the Company’s costs have escalated as the price of locally available consumables and spares has increased exponentially when compared to the prices quoted by external suppliers for the same products.”
In some cases, RioZim said the prices quoted by local suppliers were more than 300% above those quoted international suppliers.
The mining group said the situation was unsustainable and prohibits its ability to operate viably and maintain its production.
“In addition, the gold business requires access to foreign currency in order to fund very important sustaining capex projects. For example, the Company needs to establish a Biological Oxidation Plant at Cam & Motor Mine which is required to treat refractory ore as the near-surface oxidized ore was already depleted at the end of last year. Unless the Company is allowed to access adequate foreign currency to fund this project, it will not be able to build this plant thereby adversely affecting the viability of the mine. There are other similar capex projects which are absolutely critical for the Company to sustain and grow its current production which have not been triggered as a result of foreign currency not being available,” RioZim said.
“The lack of foreign currency has also started to have a significant negative impact on the Company’s ability to meet its projected targets. The challenge which the Company faces is that its revenues have shrunk leading to a severely depressed production whilst its cost base continues to fluctuate and like most mining companies, the Company’s costs are largely fixed and the Company can only benefit from increased production. Costs in local currency have increased exponentially.”