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Does Zimbabwe's Central Bank Export Incentive for Mining Need a Re-think?

In May 2016, the Reserve Bank of Zimbabwe introduced an export ince.... As some mining companies begin to report on their earnings, it is becoming evident that the export incentive has been beneficial to them.

Asa Resources owned Freda Rebecca Mine reported earning $1.3m from the export incentive. Zimplats has reported earning $6.6 million from the same export inc....

What is not clear is the extent to which the export incentive has resulted in increased production and exports. As an example, the increase in platinum and 4E production at Zimpla... and this is  during the period when the export incentive kicked in. The export incentive does not seem to be tied to production like the royalty rate which is on a sliding scale.

Some mining commodities are largely inelastic. This means that minerals that are already largely being exported will likely continue to be exported even where there are changes to pricing and whether or not there are is an export incentive in place. Has the incentive really resulted in increased production and exports? Is the government not forgoing much needed revenue through this incentive? It is important to note that even before the export incentive the mining sector was already contributing between 50%-60% of export earnings. Was it really necessary to incentivise large scale miners this way? It could be argued that the bonus scheme was put in place to pacify what concerns large scale miners might have on selling 50% of their export proceeds to the RBZ  for exchange with
40% in Rands and 10% in Euro at the prevailing market exchange rate.In some sense, the export incentive is possibly meant to ensure miners do not complain as the central bank credits their RTGS Accounts with the respective rand and euro values.

When the central bank instituted the incentive, it was also extended to small scale gold producers at 5%. The export incentive for gold producers makes much more sense as the gold from this sector is more likely to circumvent the formal market. It therefore, becomes necessary to incentivize artisanal and small scale gold miners through this export benefit. This is not the case with large scale miners over which the government has considerable oversight already. It will be interesting to look at the total bonus payments made to mining companies against the export receipts at the end of the year.

Mining companies could really do with some incentives. However, these incentives do not have to be in the form of an export bonus that comes across as ‘ free money’. Incentives could include policy certainty, rationalisation of mining fees, levies and taxes and support for access to energy.

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