Zimbabwe’s economy is bearing the brunt of the worst commodities slump in over a decade, primarily as a result of the prolonged shock of unprecedented low forex that followed a steep decline in commodity prices on the global market , a bigger source of foreign currency for the southern African country, Business Times can report.
This week, the governor of the Reserve Bank of Zimbabwe (RBZ), John Mangudya (pictured), painted a dire picture, warning that the more than 80% dollarized ailing Zimbabwean economy would suffer greatly from the sharp decline in export earnings brought on by falling commodity prices on the global market.
Mangudya said it was unprecedented that export earnings fell by 9% in the nine months leading up to September 2023, to US$3.6bn from US$4.5bn in the same period in 2022.
Lithium, platinum, nickel, and many other commodities are seeing price declines, which is a challenge for the mining industry.
There are increasing concerns about job losses in the mining industry, which employs hundreds of thousands of people.
Business Times was informed yesterday by a number of mining industry executives, who are grappling with the toughest period, that the industry’s workforce is currently undergoing consultations that may result in layoffs.
The impending layoffs will demonstrate how some of the nation’s most important metals and minerals are among those whose prices have fallen the fastest during the most recent commodities downturn. The situation has been worsened by rising costs of mining, outstripping inflation.
Owing to the gravity of the situation, Mangudya and his colleagues noticed the dark cloud looming over the Zimbabwean economy, prompting them to focus this week’s Monetary Policy Committee meeting on the crisis.
Mangudya issued an alert this week, stating that the shortage of foreign currency would get worse.
“Due to the negative developments in the global economy, prices for most mineral commodities including platinum, nickel and lithium have been declining, negatively affecting export receipts in the economy. As a result, export receipts, which are the main source of foreign currency for both the wholesale and retail foreign exchange auctions and for servicing the country’s foreign commitments, fell by 9% over the nine months to September 2023, from US$4.5bn during the comparable period in 2022 to US$3.6bn,” Mangudya said this week.
He added: “Considering the emerging global risks and the need to keep exchange rate and inflation expectations anchored to support economic growth, the MPC (passed a number of resolutions, among them) standardising the percentage of foreign currency retained on exports to 75% for all economic sectors and eliminating all special dispensations granted to certain economic sectors.
“The net effect of this measure is to increase foreign exchange resources available to the Bank and Government to meet foreign exchange requirements for the settlement of national and international obligations.”
According to Isaac Kwesu, CEO of the Chamber of Mines of Zimbabwe, the mining industry is facing a dilemma.
“Since we are price takers, we have no control over it. It’s the cost side that we have control over. Regretfully, the cost structure has been increasing,” Kwesu said.