Furious Rio Zim threatens to sue RBZ over foreign currency

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By Staff Reporters

GOLD miner Rio Zim is considering suing the Reserve Bank of Zimbabwe (RBZ) as a row over the company’s foreign currency access took a nasty turn.

In an angry statement recently Rio Zim said monetary authorities had effectively broken their own rules by withholding its foreign earnings without explanation.

“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,” read the statement in part.

Listed on the Zimbabwe Stock Exchange (ZSE), Rio Zim said failure to access foreign currency its was negatively affecting the mining group’s viability.

“The company is currently facing severe challenges arising from the company’s inability to access its foreign currency earnings that are required to fund its operations and sustain its growth. 

“Whilst the Central Bank’s policy from April 2016 to September 2018 was that gold producers were entitled to access 50% of their receipts in foreign exchange automatically in their nostro account and the balance 50% by application (this policy has changed to 30% with effect from 1 October 2018), the company has not received even the first 50% let alone the balance as per the directives issued by the Central Bank in respect of its foreign exchange allocation.

“Since 2016 to date, the Company has only been allocated an average of circa 15% of the foreign currency that it has generated.”

Finance Minister Mthuli Ncube has promised not to temper with companies’ nostro accounts which were routinely raided by his predecessor Patrick Chinamasa.

According to the Rio Zim, gold producers are required to deliver all ore to Fidelity Printers and Refiners “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.”

The company said the failure by the RBZ to honour these obligations has resulted in the company failing to pay its external suppliers.

“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, the prices quoted by local suppliers is more than 300% the prices quoted by their international counterparts,” said the company. 

It added: “Furthermore, the effect of the Central Bank’s inability to allocate the company adequate foreign currency is that the company has in effect been receiving a fraction of the true value of the international market price of the gold that it has been delivering to Fidelity Printers.

“The situation is thus unsustainable and prohibits the Company’s ability to operate viably and maintain its production.”