You’re Right, Zimbabwe’s Government Is Broke Again – Gold Mines Close For Lack Of FX Payment


The classic sign of an organisation going bust is that payment terms to creditors start to lengthen. Sure, we all manage our cash flows. Pay the little guy ahead of time because who doesn’t want a decent local reputation. Pay the taxman at the last moment possible for who the hell cares what he thinks of you? But as payment terms ever lengthen there becomes the risk that creditors will stop supplying. At which point the organisation – whether a firm or a government – topples over into insolvency. For without the flow of inputs to create more output there’s no possibility of paying off those past bills for earlier inputs is there?

Which is where Zimbabwe’s government is now. The majority – not just a plurality but a majority – of export earning and thus foreign exchange comes from the mining sector. This obviously a result of the tender care and attention given to the farming and tobacco sectors by Robert Mugabe. But the central bank has been delaying payments to the miners for long enough that they’re closing down operations over lack of cashflow. Meaning that we’re approaching crunch time for those government finances:

One of the country’s leading gold producers, RioZim, has yet again stopped operations at three of its mines — Cam and Motor, Dalny and Renco — citing non-payment by the Reserve Bank of Zimbabwe (RBZ) for gold deliveries made to Fidelity Printers and Refiners. Gold mines are required by law to sell their produce to Fidelity Printers and Refiners, which is a wholly-owned subsidiary of the central bank. Mining is the largest earner of foreign currency in the southern African country, contributing more than 60% of total exports, but miners are forced to surrender 70% of their export earnings to the central bank, which is supposed to allocate the foreign exchange to the rest of the economy.

In exchange for the foreign currency, the central bank pays the exporter using Real Time Gross Settlement (RTGS), crediting the exporter’s account with local currency. “As of date, the company has experienced significant and persistent delays in payment of its foreign currency allocation for deliveries made to Fidelity Printers and Refiners since December 2018 and severely affected the viability of the company’s operations and consequently, the company has been recently forced once again, to involuntarily suspend production across all three of its gold mines pending full payment of its foreign exchange proceeds which it requires in order to produce the necessary consumables needed to keep gold production running,” RioZim said in a statement.

At which point we might as well just stick a fork in the financial viability of the current Zimbabwean government, it’s done.

As it turns out getting rid of Robert Mugabe was a necessary but not sufficient condition of improvement. Emmerson Mnangagwa isn’t sufficient either. Next please?

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