PRESS STATEMENT ON THE LIFTING OF THE BAN ON EXPORT OF CHROME ORE

 

 BY

 

THE MINISTER OF MINES AND MINING DEVELOPMENT

 

HON. W. K. CHIDAKWA (MP)

 

8 JUNE 2015

 

 

1. In an effort to address challenges currently faced by the chrome mining sub-sector, and the need to promote value addition to minerals before export, Government lifted the ban of exportation of chrome ore and levied 20% Export Tax in 2009.

 2. After the lifting of the ban on exports, the chrome sub-sector continued to experience the following challenges:

    • Lack of effective accounting framework for chrome ore volumes and values that were being exported to Maputo Port;
    • Lack of a well-coordinated administration and monitoring framework for production, marketing and export of chrome ore; and
    • Environmental degradation that resulted from uncontrolled mining of chrome ore far outweighed the foreign currency generated.

 3. In light of these challenges and in an effort to encourage local beneficiation and value addition of chrome ore, Government, again, imposed a ban on the exportation of chrome ore in April 2011.

 4. However, the Government ban did not result in additional smelting operations of chrome ore due to the following factors:

    • Lack of efficient and modern technology for processing chrome ore to ferrochrome;
    • Falling international prices of ferrochrome to sub-economic levels; and
    • High electricity tariffs.

5. The ban on the export of chrome ore negatively affected all small-scale (artisanal) chrome ore producers, who lost their economic ventures and livelihoods. In addition, the ban on the export of chrome ore did not create opportunities for smelters to invest in new technology for expanded value addition and beneficiation.

6. In order to enable chrome ore producers to mobilize financial resources for capitalisation to invest in modern technology in smelting, as well as address the plight of the small-scale chrome ore producers, Government, has with immediate effect, lifted the ban on the export of chrome ore to allow for the export of up to thirty (30) million tonnes of chrome ore (lumpy, fines and concentrates) over and above the export of processed ferrochrome.

7. The threshold of up to 30 million tonnes of chrome ore shall be subject to review based on desired developments in the establishment of additional smelting capacity in the country. In line with ZIMASSET, Government’s ultimate objective is to create, in the medium to long term, adequate smelting capacity for value addition/beneficiation purposes.

8. Government has also reviewed the current royalty fees for chrome ore from 2% to 5%, whilst the export tax of 20% has been removed to allow chrome ore producers to generate income to increase smelting capacity.

9. In addition, in order to assist chrome ore producers to operate viably to allow them to create investment capacity in smelting,  Government decided to reduce electricity tariffs from 8.0 US cents to 6.7 US cents per kilowatt hour for chrome ore producers, ZESA shall implement the approved electricity tariff, with immediate effect.

 10. Prior to the suspension of export of chrome ore in 2011, total prepayments amounting to US$9,432,335 were made for exportation of lumpy and concentrate chrome ore totaling about 77,000 metric tonnes. This tonnage was not shipped following the ban and remains an obligation to the country. With the lifting of the ban, Government will facilitate the export of all the encumbered chrome ore to the beneficiary importers.

11. In lifting the ban on the export of chrome ore, Government has taken into account the following key considerations:

    • Available chrome ore production capacity which is estimated at 1.5 million metric tonnes per year;
    • Limited smelting capacity at 455,200 metric tonnes per year;
    • Available rail transportation capacity at National Railways of Zimbabwe to port estimated at over one (1) million metric tonnes per year;
    • Available road transportation capacity at National Railways of Zimbabwe and other transporters. There is currently excess capacity for NRZ’s Road Motor Services (RMS) which is currently under-utilised and NRZ is desirous to put its transport fleet to full use through chrome ore movement.

 12. The optimum production, smelting and export of chrome ore would result in major producers such as Zimasco being able to generate income for expanding their smelting capacity. The economic livelihoods of small scale producers would also be restored, and revenue to Government would be boosted through Royalty fees payments, and other taxes such as corporate tax and PAYE.

 

Guidelines for Licensing and Exportation of Chrome Ore

13. All the 12 Chrome ore producers already in ferrochrome smelting and a Special Purpose Vehicle (SPV) established by Government shall be registered with the Ministry of Mines and Mining Development to export excess chrome ore. However, in order to encourage greater participation by small-scale producers, a well-monitored purchase and sale structure shall be put in place by MMCZ in due course.

14. All exports of chrome ore shall be conducted under the auspices of the Minerals Marketing Corporation of Zimbabwe (MMCZ) and facilitated by the Reserve Bank of Zimbabwe (RBZ) and the Zimbabwe Revenue Authority (ZIMRA).

15. The export of chrome ore shall be on pre-finance or pre-payment basis. A strict monitoring framework for pre-financed chrome ore has been put in place to address problems of side marketing.

16. The SPV shall establish viable toll-processing (manufacturing) arrangements with external toll manufacturing companies to beneficiate chrome ore fines into ferrochrome for export purposes.

 

Infrastructural Support

17. It is important to note that, capacity challenges experienced prior to the ban may recur if there is no strategic intent by Government to create sufficient infrastructural support for the exportation of chrome ore.

18. In this regard, Government shall, as a matter of urgency, establish ISO Certified Government mineral laboratories that will be administered by the Department of Metallurgy in the Ministry of Mines and Mining Development.

19. In addition, for effective accounting and monitoring of chrome ore production and exportation, Government will establish rail and road weighbridges.

20. Similarly, in a bid to ensure that the transport infrastructure is adequate to move the export tonnages under this window and in line with ZIMASSET objectives, Government will immediately enhance NRZ’s capacity to improve its rail infrastructure and rolling-stock capabilities.

 

Compliance Monitoring Framework

21. It is important to note that the monitoring challenges that were experienced prior to the lifting of the ban on the export of chrome ore may persist if Government does not put in place an effective monitoring framework. In this regard, the country’s monitoring capacity in terms of assessment of quantity and quality of chrome ore exported shall be addressed through the infrastructural support alluded above.

22. To complement this, Government shall also establish a well- coordinated inter-ministerial institutional framework that will comprehensively monitor the entire value chain of chrome ore from production to marketing and export.

23. In order to ensure that only excess chrome ore is exported, registered chrome ore exporters shall enter into agreements with the Ministry of Mines and Mining Development on the minimum feedstock into the smelter - which throughput shall be based on an average of the chrome ore producer’s ferrochrome production over the past three (3) years.

24. To facilitate smooth implementation of these measures, the Reserve Bank shall, in due course, issue detailed operational guidelines, export modalities and a strict monitoring framework that provides a consistent link between production, smelting for exportable ferrochrome and exportation of excess chrome ore.

25. It is Government’s objective that the temporary lifting of the ban on the export of chrome ore should generate additional foreign currency earnings to boost market liquidity and expand the Government’s revenue base. 

 

 

BY THE MINISTER OF MINES AND MINING DEVELOPMENT

HON. W. K. CHIDAKWA

9 JUNE 2015