Zimbabwe could lose the equivalent of four months of mining output this year because an acute dollar shortage has led to delays by banks in processing payments for imports of spare parts and supplies, the Chamber of Mines said on Monday.
The problem affects the entire mining sector, which includes gold, nickel, chrome, diamonds and coal.
Zimbabwe ditched its own dollar in favour of the U.S. currency in 2009 to try to put a lid on hyper-inflation and prevent a complete meltdown of the economy.
But shortages of U.S. bank notes that started in March have worsened and the central bank has unnerved depositors with plans to introduce local notes.
Toindepi Muganyi, president of the Chamber of Mines, told a parliamentary committee that banks were taking 10 to 20 days to clear payments for imports by mining companies “with potential production loss of up to four months.”
“This will remain a huge potential risk to the outlook,” Muganyi said.
Mining earned more than half of Zimbabwe’s $2.7 billion in foreign earnings in 2015 and a loss of output would damage a sector struggling with depressed commodity prices.
The central bank says cash shortages are caused by the illegal export of dollars and lower exports at a time when Zimbabwe’s imports are growing, resulting in the trade deficit growing nearly tenfold in the last decade.
Charity Jinya, president of Bankers’ Association of Zimbabwe, told the same committee that adopting the rand of South Africa, Zimbabwe’s largest trading partner, would stem the outflow of dollars.
“We would recommend that the South African rand be used as the main transacting currency. This would reduce concentration of risk on the U.S. dollar,” Jinya said.
Zimbabwe was importing smaller value U.S. dollar notes to discourage the illegal export of money from Zimbabwe, Jinya said.
The central bank on May 4 imposed curbs on imports and set limits on cash withdrawals to ease shortages.