The post The surprising story of Zimplats and US$5,5 million appeared first on Provoker Magazine.
]]>During the half year ended December 31, 2020, Zimplats was able to reduce foreign exchange losses by an impressive US$5,5 million.
Before we dive into how they were able to do that, we’ll take a look at who Zimplats is as an organization for those who don’t know. In short, Zimplats is the leading mining company in Zimbabwe specializing in platinum group metals such as platinum, palladium, rhodium, iridium, ruthenium and osmium. With this background in mind, its safe to presume that vast amounts of funds had to be exchanged from the local currency to foreign currency in order to continue with effortless operations.
Given the unpredictable fluctuations of the exchange rate from the local to foreign currency, Zimplats, much like other institutions had to deal with major losses that arouse from currency exchange alone. In the case of Zimplats, a staggering US$5.6 million foreign currency exchange loss was recorded in the half year period ending December 2019. However, during the same period in 2020 they were able to reduce those losses to US$0.1 million. So how were they able to save an astounding US$5.5 million regardless of foreign exchange rate fluctuations remaining uncertain?
On June 2020, the RBZ foreign exchange auction system replaced the interbank market. These weekly foreign exchange auctions were put in place with the aim of,
“improv[ing] transparency and efficiency in trading of forex in Zimbabwe”
said RBZ Governor, Dr John Mangudya.
Dr Mangudya described the system saying
“that auction system will operate on the Reuters Forex Trading platform, a real-time electronic trading system.”
Since its establishment in June 2020 , the auction continues to be held every week on a Tuesday. Zimplats spoke in regards to this saying,
“The group recorded net foreign currency exchange losses of US$0,1 million compared to US$5.6 million in the same period last year owing to the rate movements of the Zimbabwean dollar observed on the foreign currency auction system that was introduced in June 2020 by the Reserve Bank of Zimbabwe.”
Many corporates that participate in the auctions, such as OK Zimbabwe and Telecel have praised this system as it has been able to calm exchange rate volatilities and ease the liquidity crisis.
What is your opinion on the Foreign Exchange Auction that was introduced? How has it impacted your organization?
We would love to hear your thoughts in the comment section below.
The post The surprising story of Zimplats and US$5,5 million appeared first on Provoker Magazine.
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