EDITORIAL: Mining: Guarantee fund long overdue

It takes a lot of grit, endurance and determination to drill through rocks in dark mines feet underground, but all the effort and risk might appear nothing compared to attempt to secure a bank loan to shore up mining activities. Banks just won’t accept loan requests from miners. The central bank says for the second year running, mining topped the sectors with the highest loan rejection rate by local banks. Statistics for last year indicates that 96 per cent of the total loan applications in the sector were rejected, up from 68 per cent in 2014. The biggest loan request rejected from the sector was of about Rwf4.5 billion owing to lack of tangible security and the business being a start-up with no track record. Mining, a sector that would otherwise be giving tourism and agriculture a run for their glory in terms of revenue addition to the GDP, has been so badly beat up in recent years, especially with the fall in global prices as well as unfounded accusations on ‘legitimacy’ of Rwandan minerals. Banks also say the sector lacks clarity in terms of cash flows and that heavy investment for ventures that are long-term put off banks. The result is that most mining firms continue to limp financially, leaving sector players bearing the brunt of operations. Many miners find themselves without insurance despite the risk, while others are forced into illegal mining. Many more end up seeking alternative engagements in other sectors. The boomerang has seen mining sector revenue fall $203.2 million worth of exports in 2014 to $117.81 million last year. This calls for serious consideration given that with the country receiving over 50 mining applications during each of the last five years; it means more jobs would be at stake if the sector was left to crumble. The good news is that the government has drafted a guarantee fund that is under review, and has also involved the World Bank in the process. This has been long overdue but not too late to get rolling. With the global market still unstable, such support from government will reinstate confidence in miners to exploit their potentials and contribute to economic transformation.

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EDITORIAL: Mining: Guarantee fund long overdue