LIVINGSTONE MARUFU
Zimbabwe’s gold deliveries surged 44% to 2.54 tonnes in January from 1.77 tonnes during the same period last year on the back of increased fuel allocations to miners.
Experts said the country’s prospects of recovery could be very possible this year if the January gold deliveries are anything to go by given that the yellow metal is now the highest single foreign currency earner ahead of tobacco.
On average bullion contributes 38% of the country’s total earnings and more than 60% to the mining sector which is the highest forex earning sector in the country.
Fidelity Printers and Refiners (FPR) general manager Fradreck Kunaka told Business Times that since October last year gold deliveries have been improving due to fuel accessibility to miners.
“In January 2020 gold deliveries went up 44% to 2.54 tonnes from 1.77 tonnes delivered during the same period last year due to the massive fuel provisions from monetary authorities and increase of gold centres across the country,” Kunaka said.
In January small scale delivered 1.81 tonnes while primary miners contributed 0.73 tonnes compared to 1.02 tonnes extracted by small scale miners and 0.74 tonnes by primary miners in January 2019. In 2019, cumulative gold deliveries fell 16% to 27.6 tonnes from 33.2 tonnes in 2018 due to suspected smuggling and hostile mining policies.
The decline was mainly due to power outages which intensified during the month of June, inefficient mining and processing technologies in use, inappropriate mining methodologies especially at a time when most mines have deepened beyond 30 metres and inappropriate ore hoisting machinery from the deep mine shafts.
Last year, gold receipts slumped 28% to US$946m from US$1.33bn in 2018, leaving the country with no alternatives for foreign currency as the second-highest forex earner, tobacco, also tumbled 7% to US$846.7m from US$907.8m due to prolonged droughts and unfavourable payment policies.
Since 2017, the country has been grappling with foreign shortages, inefficient mining and processing technologies and the reduction of the forex retention levels by the Reserve Bank of Zimbabwe to 55% from 70%.
This has created arbitrage opportunities for miners who are smuggling gold to South Africa.
Last year, Finance and Economic Development minister Mthuli Ncube said close to 34 tonnes of the yellow metal was smuggled to Rand Refinery in Cape Town, with South African authorities beneficiating gold into posh jewellery.
This is believed to have created arbitrage opportunities in the gold sector and this will have a negative impact to the already fragile economy as gold is the most liquid commodity in the world with countries earning their forex within a fortnight.
The increase in gold deliveries is a boon for the economy which is hit by rampant inflation, subdued production across most sectors of the economy, crippling power outages and serious shortages in many areas, leaving Zimbabwe on the edge of total economic explosion.
Despite Mines and Mining minister Winston Chitando targeting gold at 50 tonnes, FPR said the company has its own targets due to the information they have on the ground.
“The target for this year is 35 tonnes and we are encouraging all gold producers to deliver their gold using the formal channels.
“This will go a long way in generating foreign currency for the nation which will be used for purchasing of medicines for hospitals, buying fuel for the country, importation of chemicals to purify water and chemicals used in mining and other national beneficiation projects,” Kunaka said.
He said, however, if miners opt to sell gold to the parallel market, valuable foreign currency is lost, hence the failure to generate any forex for developing the country.
FPR said the end result will lead to the crippling of the economy and suffering of the entire nation as critical requirements will not be met.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly and only if forex retention threshold, fundamentals and funding issues are addressed. Gold is expected to contribute US$4bn by 2023.
