The country’s sole buyer of gold, Fidelity Printers and Refiners (FPR) says authorities should introduce a tax moratorium on small scale miners to ramp up production as Zimbabwe eyes 100 tonnes of the yellow metal per annum by 2023.
The country’s gold production has gone down to 2015 levels due to unfriendly mining policies which promote rampant smuggling.
The country’s multi-billion dollar mining industry was characterised by high taxes, low retention levels and uncompetitive prices.
FPR acting general manager, Peter Magaramombe told Business Times that a resolution of current challenges will redirect the country towards the 100 tonnes a year target.
“There is a need to introduce tax exemptions for small scale miners in order to attract deliveries through the formal channels.
“There should be a tax moratorium – for a specific period to harness the gold that the small-scale miners are selling to alternative markets due to high taxes,” Magaramombe said.
In June this year, FPR introduced a 5% incentive to those who deliver 20 kilogrammes going upwards a month and pegged its buying price at par with the international gold price to lure miners to sell gold through the formal channels.
Small scale miners are the game changers and if they divert their gold to the alternative market the national gold output will suffer, experts say.
The authorities are giving the small scale miners preferential treatment to convince them to sell to
the official channel.
Last year, the country delivered just over 19 tonnes and the experts believe there is a big possibility that the country might have extracted over 50 tonnes with the bulk of the output being smuggled out of Zimbabwe.
It is understood that the country could be losing over 30 tonnes yearly which is valued at US$1.7bn due to smuggling and unfavourable mining policies.
Experts say Zimbabwe has to liberalise the gold sector to combat smuggling and compete at the highest level with foreign gold buyers.
“To reach 100 tonnes, we need to curtail leakages through providing incentives for gold deliveries, registering all gold processing plants in the country and providing a competitive price all the time,” Magaramombe said.
The country’s gold output plummeted 31% to record 19.052 tonnes last year from 27.66 tonnes recorded in 2019 as due to Covid-19 effects and low foreign currency retention levels.
Zimbabwe is offering the large scale miners 60% forex retention and small scale miners are getting
100% forex at international spot gold prices.
Yesterday’s gold price was over US$58,000 per kilogramme and FPR has moved to pay that amount
together with incentives to encourage miners.
“The true position is that the government of Zimbabwe through RBZ reviewed Fidelity’s buying price of gold from the artisanal miners, small scale miners and buyers and introduced a 5% incentive to those who deliver 20kg or more per month.
This has resulted in a positive response that is set to propel June deliveries to breach the two tonnes line for the first time since May 2020,” Magaramombe said.
He said there is need to improve gold production by resuscitating dormant mines and opening new mines as well as ramp-up production for existing gold mines to achieve 100 tonnes by 2023.
Experts said friendly policies will enable the mining sector to attract long term, “patient” investment which will help to reach the 100 tonne mark.
Gold Miners Association of Zimbabwe Irvine Chinyenze said the industry expects gold deliveries to improve as the authorities have removed most of the impediments that drove the small scale miners to sell to the alternative market.
“It is a timeous intervention, we hope things will stay like that for a while,” Chinyenze said.
Zimbabwe gold deliveries fell 17% to reach 1.668 tonnes during the month of May 2021 from 2.015 tonnes during the same period last year due to unfavourable policies and smuggling.
During the period under review, small scale miners delivered 0. 783 tonnes while primary producers delivered 0.884 tonnes to FPR.
Overall, gold deliveries for the first five months of the year fell 24% to reach 7.028 tonnes from 9.195 tonnes during the January to May period in 2019.