LIVINGSTONE MARUFU
ZIMBABWE’s gold deliveries are likely to go down this year amid indications that over 30 tonnes of the precious mineral were smuggled to out of the country last year due to unfavourable pricing following the widening disparity between the bond note and the US dollar.
Despite beating the 19-year record in terms of gold deliveries last year, Zimbabwe lost a significant tonnage of gold to neighbouring countries due to the 70% forex retention to small-scale miners who are the biggest contributors to the sector.
With the 55% forex retention announced yesterday by the Reserve Bank of Zimbabwe governor John Mangudya during his monetary policy statement, smallscale miners are looking for an alternative market and leakages are likely to increase. This, according to industry players, will result in local gold production going down.
Prior to the pronouncement, gold deliveries had already gone down 30% in January this year to 1.77 tonnes from 2.55 tonnes during the same period last year.
Smallscale gold producers believed that with the 70% retention threshold, the country was not likely to achieve the targeted 40 tonnes this year due to crippling foreign currency shortages needed to procure critical raw materials and consumables required in gold mining.
In the monetary policy statement yesterday, the RBZ reduced the 70% retention threshold to 55% for all miners, big or small in order to discourage the large scale miners from delivering their gold through small scale miners. Before yesterday, large scale miners were already on a 55% retention threshold.
Irvine Chinyeze, the Gold Miners Association chief executive, told Business Times that the 55% retention for all miners will “kill the goose that lays the golden eggs” given the amount of gold that the smallscale miners contribute under difficult circumstances.
“The central bank has totally lost it on this one as it promotes smuggling and leakages,” Chinyeze said. “With the retention level at 70% forex, we were given very low proceeds way below the world market price as they are all pegged in US dollars.
“A range of between 20 and 30 tonnes of gold were said to have been smuggled to South Africa. Given the newly announced retention level [of 55%], most gold will be smuggled as smallscale gold miners will look for better markets. Certainly deliveries will go down.”
Chinyeze said smallscale gold miners will need forex to buy fuel, JCBs, compressors, generators and spare parts among other requirements.
The development also comes at a time when the smallscale miners, who have eclipsed primary producers in the past two years, have suffered due to excessive rains in the past month which have had.
This will mean the country’s general export receipts will also be affected as gold contributed around 38% of the country’s export earnings last year.
Consequently, the foreign exchange and cash shortages are likely to prolong because the country mainly depends on gold for quick forex.
Gold only takes a week to export while other minerals like platinum take at least a month.
Gold and tobacco are the country’s two highest forex earners.
Fradreck Kunaka, the general manager of Zimbabwe’s sole buyer of gold, Fidelity Printers and Refiners, said smallscale miners should be capacitated and formalised to ensure deliveries do not go down during the rainy season.
Accordinv to Kunaka: “Zimbabwe’s gold deliveries have gone down 1.77 tonnes in January 2019 from 2.55 tonnes during the same period last year. This is mainly due to the crippling forex crisis which has caused miners to delay in procuring equipment and consumables for extracting minerals. Smallscale miners are having difficulties in getting fuel for generators and other machines for dewatering processes.”
Some miners such as RioZim have blamed the RBZ for not honouring the 55% forex retention in time for large scale miners and this has choked their operations. This is causing large-scale producers to divert their gold to smallscale producers where forex retention is 70% and is paid within a week.
Though Winston Chitando, the mines and mining development minister, says the country’s rise in gold production is due to government’s efforts to curb leakages through the Gold Mobilisation Task Force, more needs to be done to plug leakages.
The Taskforce is mandated to make sure that all the gold produced in the country goes through formal channels. It is comprised of officials from the Ministry of Mines and Mining Development, the Zimbabwe Defence Forces and the Zimbabwe Republic Police.
Last week’s Battlefields mine disaster, which claimed the lives of more than 24 smallscale miners, is expected to be taken as a learning curve by smallscale miners and an urgent need for them to formalise their operations.
If the over 300,000 small scale miners formalise their operations, more gold will be harnessed and the mobilisation processes will be much easier.
