Gold deliveries slipped 53% to 1.27 tonnes last month from 2.746 tonnes during the same month last year on delays in payment amid fears the yellow metal could have been diverted to an alternative market where payment is instant.
The yellow metal is the highest forex earner and 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 economy.
The drop in delivery could jolt monetary authorities as it comes after Fidelity Printers and Refiners began 100% United States dollars payment on July 17 2020 for small scale miners.
However, it is taking a fortnight to clear small scale arrears.
From a total of 1.2 tonnes, small scale miners delivered 0.418 tonnes while primary producers delivered 0.85 tonnes.
Experts said the 78% drop in gold deliveries by small scale miners to 0.418 tonnes in August 2020 from 1.933 tonnes during the same month last year indicates that the secondary producers are protesting the delays in payments for their precious metal.
Fidelity Printers and Refiners general manager Fradreck Kunaka told Business Times that deliveries this year have not been as expected because the year has been marked with unprecedented setbacks.
“August 2020 gold deliveries have dipped to 1.270 tonnes from 2.746 tonnes during the same period in 2019 due to cash shortages that we have been experiencing and this has been a result of the limited inflow of flights with United States dollars because of the Covid-19 restrictions,” Kunaka said.
“We have to work around restrictions imposed by the coronavirus pandemic which has hampered our operations thus the noticeable decline in gold deliveries.”
The development comes after gold deliveries fell 49% to reach 1.406 tonnes in July 2020 from 2.77 tonnes due to change in payment system of the small scale miners.
Current cumulative gold deliveries figures up to August 2020 has fallen 25% to 13.409 tonnes compared to 17.84 tonnes delivered during the first eight months of 2019.
Zimbabwe’s gold export receipts have retreated 1.2% to reach US$555.5m during the first six months of 2020 from US$561.4m earned during the comparative period in 2019 due to a huge fall in July gold deliveries.
This comes as Zimbabwe’s golden leaf’s export receipts have gone up 4% to US$261m after selling 78.3m kilogrammes as on July 8 2020 from US$250m earned during the same period last year.
Cumulatively the country’s gold and tobacco export receipts remained flat at US$816.5 m during the first seven months of 2020 from US$811.4m grossed during the first seven months of 2019.
Last year gold export receipts, slumped 28% to US$946m in 2019 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 but the reduction of the forex retention levels by the Reserve Bank of Zimbabwe is believed to have impacted negatively on the deliveries.
This has created arbitrage opportunities for miners to smuggle gold outside the country’s borders.
Over 34 tonnes are believed to have been smuggled out of Zimbabwe last year as miners seek more receipts to avoid the 55% forex retention threshold that was in place.
The retention threshold has been standardised at 70% for all exports. Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze told this publication that Fidelity Printers and Refiners should move swiftly to pay miners on spot to encourage gold deliveries through formal channels.
“The fall in gold deliveries was expected in August as FPR still owes various small scale miners United States dollar payments as back as two weeks backlog.
As long as there are delays in payments small scale miners will search for alternative markets for their yellow metal,” he said.
“We don’t protest in the streets but the fall in gold, deliveries show our sign of displeasure in gold payments.”
Despite Fidelity Printers and Refiners optimism of reaching 35-tonne target, Chinyenze said output will not reach last year’s haul of 27.6 tonnes.
Experts suggested that established mining companies with huge capital have dominated this year’s deliveries due to lack of movement from the small scale miners.
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 lead the charge with US$4bn.