The Reserve Bank of Zimbabwe (RBZ) will meet gold mining players next week to resolve differences on forex retention levels as it moves to boost sales through the formal channels amid rising leakages of the yellow metal.
The sector is battling leakages amid claims by Finance Minister Mthuli Ncube that over 34 tonnes of gold were smuggled to neighbouring South Africa which is offering a 15% rebate to miners who sell gold to them.
In February, RBZ lowered the forex retention levels to 55% from 70%, raising the ire of goldminers who warned that leakages would persist. Save for October, monthly gold deliveries to Fidelity Printers and Refiners (FPR) have been low compared to the same period last year. RBZ governor John Mangudya told Business Times that the monetary authorities would continue to discuss with miners to bring the forex retention issue to a finality.
“Next week we will meet the Chamber of Mines of Zimbabwe, Zimbabwe Miners Federation (ZMF) and other gold mining affiliates to discuss the forex retention threshold as we move to ensure that gold comes through Fidelity Printers which is the sole buyer of gold in the country,” he said.
“We are free to discuss with the miners to find common ground on retention levels but what we always remind each other is that minerals in Zimbabwe under the Mineral Act are for the people of Zimbabwe, therefore everyone has to benefit from the minerals through the purchasing of critical raw materials from the balance of [the forex retention levels that] we would have agreed upon,” Mangudya added.
Gold is now the highest single foreign currency earner for Zimbabwe ahead of tobacco, but its subdued performance continues to shatter the country’s hope of turning around the economy. Gold contributes 38% of the country’s total earnings and more than 60% to the mining sector, the economy’s highest forex earning sector.
Mangudya, who equated gold’s importance to the country as oil is to Nigeria, said gold was the most liquid asset and most important to Zimbabwe and should be handled with care. Last week, he ruled out 100% retention for gold miners saying the forex from gold was needed to meet the economy’s critical imports, such as fuel and medicines.
In Australia, gold is placed under the Crown and in South Africa it is under the President’s jurisdiction.
“In as much as we would like our miners to bring the gold to Fidelity to increase productivity, we can’t lie to each other saying that we will give them a 100% percent forex retention level, because we have the people of Zimbabwe to feed through grain importation, we have agriculture productivity to increase through fertiliser and fuel importation, and we have the people to heal through medicine importation,” Mangudya argued. “We can’t afford to give them 100%, we just can’t.”
During the inaugural ZMF conference in Gweru a fortnight ago, President Emmerson Mnangagwa pleaded with the monetary authorities to increase forex retention levels to 60% to woo more miners to sell their produce to Fidelity. That offer was openly rejected by the miners who want over 70%.
Irvine Chinyenze, the CEO of the Gold Miners Association of Zimbabwe, said the monetary authorities should increase forex retention to above 60%. “The monetary authorities should just raise the forex retention levels to around 80% to motivate miners to sell their gold through the formal channels. We would want the FPR to pay miners timely to continue with production,” Chinyenze said. “Most importantly, we would want the FPR to improve on efficiency and the rest will follow as trust should be the first thing that miners should have towards the refinery.”
Gold deliveries decreased 23% to 23.03 tonnes during the first 10 months of 2019 from 30.13 tonnes during the comparative period last year due to currency shortages, power outages and poor mining policies.
A further decline was caused when the country’s power utility intensified power outages during the month of June, resulting in some companies working only four days a week. Experts warn that the US$4bn export earnings target by 2023 will not be realised if the country does not resolve the electricity problem, and the forex retention level.
Zimbabwe is targeting to increase production to 100 tonnes of gold per year by 2023, a figure which the country may reach if all gold is accounted for.