LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) has set a January 2022 deadline to complete the restructuring process of the country’s sole buyer and marketer of gold, Fidelity Printers and Refiners (FPR), Business Times can report.
Under the plan announced in January this year, FPR will be unbundled into two separate entities — gold refining and printing and minting units.
RBZ governor John Mangudya said the central bank, which wholly owns FPR, was on course to cede controlling stake in FPR and unbundle the entity as part of efforts to boost compliance levels in the trading of the yellow metal.
It is estimated that Zimbabwe is losing over US$2bn in potential revenue through smuggling of gold every month as producers and dealers search for better prices.
“It is expected that the unbundling process of FPR will be completed in six months’ time given the need to ensure transparency, adhere to international best practice and to provide ample time to would-be new shareholders to complete the necessary due diligence,” Mangudya said.
The central bank said it would retain the printing and minting business but dispose of its 60% shareholding in the gold refining unit.
The big mining houses have been offered a 50% stake, while the small-scale miners and FPR gold buying agents were offered 7% and 3% respectively.
The model is similar to the Rand Refinery, South Africa’s biggest refinery, which is owned by some of that country’s biggest gold producers including AngloGold Ashanti, Gold Fields, Harmony, Sibanye Gold and DRDGOLD.
Two weeks ago, the Finance and Economic Development Minister Mthuli Ncube disclosed that 10 gold producers have agreed to buy 60% shareholding in FPR.
Ncube, however, did not reveal the identities of the 10 gold producers.
RBZ expects that the gold producers’ compliance levels in the trading of gold will significantly increase as they will be part of the decision-making process in gold trading.
The proposed privatisation of FPR came after some lobbying from some players in the mining business.
Gold miners want Zimbabwe to fully liberalise the marketing of gold so as to allow miners to sell their own production, a suggestion that Mangudya has publicly opposed, saying he feared it would worsen smuggling. Some of the country’s biggest gold producers are Kuvimba Mining House, RioZim and Caledonia Mining. FPR started refining gold in 1988, and at its peak producers from abroad sent in their gold for refining at its Msasa refinery.
However, FPR has not used most of its installed capacity to refine 50 tonnes of gold per year.
With more gold expected through the formal channels, experts believe FPR full capacity will be reached by 2022.
Gold exports in 2021 are forecast to be higher than in 2020 on account of the recently introduced 2.5 to % gold delivery incentive and the Covid-19-induced restriction that could have curtailed gold leakages through smuggling.
There was a remarkable surge in gold deliveries to FPR in the months of June and July 2021 where gold deliveries surged by over 100%.
The June 2021 gold deliveries to FPR surged 108% to 2.924 tonnes compared to 1.409 tonnes delivered in June 2020.
Similarly, gold deliveries for July 2021 spiked 100.1% to
2. 824 tonnes compared to July 2020 deliveries of 1.406 tonnes.
The small scale gold producers contributed 52.8% of the total gold deliveries to FPR during the first seven months of 2021 which compares favourably with the 55.8% delivered for the same period in 2020.
Mining experts said if the authorities would reduce punitive taxes (royalties), cost of importing cash and timeous payments the gold sector has the capacity to sustain the country’s economy.
