Zimbabwe’s gold deliveries have dipped 23% to 23.03 tonnes during the first 10 months of 2019, from 30.13 tonnes during the comparative period last year, due to the government’s adverse mining policies.
The development comes at a time when the country is experiencing rampant inflation, subdued production across most sectors of the economy, crippling power outages and serious shortages in many areas, leaving Zimbabwe on the edge of total economic explosion. Given that gold is the single highest foreign currency earner, ahead of tobacco, the government should pay more attention to the sector.
Gold contributes 38% of the country’s total earnings and more than 60% to the mining sector’s revenue. Surprisingly, the crafters of mining laws and regulations have turned a blind eye to the critical issues affecting the gold sector. In various forums, the RBZ Governor, John Mangudya, has insisted that gold miners cannot get a 100% forex retention level because the country needs money to import grain, fertilisers, drugs and fuel.
This year, the RBZ reduced the gold forex retention level from 70% to 55%, and this has greatly displeased gold miners who have resorted to selling a large chunk of their production to South African dealers. The level of side marketing in the gold sector is a cause for concern. Some reports have claimed that senior government officials and ruling party stalwarts are involved in the side marketing.
That puts the central bank in an invidious position as this has created arbitrage opportunities for those close to the corridors of power. Worse, Finance Minister Mthuli Ncube believes that close to 34 tonnes of gold have been smuggled out of the country in the first 10 months of 2019 and nothing concrete has been done to stop it.
A fortnight ago, during the US$12bn mining roadmap conference in the capital, Henrietta Rushwaya, the Zimbabwe Mining Federation president, told the gathering that gold production had gone up significantly but formal gold deliveries were going down.
“We can’t say gold production is going down, actually it’s going up, but gold is sold through other channels which are offering high forex retention levels, which show that the government should do something to ensure that the precious mineral is sold through formal means here,” Rushwaya said in the presence of Mangudya and Ncube.
Irvine Chinyenze, the Gold Miners Association of Zimbabwe (GMAZ) chief executive, says the fact that the authorities maintain the forex retention levels means there is someone benefitting somewhere.
“The monetary authorities should rethink their 55% forex retention threshold if they want miners to sell their yellow metal via Fidelity Printers and Refiners, otherwise we will continue to lose gold to South Africa which offers good incentives for gold miners and dealers,” says Chinyeze.
The government is planning to increase forex retention to 60% but the miners want above 70%. Analysts believe Zimbabwe is extracting over 75 tonnes of gold but most of it is smuggled out of the country by influential figures.
Some miners, especially large scale, are believed to be selling their gold to suspected smugglers to get more forex for their operations.