Gold export earnings dropped 13 percent to US$122.2 million in July from US$142 million last year on the back of a slow down in deliveries.
Gold, which leads tobacco as the country’s highest forex earner, continues to shatter the country’s hope of improving the liquidity crunch and forex challenges as deliveries plummeted 27 percent to 15.08 tonnes from 20.7 tonnes during the first seven months of the year.
Gold contributes 38 percent of the country’s total earnings and more than 60 percent to the mining sector.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya told Business Times that gold is very crucial to Zimbabwe as oil is to Nigeria or other oil nations and its decline will negatively affect the country’s economy.
“Gold export earnings have gone down to US$122.2 million in July this year from US$142 million. Last year in July large scale producers were at 1.08 tonnes while small scale were at 2.463 tonnes, giving a total of 3,54 tonnes for the month against 2.776 tonnes produced this year due to power outages and forex challenges in the gold sector,” said Mangudya.
Of the 2.776 tonnes mined in July, large scale producers extracted 0.932 tonnes against small scale who managed to deliver 1.846 tonnes.
Though the country gold earnings and deliveries are down compared to last year’s record breaking 33.3 tonnes, month to month gold exports have improved by 122 percent to US$122.2 million in July million from US$55 million in June.
Cumulatively gold export earnings have plunged 21 percent down to US$672.2 million from US$857 million during the first seven months of the 2019 and 2018 respectively.
Mining experts believe that the drop in gold exports was due to suspected smuggling due to lower forex retention threshold to small scale miners which contribute 64 percent of the gold earnings.
During his Monetary Policy Statement on February 20, Mangudya reduced small scale miners’ forex retention to 55 percent from 70 percent and this created arbitrage opportunities and created conducive environment for smuggling.
South African authorities suggested that over 40 tonnes of gold were smuggled into their country last year.
Gold Miners Association of Zimbabwe (GMAZ) chief executive Irvine Chinyeze said the reduction in forex retention has caused a big slump in gold deliveries.
“The fact that monetary authorities have reduced forex retention to 55 percent, gold miners don’t have appetite to sell their gold to Fidelity Printers and Refiners as they are better offers somewhere. The trick is that they should have raised forex retention to above 80 percent to woo miners,” said Chinyenze.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector earn US$12 billion yearly.