Zimbabwe: Treasury smiling to the bank as gold deliveries improve

By Almot Maqolo
HARARE – Gold deliveries to the country’s sole buyer and marketer, Fidelity Printers and Refiners (FPR) rose 88% to 10.176 tonnes in the first four months of 2022 from 5.4 tonnes delivered during the same period last year lured by high commodity prices.

The Reserve Bank of Zimbabwe (RBZ) in June 2021 introduced a 5% incentive for those who deliver above 20 kilogrammes a month. The apex bank also cut royalties and the cost of importing cash on small scale miners to improve gold production in the country amid revelations the economy was losing over 2.5 tonnes per month to smuggling. Economist Dr Prosper Chitambara said, “The high prices are an incentive to produce and we will see
increased production this year. They also discourage smuggling as a safer selling procedure is preferred by all.”

He added that the country will also benefit from the improved prices as it means that there is more foreign currency which will cushion the country from global inflation and will also provide stability on the foreign exchange auction. Isaac Kwesu the President of the Chamber of Mines said, “The 40 tonne target is very achievable if the current policies are maintained and not tempered with because they have sought increased incentive to produce.”

However, the Chamber of Mines has been engaging the government on some policies they feel still need to be addressed in order to increase production even further. “We have written to the government that the retention ratio should be increased to 80-85% in order to see the mines expand and be sustainable,” Kwesu added. The association is also fighting for constant power supply in order to lower cost of production as well as not to disrupt production. Multiplicity of taxes is also an issue the Chamber of Mines feels needs to be addressed by consolidating the taxes in order to achieve the ultimate goal of 100 tonnes per year. Players within the gold subsector continue to blame the RBZ payment model and delays in processing RTGS payments as the reasons why gold is not being sold through official channels. Experts continue to raise the need for the RBZ to raise the retention ratio. However the central bank has always defended the payment model saying that it allows the country to retain money for essential imports such as fuel and medicine.

Full production within existing mines has proved elusive because of a lack of capitalisation, high cost of inputs and serious problems with the supply of power and diesel. Outside of the power problems, the sub-sector needs modest investment in plants while in the long term, it needs a radical rethink on the current mining strategy (which is currently being weighed down by political and criminal risk) and a substantial injection of capital to increase.

Zimbabwe’s gold mining is not quite engineered towards large scale mining mainly because of the politics and the narrow vein greenstone belts which would need extensive capital to expand to support large, world class gold mining operations. Analysts believe that mining the veins as the cheapest form of exploration in Zimbabwe even though the geological potential seems to be there. However the skew towards small scale mining is more historical and in recent times more political as the ruling party invited more players into the subsector as a form of empowerment.