Fidelity refinery unbundling just a change in shareholding structure
On the 15th of December, the Reserve Bank of Zimbabwe informed the public that at its meeting on 9 December 2020, the Bank’s Board of Directors resolved to dispose of Tuli Coal (Private) Limited to the government and to unbundle Fidelity Printers and Refiners (Private) Limited (FPR) into two business entities, that is (i) gold refining and (ii) printing and minting.
The unbundling of FPR according to the statement, is designed to partially privatise the gold refining business by allowing private players to acquire a stake therein and in the process secure and endear the private sector’s interests in the production and marketing of gold in Zimbabwe. By being part of the decision-making process on gold trading, it is expected that the gold producers’ compliance levels in the trading of gold will significantly increase.
Accordingly, the Bank shall retain 40% shareholding in FPR and dispose of 60% shareholding to both the large-scale and small-scale gold producers.
Using a three-year average delivery of gold to FPR, the Bank will offer 50% shareholding in FPR to the large scale gold producers, 3% to major FPR gold buying agents and the balance of 7% to the small scale producers through their representative bodies.
Commenting on the development Engineer Sithole – Head Gemologist, (DAI – USAID Invest/ Afghanistan) said this is a positive development that will see the gold buyer conducting profitable business.
“It is good coz it now makes FPR conduct its business in a profitably. Also, now they are able to benchmark their gold prices competitively in line with prevailing market conditions,” Sithole said.
“It creates a laissez-faire system where there is minimal government intervention. It allows FPR to conduct its business operations in a free market. There will be faster decision making processes in line with dynamic Gold prices. Also, it allows FPR to attract investors and wealthy shareholders if it decides to list on the stock market. ASMs stand to benefit as a result of attractive prices. FPR liberatisation will also allow it to find ways of capacitating gold production such as attracting investments in machinery,” he concluded.
Mines and Mining Development Portfolio Committee Chairperson Hon Edmond Mkaratigwa also praised the move saying it promotes business investment in the country.
“The move is good in the sense that it creates a sense of process ownership among the gold sector stakeholders. Effectively that complements the government’s efforts on promotion of business investment in the country. The approach theoretically further taps into existing opportunities that are not being fully utilised hence empowering locals. The question that may arise is whether the idea will be fully implemented and equitably. Safeguards will also need to be put in place to guarantee the security of government interests against the nature of capital which is always to thrive towards acquiring and controlling more stake through which government can become the victim of its future founders if they are irresponsibly avarice,” Hon Mkaratigwa said.
Legendary miner Eng Chris Murove however disagreed that the move was liberalisation of FPR.
“This cannot be ‘liberalisation’ of FPR. This is just a change in shareholding structure, from 100% ownership by the government through RBZ to taking on board other shareholders while reducing government ownership to 40%. It amounts to capital raising by the RBZ through partial privatisation. But then how can the gold buying monopoly be sustained when FPR will now effectively be privatised? The logical step is for government to open up gold buying to other players and remove the FPR monopoly,” Murove concluded.
FPR Monopoly
Fidelity Printers and Refiners the sole buyer and exporter of gold currently enjoys a monopoly in Zimbabwe. The entity currently faces stiff silent competition from illegal buyers who manage to smuggle over US$100million out of the country monthly according to the government.
It remains to be seen if the government will rethink its stance on the monopoly as the governor of the Reserve Bank last year said the monopoly was here to stay. Governor Mangudya was responding to the parliamentary portfolio committee on Mines and Mining Development recommendation to end of Fidelity Printers and Refiners’ monopoly and the liberalisation of the sector to increase export earnings for the country.