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Gold export earnings near US$500m

Gold export earnings near US$500m

8 reasons why gold forex retention should be revised upwards

Zimbabwe’s gold export earnings were US$476.2m during the first half-year of 2020 from US$464m earned during the same period last year after deliveries improved on the back of increased foreign currency retention to 70%.

The retention was 55%. The increased exports come at a time when the economy is grappling with foreign currency challenges and is banking on gold and tobacco receipts.

This comes as Zimbabwe’s golden leaf’s export receipts have gone up 4% to US$261m after selling 78.3m kg as on July 8, 2020, from US$250m earned during the same period last year.

Cumulatively the country’s gold and tobacco export receipts were 3% up to US$737.2m during the first half of 2020 from US$714m grossed during the first six months of 2019.

These are the country’s highestforeign earners and account close to 50% of the country’s earnings.

Tobacco exports usually peak after the tobacco selling season has ended. Zimbabwe’s gold exports were up in January, May, and June with the rest of the months down during February, March, and April due to lockdown restrictions which limited artisanal miners to operate.

The government has increased fuel allocations to gold miners from last year but the lockdown and the effects of coronavirus have thwarted miners to get useful consumables from China.

Experts say gold mining especially, especially small scale, was greatly affected by lockdown regulations as social distancing needs to be observed.

The yellow metal is now the highest forex earner and contributes 38% of the country’s total earnings and more than 60% to themining sector which is the highest forex earning sector in the country.

In an emailed response Reserve Bank of Zimbabwe governor, John Mangudya, told this publication that the country’s gold export earnings were pushed by May and June earnings thanks to 70% forex retention threshold.

“The country’s export earnings have gone up 2,6% to US$476.2m from January 2020 to June 2020 from US$464m earned during the same period last year due to the review of foreign currency retention threshold and increased fuel allocations this year,” Mangudya said.

In January, export earnings were US$98m from US$70.4m last year, while in February export earnings were US$56.1m from US$77.8m.

In March, the yellow metal export receipts were US$71.9m from US$88m in the same period last year.

April exports were down to US$63.4m from US$76.4m. In May, gold export receipts were up to US$120m from US$85.8m realised in the same month last year.

Receipts in June were US$66.4m up from US$65.4m in the same period last year. Gold deliveries were down 13% to 10.597 tonnes in the first six months of 2020 from 12,294 tonnes achieved in the same period last year as the sector takes a hit from foreign currency constraints and Covid-19 restrictions which affected small scale producers.

Mines and Mining Development minister Winston Chitando said Covid-19 has affected the operations and a plan needs to be worked out to ensure miners recover from the big slump.

Last year, gold export receipts slumped 28% to US$946m in 2019 from US$1,33bn in 2018, leaving the country with no alternatives for foreign currency as the second-highest forex earner tobacco also tumbled 7% to US$846.7m from US$907.8m due to prolonged droughts and unfavourable payment policies.

Cumulative gold deliveries fell 16% to 27.6 tonnes in 2019 from 33.2 tonnes in 2018 due to suspected smuggling and hostile mining policies.

Experts said the underperforming of the small scale sector was due to unfavourable mining policies where the retention threshold was 55% against 70% in 2018.

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Since 2017, the economy has been grappling with foreign shortages, inefficient mining and processing technologies but the reduction of the forex retention levels by the Reserve Bank of Zimbabwe is believed to have impacted negatively on the deliveries.

This has created arbitrage opportunities for miners to smuggle gold outside the country’s borders.

Over 34 tonnes are believed to have been smuggled out of Zimbabwe. Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said Covid-19 has negatively impacted gold production.

“By far Covid-19 has negatively affected our operations as small scale miners struggle to procure crucial raw materials and restrictions in movements across the country as authorities tighten lockdown measures,” Chinyenze said.

He said the underlying problems of forex retention continue to affect production as miners look for alternative markets.

Some miners, especially large scale, are believed to be selling their gold to suspected smugglers to get more forex for their operations.

Experts suggested that established mining companies with huge capital have dominated this year’s deliveries due to lack of movement from the small scale miners.

Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly and only if the forex retention threshold, fundamentals, and funding issues are addressed.

Gold is expected to lead the charge with US$4bn_Business Times

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