Gold price hike: A closer look
Zimbabwe’s mining industry is regarded as one of the major economic centrepieces with the sector exponentially contributing to the Gross Domestic Product through foreign currency earnings and employment creation.
To demonstrate commitment towards improving the mining sector’s contribution to the economy, the Government under the new political order which came into being in November 2018, has made inroads in trying to stimulate production in the sector and unlocking investment through policy reforms.
Such efforts include the repealing of the Indigenisation and Economic Empowerment Act, which was widely viewed as draconian and scared away investors.
Last week, the Reserve Bank of Zimbabwe through the country’s authorised sole gold-buyer, Fidelity Printers and Refiners (FPR) reviewed the gold trading framework.
Under the framework, large miners now receive 70 percent of the gold sale proceeds in US$ and 30 percent in ZWL$ at the prevailing interbank exchange rate.
In addition, small-scale and artisanal miners now receive a flat rate of US$45 per gram against the prevailing international price of US$54,8.
By and large, the pronouncement by the Central Bank, adds impulsion in boosting the production of the yellow metal in the country.
Prior to the review of the gold trading framework, FPR was paying the producers 55 percent in US$ and 45 percent in ZWL$ at the prevailing interbank rate.
The miners prefer payment in hard currency to the Zimbabwe dollar as the local dollar is unstable, production equipment, and products are priced in USD.
Moreso, large mining houses have in the past appealed to RBZ to consider raising the retention thresholds to improve their foreign currency base and be able to meet their procurement needs for imported consumables.
A market analyst, Mr. George Nhepera said:
“In my view, both policy reviews for large and small miners reflect our gradual phasing out of subsidies in the gold sector.
“This is a good step in the right direction as already advised by IMF (International Monetary Fund) in their latest report on Zimbabwe.
“The subsidies were already contributing to the creation of money supply hence fueling inflation.” He said now that the small-scale miners are being paid 100% their receipts in foreign currency, this was again a good thing as it reduces pressure on the exchange rate.
“As a country, we have to use all possible policy options to increase our exports, and this among other options is intended to achieve a positive outcome.
“In my view, the IMF recent report is a very frank and candid report on our current economic and financial status as a country.
This article first appeared in the Mining Zimbabwe June 2020 Issue