Gold production, the rapid rise, and fall
The gold industry in the country has been in existence for over 1000 years with one of the powerful early societies, the Great Zimbabwe kingdom and the Mutapa kingdom believed to be gold funded economies. Since then the country has produced a significant amount of gold. Zimbabwe’s production peaked last year when it produced 33,2 tonnes and in 1906 and 1999 at 30 tonnes and 27 tonnes respectively.
Rudairo Dickson Mapuranga
In Zimbabwe, all gold by law is sold to the country’s sole gold buyer and exporter, Fidelity Printers and Refiners (FPR). Experts believe that gold produced in Zimbabwe is four times more than gold delivered to the country’s sole gold buyer and exporter.
Despite the coming in of more small scale and artisanal miners on board and better mining technology introduced, the country has surpassed its record production of 30 tonnes per annum only once last year (2018) when a record delivery of 33,2 tonnes was recorded due to various reasons.
This year, the government has set a gold production target of 40 tonnes which has proven to be out of reach with the country’s sole gold buyer and exporter recording only 12 tonnes during the first half of the year. Production is expected to rise to 17 tonnes during the second quarter of the year, however, the record set last year will not be surpassed as expected by the government.
The government through its USD12 Billion road map has set a likely to be laughable target earnings of gold per annum of up to 4USD billion that is over 100 tonnes of gold per annum when the country since 1980 has failed to reach 40 tonnes in a single year.
Traditionally, the mining industry has been very important to the economy of Zimbabwe. The sector generates considerable employment, foreign currency earnings, infrastructure development and attracts significant foreign direct investment.
Can the mining sector achieve 100 tonnes of gold delivery to Fidelity?
According to Zimbabwe Miners Federation spokesperson, Dosman Mangisi the gold mining sector can deliver 100 tonnes of gold or more to the country’s sole gold buyer and exporter if the government supports the sector.
“More gold is being produced in the gold mining industry, the sector has the potential to produce 50 to 100 tonnes of gold annually and if more resources are channeled, we are able to produce more in this country,” said Mangisi.
However, according to Core Miners Association Founding Chairperson Canaan Joseph Saurombe, the 100 tonnes production figure being thrown around cannot be considered to be true, however, production according to him is very high and delivery to the country’s sole gold buyer and exporter can only be achieved when the gold mining sector is formalized.
“Well, I don’t know how that assumption was build up. But I do agree without a doubt that we are producing more than what is accounted for. The complexity begins on our definition of production, in this case, it focuses on formalised production which is accounted for and adds up to the monthly/ annual gross” said Saurombe.
Saurombe also added saying that it should be the government’s main priority to make sure that, small scale and artisanal miners are attracted to formalisation before the idea of formalisation is preached. The Core Miners Association chairperson said that the government needs to dovetail gold production and declaration through dialogue and creating relationships with the miners.
“We need to interlock the gold production and gold declaration to Fidelity; we have to create incentive policies for the formal sector. Besides preaching formalisation, one has to be attracted to formalise by just evaluating the pros of making that decision.”
“If it becomes more profitable and business-oriented for a miner to be formal and to work with fidelity being the sole buyer, then I’m sure we can revolutionise as intended.”
“So, I think engagements between the miners and the government being the policymakers have to be ongoing. To make sure that the mining environment becomes very much favorable for business to those who are supporting production. I’m sure that how we will experience a boom in production” Saurombe said.
Why gold delivery was high 20 years ago with fewer miners in the industry?
The year 1999 is Zimbabwe’s most successful gold production period before 2018, with the country getting over 27 tonnes from both large scale and small-scale gold producers.
According to Zimbabwe Miners Federation spokesperson Dosman Mangisi, production in 1999 was high because of the government despite the sector being under-exploited was very promotive to all the miners through different initiatives which encouraged miners to sell their gold directly to the government without being pushed.
The ZMF spokesperson also said that gold production was very high during the period because the control of gold was production was controlled directly by the Ministry of Mines and the ministry of finance through the central bank could only care about receiving the gold from the miners.
“The policy was just simple government being so promotive through RBZ, miners were being resourced directly through their banks to buy gold and deposit to RBZ. It was right on the grassroots, it was direct interaction, there were not so many arms who deal in the regulation of gold” said Mangisi.
Mangisi also said that production in the 1990s was high because the small scale and artisanal miners were recognized by the government in 1991 through the amendment of the Mines and Minerals Act which allowed independent gold mining efforts by black workers.
2000-2005 gold production was fair
The year 2000 gold production declined only by 2 tonnes from the record set in 1999 and by 7 tonnes in 2001 setting production of 20 tonnes in 2001. Gold delivery during the period is believed to have been caused by different factors among them the grabbing of commercial farms by the government a move which made some small scale and artisanal miners move to farming from mining.
The period also was the genesis of the economic crisis which hit the country due to the economic sanctions which were imposed on the country by the European Union and the United States of America.
In 2002 gold delivery to FPR was 15,5 tonnes, the following year production was 18.78 percent decline with the country’s sole gold buyer and exporter recording 12.5 tonnes. In 2004 production increased getting over 21.3 tonnes of gold an increase in production by over 69 percent. Delivery, however, declined in 2005 when the gold buyer recorded over 34 percent decrease in production, with only over 14 tonnes of gold delivered.
2006 -2013 an average of 9 tonnes per year
Although foreign currency retention was higher both from 2006-08 when gold buyers would receive 75 percent forex from all gold delivered to the central bank, and 100 percent foreign currency during the GNU era, gold production during the era was very low averaging only 9 tonnes per annum.
According to Mangisi, artisanal and small-scale mining was criminalised in 2006 as part of a government effort to ensure that all gold extracted in the country be sold to the government, but that policy only pushed illegally mined gold to the parallel market.
Why did the gold delivery increase between 2013-19?
From 2014 to 2018 gold deliveries to the country’s sole gold buyer and exporter increased rapidly mainly due to the reason that small scale and artisanal miners who were banned were allowed to operate again, the period produced an average of 30 tonnes of gold delivery to Fidelity.
According to Mangisi, in 2014, the government began issuing artisanal mining permits, free of charge, to anyone interested in selling gold to the government-run Fidelity Printers and Refiners, the only legal gold buyer in Zimbabwe. In 2018, there was a massive public outreach through ZMF to encourage miners to sell their gold to Fidelity. During the period before 2018, there was no hustle getting a gold buying permit.
For the government to get more gold from small scale and artisanal miner it is of paramount importance for the government to reminiscent this period and look forward to improving the period than disturbing it.
Why the target cannot be reached in 2019
The government through the Ministry of Mines and Mining Development has set a gold target of 40 tonnes which the deputy minister of Mines Hon Polite Kambamura has expressed pessimistic views that the target would not be reached.
Caledonia has reduced its yearly target from 56 000 ounces in 2019 to 50 000 ounces due to the electricity problems the country has been experiencing during the first half of the year. The unstable power supply is one of the reasons that makes it difficult for the sector to gain ground in 2019.
ZMF spokesperson Dosman Mangisi also said that the target cannot be achieved due to policy inconstancies by the Ministry of Finance. According to Mangisi, it is not the production that usually declines in the small scale gold mining sector but deliveries to central bank because of some of the policies introduced during the year affected the market greatly.
“It is deliveries that decline caused by economic policies that the country put, as long as our payment methods are very poor gold delivery is affected, the situation will then attract vultures in the country to buy gold at low prices,” said Mangisi.
The ZMF spokesperson also said that mining disputes in the sector have caused a decline in production, the year 2019 recorded more mining disputes than the previous four years which led to the sector halting some operations that would have helped in the attainment of the gold target.
Late payments by Fidelity are also a cause of concern, this year one of Zimbabwe’s biggest gold producer Metallon Corporation Limited placing its mines under care and maintenance siting late payments by the country’s gold buyer. RioZim for almost 2 months during the year also suspended operations due to late payments.
What should have been done?
For the sector to have achieved its 40 tonnes target, monetary policies would have been improved to favor business than indulgence government appetite.
Rising mining disputes would have been curbed and a lasting solution reached, the situation might be carried over to 2020 which might also affect production next year.
The government should liberalise gold buying, give free permits to all gold buyers in the country. As long as the miners who are the producers are still complaining about pricing, licensing, marketing and late payments, then gold Mining submissions to Fidelity may further decrease.
According to Core Miners Association chairperson, Canaan Joseph Saurombe, “Next year there is a need to work on the pricing of gold, I would personally suggest at least 80%US+, 20%-Rtgs, considering that government is also banking on the forex for the acquisition of other important commodities such as pharmaceutical stocks.
(2) FPR being the sole buyer has to be readily available to each and every miner. Most being breadwinners they need quick money and the advantage is being taken up by smugglers.
(3) Encouraging policies and/or incentives for miners who are declaring their yellow metal to FPR
(4) Direct support to miners; machinery, mining loans that can be effectively assessed
(5) need for accountability and clarity; if a target is set, steps towards the mandate must be clear to quickly identify falls in trends to allow the authorities to deal with them whilst they are still short term and less complex.”
This article first appeared in the Mining Zimbabwe Magazine November 2019 issue