Gold miners in Zimbabwe are required by law to sell all their gold output to Fidelity Printers and Refiners, which is a wholly owned subsidiary of the Reserve Bank of Zimbabwe.
Dickson Rudairo Mapuranga
The Reserve Bank of Zimbabwe through its subsidiary, Fidelity Printers and Refiners is the country’s sole gold buyer and exporter in the country. In 2008, many gold producers particularly the largest that time Metallon Gold was reported to have shut down operations following failure by the government to pay them in time, some gold mines went up to a year without receiving a single penny for their deliveries the same year.
In 2005 gold deliveries declined by 31 per cent, in the first half of the year compared the previous one, the Chamber of Mines blamed the administration glitches at RBZ which was delaying payments to producers for gold deliveries as well as an uncompetitive exchange rate. The official exchange rate which miners were paid for a third of their earning was blasted by the chamber of mines as unviable.
The Reserve Bank in 2008 paid 75 per cent of the total value of gold delivered in US dollars directly to the producers’ foreign currency accounts with a balance of 25 per cent paid in local currency, this was however, not viable as the government was always falling behind on payments to gold miners as it struggles for hard cash to import food and other basic commodities in short supply in the country.
When the current monitory policy was announced by the current Reserve Bank Dr John Mangudya, moving gold foreign currency retention from 70 percent to 55 huge decreases considering the fact that small scale and artisanal miners were lamenting for 100 per cent foreign currency, miners and experts accused the current RBZ administration of creating a déjà vu in the mining industry and the Zimbabwe economy at large.
Gold deliveries in the first quarter of the year to FPR, took a 10 per cent decrease compared to the same period last year. According to The Herald, FPR officials blamed the market plunge, particularly for primary producers, as a result of the discord that existed in the country’s monetary system that had the US dollar pegged at par with the RTGS dollar before the Reserve Bank corrected the anomaly when presenting the 2019 Monetary Policy Statement.
However, according to Kennedy Mtetwa, history is repeating itself in the mining industry in Zimbabwe. RBZ and Fidelity learnt nothing from the 2000 to 2008 era, the same mistake the RBZ did in pegging the exchange rate instead of allowing the market forces to determine it, is the same way the current Reserve Bank is operating thereby leading the country to an abyss of unwanted results.
“RBZ policy of pegging the USD exchange rate 2000 to 2008. Rate on interbank is pegged today 2019. The rate should be free float and market driven. When official rate and parallel rate diverge significantly gold miners will stop wasting resources expanding and just mine just enough ore to pay their bills meaning less gold to RBZ” he said.
According to one miner, the 45 per cent RTGS which FPR is giving the miners is not viable therefore miners find it easy to move to the parallel market where they get their money in 100 per cent foreign currency.
We need at least 85-90% otherwise we won’t be able even to service our machines because everything is now being paid in the US. So as miners we’re left with no option but to sell at the parallel market. Plus even the very parallel market is being fueled by our politicians. They really know the kingpins of that system so unless that is stopped gold will always find its way out to the informal markets” she said.
The current decline in gold delivery to Fidelity Printers and Refiners is the same the country experienced in the period between 2000-2008, therefore the government need to up its game and create a conducive environment for the selling of stones and metals in order to curb gold leakages.
Late payments and unfavourable foreign currency retention affect the mining industry and the situation needs to be addressed quickly, one of Zimbabwe’s largest gold producer, Metallon gold, has currently suspended production at its three mines in Zimbabwe because of the unsustainable costs of running them without proper compensation for its proceeds from the Government.
In February, RioZim which is among top producers of gold in Zimbabwe also suspended its operations due to late payments from the government. The company claimed that it had gone for 3 months without receiving their full payments for their gold deliveries to the central bank.