- July 13, 2020
- Posted in LOCAL
The country could still be losing a significant amount of gold through smuggling despite having recently unveiled a new trading framework of the yellow metal aimed at mopping up more gold into the formal system.
On May 26, Zimbabwe’s exclusive gold buyer, Fidelity Printers and Refiners announced the new trading framework where it was now buying the bullion from artisanal and small-scale miners at a flat rate of US$45 per gram.
Before the new trading framework, FPR was paying small and large-scale gold producers 55% forex retention and 45% in local currency.
In addition, under the recently pronounced trading guidelines, large-scale miners are now being paid 70% of their gold sale proceeds in hard currency while 30% in Zimbabwe dollars.
Contributing during a Parliamentary debate in June, National Patriotic Front legislator for Kwekwe Central Mr. Masango Matambanadzo highlighted that the parallel market was buying gold at prices ranging between US$50 and US$52/g against a flat rate of US$45/g that FPR was paying.
“Fidelity, the company that buys gold is buying at US$45/g and they are competing with the black market.
“The black market is competing and it is a dangerous animal in this country.
“Today (Wednesday june 15) the black market is buying at US$50 and US$52/g.
“How can the country’s economy stabilise as you (monetary authorities) are not going to get gold,” he said.
Of late, the Government has expressed concern over the gold leakages as the country was losing its yellow metal through the informal market that was smuggling the contraband to neighbouring countries like South Africa, where it was fetching relatively favourable prices.
In an interview, an official from the Zimbabwe Miners Federation (ZMF) who spoke on condition of anonymity said:
“Let’s have the government paying gold sale proceeds according to the economic fundamentals of the London Bullion Market exchange rate. That’s very important because those rates are going up every day.
“We don’t want a situation where the government imposes a flat rate, we want a situation where we have a win-win situation between the government and the gold producers”
Asked to comment on what the parallel market was paying prior to the new gold trading framework, the official said ZMF does not talk about the black market rates.
“But ZMF wants to support the Government in coming up with rates that are commensurate with the situation palatable to the economic fundamentals.
“In 2004, the government rates beat the parallel market rates and we are saying let’s come back to that,” said the official.
The ZMF official also highlighted that contrary to parallel market dealers, FPR has not been paying prompt cash for gold sales.
“The parallel market is offering prompt cash, so we need the government to incentivise those operations…if you go to South Africa for example, and whatever l do, whether l deal with a dealer under the table, that gold will go to the Reserve Bank of South Africa.
“So whatever happens in the market, let’s have that gold come to Zimbabwe because gold is a reserve asset.”
Gold sub-sector contributes about 70 percent of Zimbabwe’s mineral export earnings.
Last year, the country earned about US$1,3 billion from gold export receipts, and under the US$12 billion mining economy by 2023, the yellow metal is expected to contribute US$4 billion.
This article first appeared in the July 2020 issue of Mining Zimbabwe Magazine