RBZ loses gold forex retention war
The Reserve Bank of Zimbabwe (RBZ) has caved in to demands from small scale gold producers giving them the greenlight to retain 100% of their foreign currency receipts among a raft of measures to plug leakages amid low gold deliveries.
Gold producers have been besieging RBZ so that they are allowed to retain all of their receipts after miners were told to retain 70% of the proceeds from 55%.
Gold is the single largest foreign currency earner. But deliveries dropped by nearly half in July to 1.406 tonnes from 2.776 tonnes extracted during the same period last year. RBZ through its subsidiary Fidelity Printers and Refiners (FPR) reviewed forex retention threshold to 70% from 55% but deliveries continued to fall.
FPR general manager Fradreck Kunaka told Business Times that low gold deliveries to Fidelity prompted them to come up with a raft of measures to encourage deliveries to formal channels and arrest rampant smuggling.
“Small scale miners are receiving 100% US$ cash payment while primary producers are entitled to 70% foreign currency retention and 30% in bank transfer,” Kunaka said.
He said gold prices are now benchmarked against the London Bullion Market Association (LBMA).
“As from July 17, 2020, payment method was reviewed from paying flat amount of US per gram to 100% United States dollar payment benchmarked against the prevailing LBMA price to encourage gold miners to sell using formal channels and shun black market as well as smuggling,” he said.
Last year, FPR initiated investigations on registered gold buying agents amid indications of rampant black market dealings, which could have prejudiced Zimbabwe billions of dollars.
A situation which experts described as illogical since the primary miners will use small scale miners to get 100% forex payment.
As at August 14, 2020 prices averaged above US$53 per gramme, a situation which FPR believes will attract more miners to come through.
From a total of 1.406 tonnes delivered in July, 0.747 tonnes came from small scale miners and primary producers managed to deliver 0.658 tonnes.
Cumulative deliveries to date have gone down 20% to 12.003 tonnes from 15.070 tonnes due to unfavourable mining policies and effects of the coronavirus which thwarted many miners to buy consumables due to lockdowns in other countries. Last year, over 34 tonnes were smuggled to neighbouring countries, according to Finance minister Mthuli Ncube.
In 2019, gold export receipts fell 28% to US$946m from US$1.33bn, leaving the country with limited forex generators as tobacco also fell 7% to US$846.7m from US$907.8m in 2018. With limited credit lines, Zimbabwe is mainly dependant on gold and tobacco for forex.
Given that the first seven months of the year have passed, the authorities are afraid that the 35-tonnes mark will be missed for the second year running. Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said for the first time the central bank has walked the talk on small scale miners’ forex retention. “That is what we have been yearning for all these years, finally the central bank has delivered. It is always good to be paid at the world market prices,” Chinyenze said.
The government is forecasting a US$12bn mining sector by 2023 and expects gold to take charge with US$4bn export earnings_Business Times