- November 26, 2020
- Posted in LOCAL
Gold deliveries to the country’s sole buyer Fidelity Printers and Refiners (FPR) are expected to plunge 35% this year due to increased smuggling and the negative impact of the Covid-19 pandemic.
Gold is the country’s single largest generator of foreign currency and, resultantly, inflow of foreign currency into the country is expected to take a knock by year-end and the first quarter of 2021 on low deliveries.
FPR had projected gold output to reach 35 tonnes this year after it increased fuel allocation to the miners.
But at the end of October, miners had delivered 16.12 tonnes. With two months to year-end, FPR now expects deliveries to reach 18 tonnes, the lowest national output since 2015.
Last year, miners delivered 27.6 tonnes, reflecting a 35% decline.
“We are only left with two months to end the year, we are hoping to reach about 18.5 tonnes for the year 2020 excluding gold from PGM sources,” FPR general manager Fradreck Kunaka told Business Times.
Cumulatively, the country’s bullion export receipts retreated 23% to US$697m in the first 10 months of this year from US$906.7 m earned during the same period last year.
Zimbabwe was on track during the first half of the year when the country’s export earnings for the half year went up 2,6% to US$476.2m from US$464m earned during the same period last year due to the review of foreign currency retention threshold and increased fuel allocations this year. However, rampant smuggling began in July when Fidelity delayed payments by up to eight weeks, forcing miners to opt for alternative markets.
Miners bemoaned the lack of working capital due to delays in payments by Fidelity.
Last month, Chamber of Mines of Zimbabwe chief executive Isaac Kwesu said the fall in gold deliveries was inevitable due to the fact that production cycle was disturbed due to delay in payments hence there was no working capital to support production. He advocated a payment within seven days to improve production.
Experts said the instability in the gold sector has eroded the gold export revenue that the government urgently needs to keep the country’s struggling economy afloat.
Mining experts advised that President Emmerson Mnangagwa’s government should give artisanal mining cooperatives legal standing, pay gold producers at world prices and strengthen mining dispute resolution.
In a recent report on Zimbabwe’s gold subsector, miners blamed FPR’s flawed centralised gold buying scheme and called for the law to bring complicit powerful politicians to book as they are believed to be sponsors of machete gangs’ violence in the Midlands Province and in Mazowe, Mashonaland Central Province.
The report said the development of the gold sector was crucial if the government was to salvage prospects for Zimbabwe’s economic recovery from decades of economic stagnation.
RBZ governor John Mangudya said FPR’s monopoly in the buying and marketing of gold will stay, warning that liberalisation would see annual output plummeting to less than five tonnes owing to rampant smuggling.
“We all know that the last time the gold was liberalised, production dipped to four tonnes and we were disqualified from London Bullion Market Association because we were below 10 tonnes so we have got history we know the experience,” Mangudya said.
“Miners should market their gold through FPR as it refines miners’ gold and store it as a national asset and reserve asset. But if we do what we did in 2008 thereabout whereby we liberalised, we will go back to four tonnes again.”
Gold contributes 38% of the country’s export receipts.
Gold prices have not dropped radically during the worldwide pandemic as the yellow metal prices ranged between US$53,000 per kilogramme to US$63,000 per kilogramme during the reported time.
When the world gold prices are around US$61,000, FPR pays gold producers between US$45,000per kg and US$53,000 per kg, a practice that encourages smuggling and erodes industrial mining profits, leading companies to close.
Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said deliveries and export receipts will not improve as miners will look for an alternative market due to payment delays.
“I think it is high time the political figures and powerful business people become frank with themselves to stop that rot as long as they control these syndicates the anti-smuggling unit is toothless,” Chinyenze said.
Experts say gold mining, especially small scale, was greatly affected by lockdown regulations as social distancing needs to be observed.
The country reviewed forex retention levels to 70% in July from 55% in 2019.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly if forex retention threshold, fundamentals and funding issues are addressed.
Gold is expected to lead the charge with US$4bn.