Harare – Zimbabwe is targeting to achieve a 35 tonne gold produce in 2019 which is a lower growth estimate over the last 5 year period. The projection also lags the actual growth realized over the respective 5 year period.
Between 2014 and 2018 Zimbabwe has achieved an average compound annual growth in production of 16% in gold with absolute tonnage coming from 15.4 tonnes in 2014 to a high of 33.2 tonnes in 2018.
The post dollarization success story of Zimbabwe began in 2009 when the economy dollarized. The currency stability ensured that producers got full value for their produce.
Government on its part played a pivotal part in mainly formalizing artisanal miners while offering them financing facilities to mechanise their production processes.
Consequentially these factors helped bring back produce to respectable levels and in 2018, a record production high of 33.2 tonnes.
At the beginning of 2018 government estimated to produce 30 tonnes and by mid-year it was evident that the targeted output would be surpassed hence an upward revision to 34 tonnes.
The 34 tonnes target would have, likewise, been surpassed had mid-year momentum been maintained. However, a macro-economic dilapidation ensued which necessitated a tapering in deliveries to government controlled Fidelity Printers and Refiners.
Zimbabwe’s worsening macro-economic environment saw the exchange rate took a dip in disfavor of local currency equivalents when compared to the US dollar.
Although gold is ultimately sold in forex, via the London Metal Exchange, by a third party, government legislation offers gold miners only 55% of their forex receipts in hard currency, the remainder is settled in RTGS and bond notes, a quasi local currency.
With the gravitating exchange rate, notably from the fourth quarter period of 2018, miners felt undercut by government as inflation ravaged local costs. Some miners downed tools citing lack of viability given the lack of allocation from the Central Bank which is managing the scarce forex.
Rio Zim a listed miner charged that it was only accessing 15% instead of the then threshold of 75% in forex allowable forex retention. The situation resulted in the miner failing to access some raw materials and retooling. Another miner Falgold highlighted similar challenges.
It is against this background that deliveries for the month of November and December sharply plummeted. The declining trend had however become evident in September, a period where inflation jumped by a huge margin.
Small scale miners contribution began to fall and in November their month on month deliveries plunged from 2.8 tonnes to 1.1 tonnes. It is most likely that side marketing has reemerged as more lucrative compared to selling to government.
For primary producers, the alternative would be cutting back on production, withholding stock and understating production to preserve value. It is against this background that the government of Zimbabwe has set a relatively lower growth rate in 2019.
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