Delays in foreign currency payments chalks gold production

Harare – Delays in payments for gold delivered to Fidelity Printers and Refiners (FPR) is negatively affecting gold production at a time the country is facing a myriad of macro-economic challenges among them foreign currency shortages and depreciation in the value of local currency.

According to the 2019 State of the Mining Industry Survey Report, almost all gold producer respondents indicated that they were facing delays in the funding of nostros for their gold deliveries to FPR.

“About 80% of gold producer respondents indicated that these delays were significantly impacting negatively on gold production, while 20% said that they were marginally affected,” the report said.

Gold is Zimbabwe’s largest foreign currency earner (followed by tobacco) raking in over US$1 billion in foreign receipts in 2018 after a record 33.2% deliveries last year against a target of 30 tonnes.

Government set ambitious targets for gold deliveries in the current year at 40 tonnes, but inconveniences related to unfavourable payment structure in addition to government’s decision to outlaw the multi-currency system has discouraged production output especially among the small scale miners who are currently the country’s biggest gold producers.

The ongoing power cuts are also contributing to a decline in production output across local industries including the mining industry.

Notably, small scale miners delivered less gold to FPR in June compared to large scale producers, a month in which the government gazetted the Zimbabwe dollar as the sole currency.

Deliveries from small-scale producers registered a sharp decline from 1 278 kilogrammes in May 2019 to just 687kgs in June 2019.

A total of 1 658kgs was delivered in June compared to 2 323kgs in May 2019.

Gold deliveries for the six months to June 2019 registered a 41% decline standing at 12.3 tonnes compared to 17.3 tonnes that were delivered during the same period last year.

Deputy Minister of Mines and Mining Development Polite Kambamura has since admitted in an interview with the government-controlled Herald newspaper that the 2019 target was now beyond reach.

He said “currently, we are not on course to meet the gold target; what we are recording is not what we were expecting,” Kambamura said. He said deliveries had been affected by power outages and other concerns by miners which were not being addressed. “We have several issues like power outages and complaints from miners, especially small scale miners, that we never dealt with diligently and I think that contributed to the drastic fall in gold production.”

Apparently, gold miners are demoralised with the current foreign currency retention threshold which was reviewed downwards from 70/30 percent to 55/45 percent.

“The reviewing downwards of the thresholds impacted negatively on the mining sector because it made it difficult for miners to procure supplies, plant and equipment, most of which is imported,” Zimbabwe Miners Federation spokesman, Dosman Mangisi is on record saying.

Equity Axis News

Raynold Mhotseka

Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, rayjnr.mhotseka@gmail.com and raynoldm@equityaxis.net.

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