Zim gold deliveries surge in March

  • Gold deliveries increase by 54.57 %
  • Cumulative gold deliveries dropped by 30.48%
  • Zimbabwe is losing USD$1.5 billion annually due to side trading

Harare- Zimbabwe’s sole buyer and exporter of bullion, Fidelity Printers and Refineries (FPR) reported an increase in gold deliveries by 54.57% month-on-month in March 2021 to 1.8 tonnes from 1.17t achieved in the prior month on the back of improved weather conditions

Mining operations were briefly suspended after a couple of mines collapsed killing a significant number of workers due to the wet weather conditions that the nation experienced for the past months

Despite the increase in gold deliveries, cumulative deliveries for the quarter dropped by 30.48% to 3.98t from the 5.72t achieved in the Q1 last year. The reduced deliveries to Fidelity Printers might be as a result of smuggling and trading on the side markets by miners which emanate from delayed payments by the Reserve bank to gold producers.

Also the RBZ’s foreign currency retention policies of 60% has been arguably a driver of side trading by small scale miners who have been negatively affected by delayed payments and the policy’s effect on their profits.

Miners have been clamoring for high export incentives in the range of 70% to 80%, up from 60%. Their argument being that there is significant loss of value given that the 40% claimed by government is settled at sub-optimal exchange rates, which are not reflective of inflation. The export retention portion due to government has been settled at Reserve Bank-dictated rates of 1.84.4, while prices have tracked the parallel market exchange rate, hovering above at 1:120

The RBZ’s foreign-exchange retention policies, combined with shortages of cash leading to payment delays, reduced profitability for mining companies, weighs on production volumes.

Gold production in Zimbabwe has had a positive correlation to economic growth, and because Zimbabwe’s currency lost substantial value, for miners receiving a significant part of their gold sales proceeds in Zimbabwean dollar, the resultant losses are a huge disincentive to produce. The success realised in the prior years between 2009 and 2018 was attributed to the scrapping of retentions given that the economy was dollarised.

As a result of the above the country is losing, gold worth USD$1.5 billion every year thus affecting deliveries as well as sales is being smuggled out of the country every year.

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