Harare – Mines and mining development minister, Winston Chitando says gold production volumes in the country will have increased to 100 tonnes annually by the year 2023.
Chitando said this earlier today in a speech at the 2021 Zimbabwe Mining Indaba currently underway in Victoria falls.
This growth, is expected to be bolstered by improved access to financing for players in the gold mining field as the government is working on setting up loan infrastructures for the miners.
“We aim to increase gold production to 100 tonnes by 2023, the pursuit of this has been an intervention to ensure that gold producers can access gold loans so as to expand their production,” the minister said.
This is in line with the government’s vision of turning the overall mining sector into a US$12 billion industry by the same year.
However, here is the problem, gold production in Zimbabwe was only 19 tonnes in the whole of 2020 and this was achieved on a downward production volumes trajectory as the country had managed to produce 25 tonnes in 2019.
The year prior that had seen gold production volumes reaching a record high at 32 tonnes and now the country miraculously expects an over 200 percent jump from this record production of the yellow metal in just two years.
Fast forward to 2021, cumulative gold deliveries to official points declined by 30,5 percent to 3,98 tonnes in the first quarter, compared to 5,72 tonnes in the same quarter last year, in what appears to be a consolidation of a downward trend in gold output. Also, according to the most recent statistics, gold deliveries to FPR in April 2021 totalled 1,38 tonnes, down 5.5% from the 1,46 tonnes reported in the same period last year.
Do not get it wrong! Zimbabwe is more than capable of producing 100 tonnes of gold annually and even more with these proposed loans, however, they are a lot of factors militating against that possible vision:
- 1. FPR payment delays and inefficiencies
Fidelity Printers and Refiners, the only official buyer of bullion in the country has time and again been in the limelight for failing to pay miners for their dues after deliveries.
For some time in 2020, Zimbabwe’s biggest gold miner RioZim reportedly had to stop production due to delays in payments left the company unable to meet its operational expenditures.
At the time (June 2020) RioZim said it was owed US$2.46 million by Fidelity for gold deliveries which made it difficult to pay for electricity, fuel and a portion of salaries.
On top of these glitches in payments, FPR’s monopoly in gold buying has only served as a factor of discouragement for miners as it takes advantage to set gold prices that will be way below the global average.
- 2. Side marketing
Due to the issues with the FPR, miners have been forced to resort to other means of selling their gold which is mainly on the parallel market. This smuggling and side marketing is estimated to be costing the country over US$1.5 billion annually.
- 3. Forex retention threshold
Miners like all other exporters can only retain 60 percent of their total foreign currency earnings while the other 40 percent is given to them in the local currency at the official interbank rate which is currently at around ZW$85 for US$1 against a parallel market rate of ZW$130. This has also led to side marketing to the parallel market where miners do not only get all their money in foreign currency but also earn more.
To demonstrate the discomfort that this is causing, RioZim, recently announced that it would engage with the RBZ to increase its forex retention threshold so as to meet its operational expenditure requirements.
While incentives recently introduced by government allowing for miners who produce more than their monthly averages to be allowed to retain 80 percent of foreign currency earned from their incremental produce (100 percent if they are listed on the VFEX) may encourage an increase in production, it will still be well short of the 100 tonnes target by 2023.
Conclusively, the government does not only have to shoot money at miners and hope for rapid increase in production, there is also a need to address these surrounding issues.
Liberalising gold buying in the country should be considered, FPR needs to do better in tending to miners’ dues, outcries on the retention threshold need to be heard and a comprehensive plan must be made with the aim of clamping down on side marketing.
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