Harare – Government through the Monetary Policy Statement presented last week by the Reserve Bank Governor, Dr John Mangudya, resisted calls by gold miners to increase the amount of export earnings they can keep.
The miners have been pushing for the government to increase gold forex retention to 80 percent, however, the government has kept the current 55 percent retention threshold for both large scale gold producers and small scale producers while all other minerals are pegged at 50 percent.
While presenting the MPS, Mangudya highlighted that other sectors like tobacco and cotton growers will get 30 percent retention, Manufacturing (80%), Tobacco and cotton merchants for input schemes (80%), Horticulture (80%), Transport (80%) and Tourism (80%).
In 2018, gold deliveries to Fidelity Printers and Refiners reached 33.2 tonnes, a record high for the country which also surpassed the year’s target of 30 tonnes. Small scale producers, continued to dominate the country’s gold deliveries, accounting for 65.3 percent of the total deliveries, with the primary producers contributing the remainder.
Gold is the country’s biggest export earner raking in an excess of $1.2 billion and the government has set a an ambitious target of 40 tonnes of gold deliveries to FPR this year.
The challenge however, is that gold deliveries has taken a dip effectively from September last year averaging at least 1,56 tonnes a month since November last year. In November, 1,4 tonnes was collected, while 1,6t and 1,7t were recorded in December and January respectively.
Although the figures represent a slight month on month increase, gold collected in January dropped compared to the same period last year recorded at 2,6t.
According to research firm Equity Axis, the 55 percent export retention poses viability challenges as it is not enough to cover production costs with some reports even saying the miners are not effectively accessing the 55 percent retention. According to the firm, this explains the slump in gold deliveries to fidelity as miners are likely to look for other unofficial lucrative markets than the offer they receiving from the government.
Just recently, one of the biggest gold producers in the country, RioZim temporarily suspended operations saying the Company has experienced significant and persistent delays in payment of its foreign currency allocation for deliveries made to FPR and this severely affected the viability of the Company’s operations.
According to Association for Business in Zimbabwe (Abuz) chief executive officer, Victor Nyoni, increasing export retention thresholds for both large and small scale gold producers will help reduce demand for foreign currency on the interbank foreign exchange market.
“Such a measure can potentially stabilise the rate between the US dollar and RTGS dollars at reasonable levels,” he said.
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