By Business Reporter
THE Reserve Bank of Zimbabwe governor Dr John Mangudya is expected to deliver his maiden mid-term monetary policy review statement tomorrow, in the new dispensation led by President Emmerson Mnangagwa.
On the eve of the monetary policy presentation, Mining Index caught up with Economic Analyst Persistence Gwanyanya, to discuss some of the mining expectations the central bank ought to prioritise.
Mangudya recently revealed 13 million tonnes of proven gold reserves have been established in Zimbabwe, with a paltry 580 tonnes having been exploited since 1980.
In his opening statement, Gwanyanya said, “On mining, the main issue RBZ should focus on is the financing of gold as it is our major export earner.”
Gwanyanya acknowledged immense contribution of gold output from small scale miners and is looking forward to see the apex bank double the current gold support scheme from US$150 million.
“Small scale and artisanal miners are currently contributing 65 percent of gold production in Zimbabwe. There are people being supported by the US$150 million RBZ facility which is not enough. If that facility can be increased to US$300 million, it will help in production output.”
Gold output in estimated to reach 30 tonnes by end of 2018. With gold reserves second largest in world, an investment of $900 million required for Zimbabwe to reach the targeted yearly output production of 100 tonnes by year 2030.
He called for government policies is implementing order in the gold delivery system by following the tobacco auction system model to avoid leakages to gold barons. Gold contract sales should be introduced as part of a strategy to bring greater transparency in the sector.
“We don’t seem to have order in the production of gold by artisanal miners. Just look at tobacco and how they are doing their contract farming and merchant at the auction floors. When they produce it, it is well managed and accounted for. We need a structure which is sound in the gold industry so that we minimise gold leakages to gold barons.”
He lamented loss of the yellow metal being traded between artisanal miners and gold barons from neighbouring countries.
“The country is losing between 8-13 tonnes per annum on average on gold leakages which is significant amount.”
He added that Zimbabwean boarders have become porous and government should introduce incentive mechanisms that discourage unorthodox sell of gold beyond boarders.
In September 2017, Fidelity Printers and Refiners (FPR) introduced a new payment system where cash pay-outs in hard currency to small-scale gold miners were reduced by 40 percent. Miners are now getting 60 percent of their earnings in US dollars, while the remaining 40 percent is either deposited into respective bank accounts or paid in bond notes.
“The payment structure for gold producers where RBZ is paying 60:40 percent ratio in US$ and bond notes or bank transfer is discouraging. This means small scale miners will naturally prefer to sell to gold barons outside the country where they are paid in hard currency.”
Gwanyanya advocated for Zimbabwe to be able to market its gold direct on the international market by abandoning the Rand Refinery, which has been the country’s middleman since 2007 when Zimbabwe was thrown out of the London Bullion Market Association (LBMA) due to depleted gold output.
“We expect RBZ to act swiftly to allow the country to be re-admitted in the LBMA since we have met the minimum threshold of gold production. The pace of seeking re-admittance is slow and worrisome.”
“With gold sector alone contributing over US$2 billion annually, the diamond sector is expected to roll up its sleeves and start making meaningful contributions to fiscus, contributing at least US$1 billion in annual revenue,“ said Gwanyanya, adding that this can only happen through liberalisation of the diamond sector.
After suspending diamond sales for nine months to get its house in order, government conducted its test auction of diamond stockpile that closed on February 9, 2018 which realised US$829 067. The recent ZCDC diamond sales tender number three conducted from 28 August to 12 September 2018 saw 423,066.43 carats put on sale, yielding $28.3 million.
“The nationalisation of diamonds through the Zimbabwe Consolidated Diamond Company (ZCDC) is not in line with the privatisation agenda. The diamond sector is still not performing despite their nationalisation.”
“The issue of diamonds has been a contentious matter in Zimbabwe. There has not been order despite Zimbabwe being one of the countries with richest diamond deposits. We need to ensure the marketing of diamonds is done properly so that we have meaningfully contributions to fiscus from this sector.”
Gwanyanya believes diamond contribution to revenue is still below par, versus their potential.
Turning to platinum, Gwanyanya emphasised the need for platinum beneficiation. “We are losing because of lack beneficiation. I hear there is progress in respect of value addition.”
Anglo-American Platinum (Amplats)’s Unki Mine, Impala Platinum owned Zimplats and Mimosa Mine, a joint venture between Sibanye Gold and Impala, currently send their matte for refining in South Africa. ENDS//