Zimbabwe’s gold export receipts tumbled 23% in the first 10 months of this year to US$697m from US$906.7m earned in the same period last year due to low deliveries amid fears of rampant smuggling as miners protested against low retention levels.
Cumulative gold deliveries figure up to October 2020 fell 30% to 16.12 tonnes compared to 23.04 tonnes delivered during the first 10 months of 2019 due to rampant smuggling which emanated from payment delays from the country’s sole gold buyer, Fidelity Printers and Refiners, according to data obtained from the Reserve Bank of Zimbabwe (RBZ).
Suspended Zimbabwe Miners Federation president, Henrietta Rushwaya, is currently in custody for gold smuggling allegations.
The increase in smuggling has seen the government beefing up its anti-smuggling taskforce.
Army personnel are said to have been deployed and should now start participating in all gold selling processes as part of efforts to plug leakages.
RBZ governor John Mangudya this week told Business Times that the Covid-19 pandemic situation slowed the flight of United States dollars into the country and has also affected the movement of critical mining raw materials, resulting in the plummeting of gold deliveries and export receipts.
“Cumulatively, the country’s bullion export receipts retreated 23% to reach US$697m in the first 10 months of the 2020 from US$906.7 m earned during the same period last year,” Mangudya said.
“However, for the months of September and October this year gold export receipts went down 33% to reach US$155.69m from US$232.3m during the comparable period last year.”
During the first half of the year, Zimbabwe was on track.
The country’s export earnings for the half year rose 2,6% to US$476.2m from US$464m earned during the same period last year due to the review of foreign currency retention threshold and increased fuel allocations this year.
However, rampant smuggling hit the sector.
Miners bemoaned delays in payments by Fidelity, which are taking about eight weeks to pay for gold delivered.
Miners, however, want payments to be done within seven days to improve productivity.
Chamber of Mines of Zimbabwe chief executive Isaac Kwesu said: “The fall in gold deliveries was inevitable due to the fact that production cycle is disturbed due to delay in payments hence there is no working capital to support production. We are advocating payment within seven days to improve production.”
Miners are also demanding that the central bank increase foreign currency retention levels to 80% for large scale miners and pay at the gold world market prices.
The yellow metal is now the highest forex earner and contributes 38% of the country’s total earnings and more than 60% to the mining sector which is the highest forex earning sector in the country.
Analysts say the underperformance by the small scale was due to unfavourable mining policies which remained stagnant at 55% foreign currency retention threshold against 70% in 2018.
This has created arbitrage opportunities for miners to smuggle gold outside the country’s borders.
Over 34 tonnes are believed to have been smuggled out of Zimbabwe.
Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said: “As long as the government continues to delay in payments of gold deliveries and exports will not improve as miners will look for an alternative market.
Given the effects of Covid-19 to the sector, the central bank would have come up with more incentives to boost the sector.”
The mining sector projects gold deliveries to reach 25 tonnes but Chinyenze said the output might not be reached if fundamentals are not addressed.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly and only if forex retention threshold, fundamentals and funding issues are addressed.
Gold is expected to lead the charge with US$4bn.
SOURCE – Business Times