Government admits policies disrupted gold deliveries

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GOVERNMENT has admitted that its fiscal and monetary measures have contributed to a slump in gold deliveries by small-scale miners, who have been tendering 60 percent of Fidelity Printers and Refiners (FPR)’s bullion haul or receipts for some time.
This also comes amid concerns that Zimbabwe has continued to lose tens of millions of dollars as artisanal miners are probably taking their produce to alternative markets, including smuggling syndicates which are taking the metal to South Africa (SA).
“It was basically the reaction of the gold industry to government policies of the FCA Nostro and RTGS FCA as well as the two percent intermediated money transfer tax,” Fradreck Kunaka, FPR’s general manager, said.
“We arched the trough during the period and as we move forward we should start noticing significant improvements,” he added.
But Kunaka remains optimistic that they should be able to ramp up stocks — to 34 tonnes — by enhancing monitoring of production districts and other plants.
“Chances are quite high of achieving the 34 tonnes given the enhanced monitoring of gold activities by government agents working with FPR,” he said.
“The activities are directly targeted at the high gold production activities such as elation plants, so as to ensure the target is reached by year end,” Kunaka said.
However, analysts say it was unlikely that government would meet its targets, given that FPR was receiving only 200 grams per week since September.
According to the company’s recent statistics, gold deliveries had averaged 3 000 kilogrammes in the first half of the year before peaking at 3,900 kgs about four months ago and started declining to 3,475 kgs in September — at the back of pronouncements, and policy measures that have undermined bond notes — and other moves that are affecting miners.
With bullion deliveries progressively declining to 1,500 kilogrammes in November — as small-scale miners have been shunning bond note payments and partly as smuggling has possibly remained a lucrative alternative.
Kunaka’s statements also come amid growing fears that the county was losing nearly $100 million a month at the back of reduced deliveries to the Reserve Bank of Zimbabwe-owned subsidiary FPR, which has severely affected the country’s capacity to finance fuel imports, medical drugs and other essentials.
Earlier this month, economist John Robertson not only said the reduced gold outturn would hurt and compound Harare’s revenues, and liquidity situation , but smuggling would also increase.
On the other hand, research firm Equity Axis (Equity) has said that the plunge in yellow metal deliveries also coincided with inflation rises and a “lack of floating exchange rate in Zimbabwe”.
“Gold miners have stated that they have been unable to fully recover their export earnings in real US dollars, with some claiming that they received as low as 15 percent in export retentions,” it said in a recent commentary. “In order to hedge themselves, small scale miners have resorted to side marketing while primary producers have elected to withhold stocks (and)… production,” Equity said.
But since three months ago when Finance minister Mthuli Ncube hinted on the scrapping of bond notes and in a development which sent black rates through the roof, small-scale miners have started shunning the local incentives of 30 percent in the surrogate currency — thus raising fears that more bullion was finding its way into SA now.
In addition to these short-sighted pronouncements, government’s demands for gold industry players such as jewellers to keep “100 percent of their export proceeds in nostro FCAs” have worsened matters.
This is because agents need cash to buy product from small-scale miners and the RBZ’s new directive that companies can only withdraw $10 000 per day has also compounded the situation, analysts say.
With the Zimbabwean government pinning its economic recovery hopes on mining, particularly gold and diamond production as well, key officials such as Mines minister Winston Chitando and President Emmerson Mnangagwa have said:
“Growth in the gold sector has been phenomenal, rising from the 24 tonnes we managed the whole of last year, to over 30 tonnes recorded so far. The target of 34 tonnes is now within our sights,” Mnangagwa said in his regular newspaper column, which also singled out exporters such as Bindura Nickel Corporation and Suzan General Trading among the highest gold producers.