The ongoing foreign currency challenges are undermining and reversing the gains that were made through increased gold production by artisanal miners (ASM), an industry expert has said.
According to Mukasiri Sibanda, who has extensive knowledge in the field of artisanal mining having worked and participated at ASM workshops, foreign currency shortage is a major risk to gold smuggling as businesses that rely on imports are forced to buy gold and illegally sell it outside the country to finance their operations.
Responding to questions by Business Weekly, Sibanda, who is part of a mining Technical Working Group (TWG) on the ease of doing business reforms, said one of the major risks that people have to understand is that gold can be used as a currency in the absence of real currency.
“Right now we have a number cross border traders, people who rely on imports for their businesses. And when these people cannot get adequate foreign currency they resort to buying gold and sell it in neighbouring countries.
“The other issue is how we buy our gold. Currently Fidelity Printers and Refiners is failing to pay 40 percent cash in bond notes to miners and this encourages people to trade on black market. The fact that artisanal and small scale gold miners get 60 percent cash payments in US $ and the other 40 percent in bond notes means that illegal buyers paying 100 percent in forex are preferred.
“It is also worrisome that Fidelity does not have cash and people now have to queue to get cash. In my view this opens the sector up to manipulation by those who have cash such as drug dealers.”
At the 6th edition of the Zimbabwe Alternative Mining Indaba (ZAMI2017), held in October 2017, artisanal miners expressed concern at the Reserve Bank of Zimbabwe’s policy to pay gold from artisanal and small-scale miners, 60 percent cash in US dollars and 40 percent in bond notes.
They argued that suppliers of goods and services needed for gold production are demanding payments in US dollars or charge a premium for paying in bond notes.
They said this has encouraged artisanal and small-scale miners to sell gold at the parallel market.
Mukasiri said there is urgent need to deal with the long drawn currency risks if illegal deals are to be curbed.
Speaking to bankers at the Institute of Bankers of Zimbabwe (IOBZ) Summer School 2017, RBZ financial intelligence unit’s Wonder Kapofu said while the country may have mechanisms to curb gold and financial leakages, the country is still losing a significant amount as the system is not robust enough to plug off all the loopholes.
“For every gram of gold we hesitate to buy, there is someone from India or Dubai ready to buy it,” he said.