eBusiness Weekly
Golden Sibanda
Zimbabwe’s large-scale gold miners risk suffering disruption to production and also plunging into viability challenges following revelations a good number of them have not received payment for gold deliveries for periods stretching up to six weeks.
This comes barely days after the Reserve Bank of Zimbabwe (RBZ) said it had found a lasting solution to foreign currency import challenges, which resulted in delayed payments to small gold miners. The miners are paid in US dollars cash.
The small gold miners, made up of both small firms and individual or artisanal miners are integral to Zimbabwe’s gold production as they account for an average of 60 percent of national output.
RBZ governor Dr John Mangudya, said this week the challenge around forex cash for small miners had been resolved after a sustainable way to manage funds required to pay for the bullion was found.
All the gold that is produced in Zimbabwe is marketed through Fidelity Printers and Refiners (FPR), a unit of the central bank and the southern African country’s sole authorised buyer of gold.
FPR told the representative body of small miners, Zimbabwe Miners’ Federation (ZMF) last week, that it was struggling to import forex to pay the miners because of restrictions on air travel due to the Covid-19 global pandemic.
The crippling disruption to the avian industry has reduced the number of inbound flights, especially passenger planes while cargo flights have become largely sparse and far in-between.
Chamber of Mines of Zimbabwe (CoMZ) chief executive Isaac Kwesu told Business Weekly that FPR had, however, indicated it was making concerted efforts to bring up to speed the lagging payments.
Nonetheless, a number of big miners are still owed an unspecified amount of money for up to six weeks of gold deliveries in what is feared may negatively impact on working capital, production and viability.
“A number of our members have been owed monies for more than six weeks and for others the bank has been making part payments. They are owed both RTGS component and US dollars,” Kwesu said.
He, however, pointed out that Fidelity had since given them assurances that it was working flat out to resolve the issue of lagging payments for the bullion that has been delivered.
While small miners now receive full payment in hard currency at the rate of US$45 per gramme, primary producers now get paid 70 percent forex at the going rate with the balance paid in local currency.
Small gold miners have always been pressurising the RBZ to be paid in cash and resort to smuggling the precious yellow metal if their demands are not met, including calls for forex retentions to be raised. Similarly, large-scale gold producers had also been demanding a higher foreign currency retention threshold arguing what they received in local currency always lagged behind upward movement in operating costs.
Prior to the review of the payment framework for gold producers, miners only retained 55 percent of sales proceeds as hard currency while the balance was pain in local currency at the official exchange rate.
Delays in payments was a double whammy as the inflation haunted local unit meant actual costs were always double the official exchange rate.
“Most gold miners are small to medium, so any delayed payment affects their working capital cycle; automatically it disrupts production and other miners actually become unviable.
“The miners survive from hand to mouth, what they get paid is what they invest in raw materials, equipment, etcetera, for them to continue in production,” Kwesu said in an interview.
Efforts to get comments from both Fidelity Printers and Refiners managing director Kunaka and RBZ governor Dr Mangudya were unsuccessful by the time of going to print yesterday.
However, Gold Producers Association of Zimbabwe chairman, Thomas Gono, confirmed the outstanding payments, but declined further comments saying CoMZ was handling the matter.
Gold is Zimbabwe’s single largest foreign currency earner, realising nearly US$1 billion in 2019 from US $1,3 billion the prior year, followed by tobacco, which generates average annual inflows of about US$900 million.
Production dipped to 27 tonnes last year from a record haul of 33,29 tonnes achieved a year earlier amid suspected rampant smuggling, as mostly small and artisanal miners protested perceived low prices and part payment in local currency.
While official numbers put yearly production at such apparently low levels, unofficial estimates put the figure of the country’s annual out at over 100 tonnes, with the bulk believed to be lost to smuggling.
