By Thembelani Moyo,
ZiMining News Editor
Zimbabwe is losing billions of dollars in potential gold earnings due to a dysfunctional relationship between the country’s sole gold buyer, refiner, and exporter, Fidelity Printers and Refineries (FPR), and artisanal and small-scale miners (ASM), according to the country’s Finance and Economic Development Minister, Mthuli Ncube.
The ASM are turning to the informal market for recourse due to FPR’s failure to address concerns such as uncompetitive gold prices, foreign currency retention threshold, and ease of doing business.
A 2018 report by the United Nations Industrial Development Organization (UNIDO) exposed the bad blood between FPR and ASM, who are responsible for a large portion of Zimbabwe’s gold production. The report found that ASM prefer to sell their gold in the informal market, where they are offered more lucrative prices, as illicit buyers are able to offer higher prices than FPR while still making a profit. The difference in pricing makes it difficult for legal buyers to compete with illicit buyers in the black market.
The Reserve Bank of Zimbabwe’s (RBZ) decision in 2018 to reduce the foreign currency retention threshold also added to the ASM’s woes. Miners can now retain 55% of their earnings in U.S. dollars, down from 80%. This has led to a decline in gold deliveries to FPR, as miners prefer the 80:20% retention rate that had earlier been proposed. Furthermore, ASM find it more lucrative to sell their gold on the black market due to the ease of doing business in the informal market. Despite FPR dispersing its operations from Harare, the capital of Zimbabwe, its operations still do not cover all places, a situation that frustrates the ease of doing business. This is further exacerbated by police harassment, with miners in Zimbabwe’s Mashonaland East province claiming that they are forced to sell their gold to Mozambique due to police demanding bribes and protection fees from them.
According to the UNIDO report, FPR’s foreign currency retention policy has backfired as the small-scale miners prefer payment in U.S. dollars. Illicit buyers on the black market have more ready access to cash and are willing to pay 100% cash, on the spot, for gold. As a result, the FPR policy of paying part in foreign currency and part in local currency is pushing both small-scale miners and buyers to buy and sell gold on the black market, and empowering foreign actors who have easy access to U.S. dollars.
The Managing Director of MEJRKH, Emily Hwengwere, explained that the government’s shift in the foreign currency retention threshold policy is one of the reasons gold deliveries to FPR have declined. Miners are not happy with the 55:45% retention rate when selling gold and believe this is the major reason for the decline in gold deliveries.
Furthermore, illicit buyers are willing to travel long distances that FPR officials cannot travel. ASM operations are dispersed and can be a far distance for FPR officers or other official buying agents. Illicit buyers are much more able to quickly pay for gold entirely in cash, thus dwarfing the amount of time it takes to secure the same amount of cash for gold sold through formal channels. The FPR requires individuals selling a minimum of 5 grams of gold with a purity of 75%. Many small-scale miners are unable to meet these minimum standards and are forced to sell gold to buyers on the black market.
As such, Zimbabwe is losing billions of dollars in potential gold earnings due to the dysfunction between Fidelity Printers and Refineries (FPR) and artisanal and small-scale miners (ASM). FPR’s failure to address concerns such as uncompetitive gold prices, foreign currency retention threshold, and ease of doing business, has led to the ASM turning to the informal market for recourse. A 2018 report by the United Nations Industrial Development Organization (UNIDO) exposed the bad blood between FPR and ASM and highlighted the reasons for this dysfunction. The government’s shift in the foreign currency retention threshold policy, police harassment and the ease of doing business in the informal market are some of the reasons that are pushing both small-scale miners and buyers to buy and sell gold on the black market, and empowering foreign actors who have easy access to U.S. dollars.
