Africa Moyo Senior Business Reporter
The Reserve Bank of Zimbabwe (RBZ) is willing to loosen the purse strings in support of the high-riding gold sector, which has become critical in economic transformation through employment creation and foreign currency generation.
This comes as the Ministry of Mines and Mining Development, wants to increase mining sector revenue to $4 billion by end of year from about $2,3 billion achieved last year. Government plans to increase gold production revenue by setting up eight provincial gold processing and buying centres, registration of at least 500 mining syndicates and 2 500 small-scale miners by year-end.
Gold is already performing beyond expectations after deliveries to Fidelity Printers and Refiners (FPR), a gold buying unit of the RBZ, rose to a staggering 20,8 tonnes by July 31 this year.
The deliveries are 4 tonnes shy of the 24,8 tonnes of the “yellow metal” delivered all of last year.
The RBZ has established the Gold Development Initiative Fund (GDIF) in 2016, which has seen $180 million being snapped up by both small and large-scale miners between last year and now.
Miners received $80 million last year while $100 million has been taken up between January and August this year, which is considerably higher than the $54,3 million disbursed by September 30.
The uptake dovetails with the increased gold output. This year, the RZB has set aside $150 million under the GDIF and the figure can be increased if the need arises.
RBZ principal analyst Mr Dishoni Limbikani, told a recent gold mining conference in Gwanda that the financing requirements for small and medium enterprises in the gold sector are “immense”, and the apex bank stands ready to support them.
“In recognition of the need for funding, the Bank has availed $150 million through FPR to fund both working capital and capex (capital expenditure) requirements under the Gold Support Facility.
“The bank stands ready to review upwards the facility if demand continues to go up. The bank has also availed support to gold producers (both large scale and small-scale) by way of the export incentive of 10 percent,” said Mr Limbikani.
The RBZ is also inviting and engaging local banking institutions and suppliers of critical raw materials and equipment to craft facilities that support the SME gold sector. The desire to support small-scale gold miners is motivated by the sector’s performance in the recent past.
Last year, small-scale miners contributed 55 percent to the 24,8 percent tonnes of gold delivered while by July 31 this year they had delivered 13,5 tonnes, representing 64,9 percent of the 20,8 tonnes.
In 2008, small-scale miners contributed 29 percent to the 3,8 tonnes mined.
Gold miners require huge sums of capital to over the myriad of challenges they face, which include high cost of capital, high cost of production and fluctuating commodity prices as well as high costs of consumables used in gold production.
RBZ commitment, plea to other banks
Mr Limbikani said the RBZ remains committed to prioritisation of international payments for gold miners and “periodic review of the export incentives in order to support increased gold production”.
“It is important to note that foreign exchange allocation is done under a framework that strives for optimal support to all priority sectors of the economy,” he said.
However, RBZ is deeply concerned about the leakages in the gold sector, which usually occur through side-marketing. Mr Limbikani said leakages remain “a serious threat to the industry and the economy”.
Further, the RBZ will continue to engage stakeholders in the sector with a view to improving the ease of doing business; strengthening of monitoring and surveillance programmes; and lobbying for the review of charges levied on the sector by different stakeholders, to increase foreign currency generation.
“The message is that there is need to produce so as to create foreign exchange. Increased gold exports will obviously create room for imports of all types of good and services that the country yearns for.
“The bank is committed to ensure that the country transforms from a consumptive to a productive one, albeit this requires broader stakeholder engagement and participation. The Bank is also committed to support the gold sector through ensuring that the financing options tailor-made for the sector are arranged,” Limbikani said.
It is against this background that the RBZ negotiates offshore lines of credit for purposes of nostro stabilisation.
Zimbabwe has over 5 000 gold claims across the gold mining areas. The RBZ wants to ensure all mining claims are fully utilised to boost gold production, and consequently help the country benefit from its mineral resources.
Already, neighbouring countries such as Botswana and Zambia are known for mining diamonds and copper, respectively.
Gold contribution to economy
Gold mining both by small and large-scale miners contribute immensely to economic growth through job creation, contribution to aggregate output, foreign currency and tax generation, among others. Statistics from the RBZ also show that for every dollar created in the gold sector, about 79 cents are created in other sectors of the economy due to the multiplier effect, ranging from backward linkages like transport, supplies, professional services and forward linkages such as electricity generation.
The gold sector has created over 11 000 direct jobs, representing 25 percent of total formal mining employment estimated at 45 000. An additional 33 000 in indirect jobs have also been created in the gold sector while informally, small-scale miners and artisanal miners, in the industry are over 100 000.
Gold extraction also brings foreign direct investment, which big global firms such as Falgold Limited and Metallon Corporation, investing huge sums of money and employing many citizens.
Critically, gold contributes about 40 percent of mining exports, 28 percent of mining GDP and 2,6 percent of national GDP.
Of all the precious metals in Zimbabwe, gold has become the financial lifeline for the country, generating foreign currency particularly at this point in time when there is serious demand for foreign currency. Foreign currency is badly required in the economy the importation of fuel, electricity, medicines, cooking oil, fertilisers, agro-chemicals and many other critical national requirements.
Exports account for about 60 percent of all foreign currency inflows into the economy, and gold and tobacco, currently top the list of foreign currency earners.
RBZ sources say Zimbabwe is able to borrow offshore on the back of gold export proceeds. Gold mining has also helped grow industries that add value to gold such as Aurex (Pvt) Limited which makes a number of products including wedding rings.