National gold production to beat last year’s levels
Sun Nov 10 2024
ZIMBABWE’S gold sector is witnessing significant recovery, with deliveries of the precious metal reaching 28,2 tonnes in the first 10 months of the year, drawing the country closer to its national target of 35 tonnes for 2024.
This surge in gold deliveries marks a significant achievement for the mining sector, particularly following October’s milestone of 4,16 tonnes (t) delivered, which was a 22 percent increase over September, and a 12,6 percent rise compared to October 2023.
Notably, small-scale producers, who are the backbone of the country’s gold sector, contributed 3,14t to October’s tally, a substantial increase from September’s 2,40t. Meanwhile, larger miners also saw a slight increase, delivering 1,02t in October, up from 1,01t in the previous month.
However, the two months left have to be above average as November and December usually averaged 5t combined over the past three years. These increases come in the wake of key policy changes, notably the May 2024 repeal of a controversial 15 percent value-added tax (VAT) on gold deliveries to Fidelity Gold Refiners, Zimbabwe’s sole gold-buying institution.
The VAT, initially introduced in January, had disrupted cash flows for small-scale miners, prompting some to explore less-regulated markets to sidestep tax burdens. However, the listening authorities were quick to note a stumbling block and repealed the law under Statutory Instrument 105 of 2024. In removing the VAT, the Government sought to support miners’ cash flow, stabilising the sector and encouraging a return to formal gold deliveries.
The impact of this legislative reversal is evident in the numbers that are steadily increasing month in, month out. Economists and industry experts have lauded the Government’s decision as a catalyst for growth, attributing the subsequent increase in gold deliveries to increased trust and willingness among miners to work within the formal system.
“The reversal of the 15 percent VAT on gold deliveries to Fidelity Gold Refiners was a significant development that will undoubtedly continue to encourage more small-scale miners to bring their gold to the formal market,” commented economist Dr Prosper Chitambara.
“This policy shift has eased financial burdens, thereby boosting miners’ operational capacity. As a result, we can anticipate sustained growth in gold deliveries as miners are now more confident in the regulatory framework.”
With national gold production totalling 30,1 tonnes in 2023, the country is now within striking distance of surpassing last year’s output and possibly hitting its new set target.
Small-scale miners, who were disproportionately affected by the tax, are seen as essential players in achieving this goal. For the country, this year’s increase underscores the importance of the Government’s decision to remove the VAT, a move that not only relieves financial pressures on miners, but also curbs the incentive for side marketing, an illicit but previously attractive option for gold sales.
Economist Mr Tinevimbo Shava pointed out that the removal of VAT was instrumental in rebuilding confidence among small-scale producers and stabilising the gold supply chain. “By eliminating the VAT on gold deliveries, the Government has taken a crucial step to support small-scale miners, ensuring the financial viability of their operations,” Mr Shava explained.
“The result is a resurgence in deliveries to Fidelity Gold Refiners as miners are no longer faced with the cash flow constraints that previously drove them towards side marketing. The increased deliveries observed in the second quarter and thereafter signal that the policy change is positively influencing the sector.”
As October’s strong numbers indicate, Zimbabwe’s gold industry has not only rebounded but also appears to be accelerating towards the 35-tonne target. This development is critical for the economy, given that the yellow metal is a leading export and revenue generator. The policy change has also positively affected Government revenues, as higher deliveries to Fidelity Gold Refiners boost the transparency and volume of gold sales.
The increase in deliveries could also bolster foreign exchange earnings, critical for the country’s economic stability and growth.
Looking ahead, the Government is expected to maintain a supportive regulatory stance for the mining sector, reinforcing its role as an essential contributor to the economy. Should this year’s target be met, it would solidify the positive trend brought on by recent legislative and economic reforms. If the October production levels are maintained, then the industry is well on track to meet, if not exceed, the target of 35 tonnes.
The resurgence of small-scale producers, the essential lifeblood of the sector, signals a robust future for gold, provided supportive policies continue to underpin their efforts.In the words of Dr Chitambara, “This year’s success story highlights the potential for ongoing growth and resilience in Zimbabwe’s gold sector, an achievement we hope to see sustained well into the future.”
Source: https://www.sundaymail.co.zw/