The mining industry is currently the biggest earner of foreign currency in Zimbabwe. Gold is one of the biggest contributors to that alongside other minerals such as platinum and chrome. At least 80000 workers are employed in the mining industry with at least half a million artisanal miners active in that industry. The industry is riddled with various challenges such as political patronage, indigenisation laws and heavy taxation. The other hurdle lies in the selling of minerals, particularly gold, through informal means thereby depriving the fiscus of the much-needed revenue. Lack of substantial capital injections is stalling progress in the sector.
Gold Output Trends
In 2018, the overall output was 35 tonnes and for 2019 the target has been placed at 40 tonnes. In the first 4 months of this year, approximately 8700 kg of gold were produced with the small scale miners responsible for 62% of that output. However, in April there was roughly a 19% decrease in deliveries made particularly by small scale miners. It’s reported that last year as much as 50 tonnes more of gold could have been produced had there been more funding for the sector. This shows how important capital injections will be in surging gold output going on.
Ambitious Targets Have Been Set
I’ve already pointed out that the target for this year is to produce 40 tonnes of gold. The thrust is to ensure by the time we hit 2023 we’ll be producing 100 tonnes annually. This will translate into revenue amounting to around USD4 billion. Contribution to GDP is being set to increase by 8% to 15% and contribution to total exports is being set to increase by 10% to 35%. In order for these targets to be realized it’s going to take at least USD1 billion investment.
Strategies To Achieve These Targets
Clearly outlined log frames need to be put together so as to get all relevant stakeholders acquainted with what’s expected of them. As I pointed out earlier, there is a need for favourable policies which should also be backed up by supporting legal frameworks. The overall thrust should be to create an optimum operating environment that’s devoid of crippling costs. Just to put that into perspective, the average combined cost of producing just an ounce of gold locally stood at over USD1000 last year. Take note that’s just an average, most miners have to deal with costs way beyond that average. This is seriously unsustainable and places our costs of gold production at the top in sub-Saharan Africa. With gold currently selling at US$1308.40 per ounce, the margins are undesirably thin.
The other instrumental issue is that of power outages. All across the country, there are long load shedding schedules. This obviously affects the production in the industry and also leads to increased operating costs stemming from sourcing also scarce fuel for generators. So there is a need for frameworks to be established to ensure uninterrupted power supply for gold mines.
Let me also delve into one of the most important aspects:
Forex Allocations And Retentions
The gold mining industry requires a lot of forex for its sustainable operation. Most of the items needed along the production line are imported. There is a need for players in this industry to access foreign currency. When gold producers sell their gold they must be entitled to retentions of as much as 90%. This will greatly cushion them from the harsh conditions of having to source supplies in foreign currency or inflated RTGS$ charges. The government also has a crucial role to play when it comes to gold producers depositing their gold at Fidelity. Considering that they would have chosen to use formal channels to sell their gold they mustn’t be inconvenienced. Their pay-outs must be promptly accessible so that they don’t lag behind in their operations owing to waiting for funds. Delays of almost a month are very disruptive.
The prospects in the gold mining industry are huge. Despite a lot of gold mining, there are still vast untapped deposits of gold that haven’t even been touched. That’s why the government is confident a 15% contribution to GDP and a 35% contribution to exports can be achieved by 2023. It only needs to put in place favourable policies that encourage small scale miners to deliver their gold through formal channels. There is also a need for hassle-free formalization of artisanal gold mining.