FINANCIAL services outfit, Old Mutual Investment Group (OMIG) says government’s target to ramp up gold output to 100 tonnes per annum will be achievable, although serious efforts towards stemming rampant smuggling would be key.
OMIG commented on the government’s grand plan last week, after reports said Zimbabwe could be losing billions of United States dollars’ worth of gold through smuggling.
Some reports have estimated that up to US$1,5 billion worth of bullion was being spirited out annually by black market kingpins, some of them politically-connected individuals.
“The Mines and Mining Development minister Winston Chitando is targeting annual gold production of 100 tonnes by 2023,” OMIG said in a report titled Monthly Economic Brief 2021.
“Improved access to funding from both the private and public sectors is anticipated to drive this growth. However, actual annual production is likely to be more than 40 tonnes after accounting for smuggled gold reportedly worth about US$1,5 billion annually. In view of this base and the expected new investments, growing to 100 tonnes is unlikely to be demanding, all things being equal,” the report said.
“There is a need to address the root causes of gold smuggling and challenges that are disincentivising production. Key hurdles include the market and pricing structure of the gold subsector and inefficiencies by FPR (Fidelity Printers and Refiners),” OMIG noted.
In May this year, a 33-year-old Zimbabwean man was arrested at OR Tambo International Airport in Johannesburg hiding contraband worth R11 million (about US$730 000).
Tashinga Masinire flew into one of Africa’s busiest airports with 23 pieces of gold which he did not declare.
In October last year, Zimbabwe Miners’ Federation president Henrietta Rushwaya was arrested at Robert Mugabe International Airport for allegedly attempting to smuggle six kg of gold worth US$360 000 to Dubai.
She is out on bail.
During the year ended June 30, 2021, gold deliveries to FPR rose to 12,78 tonnes from 12,017 tonnes during the same period in 2020.
OMIG said the introduction of the incremental export scheme by FPR was commendable.
However, foreign currency retention ratios must be sensitive to market developments as the widening parallel market rate premium was likely to negate the envisaged benefits of the scheme, it said.
“The move by the central bank to partially privatise FPR and parcel out majority shareholding of its refinery arm to the private sector is commendable and is expected to address some of the entity’s shortcomings,” the investment company said.
In an effort to boost compliance levels in the trading of gold, the government intends to offer a 60% stake in FPR’s gold refinery and marketing arm to large-scale gold producers, major gold buying agents and small-scale producers through their associations. According to the government, a three-year average delivery of gold to FPR will be used by the Reserve Bank of Zimbabwe (RBZ) to determine its offer to the various players.
In his 2021 midterm budget review, Finance minister Mthuli Ncube cited decline in gold deliveries to “possible incidences of side marketing and smuggling of our minerals”.
OMIG said the Covid-19 pandemic was expected to continue weighing on Zimbabwe’s economy until herd immunity is achieved.
It said the slowdown in new Covid-19 cases shows that the third wave is ebbing while vaccinations have been ramped up.
“This notwithstanding, the pandemic is expected to continue weighing on the economy until herd immunity is achieved. Despite the Covid-19 threats, the positive half-year fiscal performance has set a good platform for economic growth in 2021.