FOLLOWING weeks of terrifying news over continuing economic decline, foreign currency shortages, rising inflation and rocketing prices, reports that gold output increased during the nine months to September 30 were refreshing.
The past few weeks have been hectic for Zimbabwe.
The Reserve Bank of Zimbabwe and the Ministry of Finance, who normally maintain a calming effect even during bad times, have been clearly shaken by developments on the foreign currency front.
Forex shortages have escalated as companies scour for hard currencies for crucial imports and to fund several services now requiring foreign currency. The economy’s plight has been compounded by rolling power blackouts, which have grounded industries.
In response to the instabilities, parallel market rates have rocketed and prices of basic commodities have followed suit.
These developments have painted a picture of an economy in perpetual decline. Fears have been rising that grinding poverty sweeping across provinces could only worsen; especially after the Confederation of Zimbabwe Industries (CZI) said crucial production targets might not be met.
However, the fact that gold output has increased steadily over the past nine months demonstrates that with the right policies, Zimbabwe’s economy can be repaired and return to stability again.
The good news about this week’s gold report is that the rise comes during a time when international prices have been rising.
This means gold miners, affected by last year’s disruptions to global supply chains, could begin to generate enough revenues to address challenges stemming from subdued production during a period when costs have been rising in Zimbabwe.
With producers returning to stability, firms could start hiring again, and the positive spin-offs could cascade to downstream industries.
However, it is important to remind authorities that under an ambitious plan to ramp up output to US$12 billion annually, from about US$3 billion, gold, along with platinum, diamond and chrome miners sit at the heart of this projection. The Gold Producers Association has set a target of US$4 billion by 2023, but a lot of work must be done to reach this target. Firstly, gold producers, along with other miners, have for long indicated that the government must address the foreign currency crisis, which is holding back production.
In addition, the mining sector has indicated that Zimbabwe’s taxation regime is too heavy for miners to sustain operations, while the high cost of utilities and labour have also affected companies.
There are so many factors affecting the mining industry but recent policy flip-flops have been the highlight of an extremely difficult phase in the industry’s quest to expand.
This is why foreign direct investment into the industry has remained subdued. It is encouraging to note that there has been a significant push towards privatising loss-making state-controlled mines.
With better management, these can improve production and help the industry return to full-scale operations.
But this will only happen if the Ministry of Mines and Mining Development addresses the hurdles affecting the mining industry.