Zimbabwe News and Internet Radio

Fidelity reduces cash payouts to gold miners

Fidelity Printers and Refiners has reduced cash payouts to small-scale gold miners by 40 percent, a move some industry players fear may hurt production and give rise to smuggling of the precious mineral out of the country.

Gold refining in Zimbabwe
Gold refining in Zimbabwe

Before the new arrangement, small-scale miners used to receive 100 percent cash (US dollars) on delivery of the metal to the gold buying firm.

However, under the new payment system, miners are now getting 60 percent of their earnings in US dollars, while the remaining 40 percent is deposited in bank accounts, Zimbabwe Miners’ Federation spokesperson Dosman Mangisi said.

The miners will have an option to have the 40 percent paid in bond notes. “It is true that we now have a new payment system,” said Mr Mangisi in an interview yesterday, warning that “we fear that this may result in massive smuggling of the commodity to neighbouring countries”.

The small-scale and artisanal miners account for close to 45 percent of Zimbabwe’s bullion production, which hit 10 million kilogrammes during the first six months of the year. Gold is Zimbabwe’s second largest foreigner currency earner after tobacco.

Paying the miners US dollars in full, which came alongside decriminalisation of artisanal miners’ activities, was meant to incentivise miners to increase gold production.

To enhance deliveries to Fidelity — an arm of the Reserve Bank-from small-scale and artisanal miners, authorities directed all gold sales be done on a “no-questions-asked basis”. It is estimated that the country has in excess of 40 000 small-scale and artisanal miners.

Some industry analysts said the reduction in US dollar payouts could scale up illicit gold dealings. “We are likely to see massive gold smuggling; it is inevitable. At the same time, production may also be affected as suppliers of consumables are only accepting US dollars,” said one analyst.

According to Fidelity, the country could be losing $500 million worth of gold per year to smuggling. Zimbabwe’s gold production rose 10 percent in the first eight months of the year to 14,6 tonnes from 13,4 tonnes in the comparable period in 2016.

According to figures from Fidelity, large and small-scale miners, as of August 2017, delivered 7,4 tonnes and 7,2 tonnes respectively. The statistics also show that gold miners had a combined output of 2,6 tonnes in August, the highest so far this year.

At 2,6 tonnes, it implies that the yellow metal’s production shot by 30 percent from two tonnes produced in July. Last year, Zimbabwe gold output closed at 24 tonnes and this year the Government has projected about 28 tonnes of the yellow metal by December. The Herald