Inflation, currency shortages and energy shortages are taking their toll on gold production in Zimbabwe, causing hardship for miners and reducing export receipts. Tendai Marima reports on the problems and how they can be addressed
In the 1800s, British colonists in South Africa trekked up to Zimbabwe, attracted by rumours of a land rich in gold. While many were disappointed and quickly turned their attention to agriculture, their initial instinct proved partially correct, with small deposits supporting a modest industry for the precious metal to the present day.
Today, gold mining in Zimbabwe is struggling to maintain its historic role, as the country faces its worst economic crisis in a decade. Rampant inflation, currency shortages and a severe energy crisis have hit artisanal miners and larger producers of the yellow metal, threatening export earnings. Analysts are calling on the government to urgently address multiple issues plaguing the industry.
In June, as part of a raft of austerity measures aimed at reviving the economy, the minister of finance, Mthuli Ncube, announced the end of the country's decade-long multiple currency regime --which had permitted the use of the US dollar and South African rand in daily trading--in a bid to revive Zimbabwe's own long dormant currency. However, the partial introduction of a quasi-currency known as the RTGS dollar has resulted in inflation soaring as high as 176% in June, the highest since the Zimbabwe dollar collapsed in 2008.
In Inyathi, a gold-rich area in southwestern Zimbabwe, artisanal miners say that the reversion to a single currency system has hit earnings and dampened hopes of economic recovery. By law, gold miners are required to sell their production to the Reserve Bank-owned Fidelity Printers and Refineries, the sole official gold buyer, refiner and exporter. Fidelity has tried to incentivise small-scale miners to use the official channel by offering a gold support price. The incentive, which starts at $1,368 per ounce, is on average 7% more than the daily gold trading price set by the London Bullion Market Association, but there is a catch.
Fidelity pays at least 55% in US dollars, but 45% in the unpopular RTGS dollars at the prevailing exchange rate. The rapid devaluation of the RTGS has made miners like Cosmos Dube weary of selling gold to Fidelity. Dube says that the support price has dipped below the true value of his gold due to the constant weakening of the RTGS...