Gold prices, despite the devastating effects of the COVID-19 global pandemic are expected to reach record highs in the immediate and long-term future with researchers Wolfe Research indicating that investors should expect the rally to continue beyond that level. However, the gold sector is not expecting much from the rally citing various challenges that are affecting the sector. Writer Sydney Kawadza recently discussed the expected rally in gold prices with Gold Miners Association chief executive Irvine Chinyenze, below are the excerpts from the discussion;
Question: Can you please give us an overview of the gold mining sector in Zimbabwe? How important is the sector to Zimbabwe’s economic development?
Answer: As with other sectors, the mining sector has not been spared the ongoing challenges. The importance of the gold mining sector cannot be over-emphasised as we are a foreign currency earner. We believe that the fiscus has been able to meet some of its obligations as a result of our earnings. Currently farming and manufacturing appear not to be operating anywhere near their full potential and this is where we have come in as gold miners.
Q. What have been some of the challenges you are facing in the sector and what are you doing as an association to alleviate these challenges?
A. The cost of doing business in Zimbabwe is generally higher than our neighbours in the South African region. Electricity is expensive together with petrol and diesel. The security situation while not dire is also a serious challenge given persistent robberies that miners are experiencing. Lending rates are currently very high so the cost of capitalisation is steep. As a result small scale miners sometimes have to use unorthodox means as they are not adequately mechanized. As an association we have continuously engaged regulatory authorities to review some of the current policies to make them more favourable.
Q. The industry is fraught with leakages with miners avoiding delivering their produce through formal channels, what have you done, as an association, to discourage such practices so that the country’s economy benefits from the precious mineral?
A. Leakages cannot be addressed in isolation. While we continuously speak against smuggling and illegal activities, we also need to view it in light of the causes of such leakages. I have already mentioned the high cost of production relative to the prices obtaining on our local markets. If competitive prices are paid there will be little motivation to smuggle. There is also need to decentralise buying centres as much as possible to bring convenience and security to the miner. There is need to review the prices of petrol, diesel and electricity with a view to cushion the miner.
Q. The Fidelity Printers and Refineries recently ditched fixed gold pricing, what has been the impact of the development? How has the industry reacted to the move?
A. This is a welcome and recent development though we are yet to fully feel its impact. It should, however, yield positive results as long as the price is in tandem with what is obtaining on the world market.
Q. The FPR also uses different prices for large scale and small scale miners, is this productive? Doesn’t it promote discrimination in the industry?
A. the price offered should be the same.Gold is gold regardless of who is producing it.
Q. It has also set weekly targets for gold buyers when delivering gold, what is the reaction from the industry on these targets?
A. On paper there is nothing wrong in setting targets. However, the practicality of it is the important thing which should be complimented by the challenges addressed above. Without production, setting targets is an exercise in futility.
Q. Researchers and market watchers are predicting a rally in gold prices reaching record levels, is Zimbabwe ready to take advantage of these prices? How can the industry benefit from the predicted record increase in gold prices? A similar rally so prices in Zimbabwe rising by 11 percent, what would be the impact of such a rally to the Zimbabwean economy?
A. Zimbabwe is currently very short of foreign currency and an increase in the price will mean increased gross earnings for miners. The big question is whether or not as a nation we will benefit. Currently, there is very little confidence in the banking sector so that area also needs to be addressed. We may end up with individuals holding huge chunks of foreign currency but very little of it finding its way into the official system, reminiscent of the Marange Diamond Rush before the fields were closed to illegal miners. The market appeared awash with forex but in people’s car boots and home safes with nothing in the national coffers.
Q. How would you describe your relationship with authorities? Has government been responsive to your ideas and recommendations?
A. We are an affiliate of the Zimbabwe Miners Federation who in most instances make representations on our behalf to government. To that end we have no knowledge of any acrimony or hostilities though we have not always gotten favourable responses. Bear in mind, however, that not all engagement leaves both parties satisfied. We are continuously engaging positively.
Q. What is the future of the gold sector in Zimbabwe and what would you recommend for the development of the industry?
A. The gold mining sector does not operate in isolation. We are part of an economy that is currently not performing to expectations. All things being equal there is serious potential in the sector. The banking sector should explore ways of engaging in smart partnerships with us and harness the potential that is there.