Zimbabwe Looks Inward for Golden Economic Revival

The mining sector already accounts for 60% of Zimbabwean exports, raking in around US$$1 billion a year, and represents half of the country’s foreign direct investment.

Zimbabwe is banking on gold to shore up revenue and tackle the upshots of rampant hyperinflation, corruption and coronavirus restrictions after decades of economic mismanagement.

The landlocked African country boasts of natural resources which are, but not limited to vast gold reserves, alongside chrome, diamonds, platinum, and another 40 other minerals.

Global gold prices have surged more than 30% this year, topping a record US$2 000 an ounce in August, as the precious mineral became a go-to for investors in the face of COVID-induced volatility.

The government is eyeing gold as a possible magic bullet for an economy forecast to contract by a tenth this year, according to the International Monetary Fund (IMF).

According to official figures, gold production in the first eight months of 2020 rose by 10%, driven especially by output from small-scale miners.

Related: http://Rising debt affects Zimbabwe’s Gold Mines: Mettalon halts output at three mines

Plans are underway to reap US$12 billion from mining by 2023, mainly through gold.

The mining sector already accounts for 60% of Zimbabwean exports, raking in around US$$1 billion a year, and represents half of the country’s foreign direct investment.

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According to Finance Minister Mthuli Ncube in a pre-budget statement last month, “Mining will be a leading sector in sustaining high and shared growth.”

Gold is expected to bring in US$4 billion a year by 2023, followed by platinum at US$3 billion, but experts have warned that the ambitious plans face big hurdles.

Also, the government has promised new regulations to curb illegal exportation of gold in the country.

Even so, policy inconsistency and delayed payments for bullion deliveries are frustrating the few international mining companies operating in the country.

Read also: At least 60 feared dead in Zimbabwe gold mine flood

Large-scale gold producers are subjected to a more generous 70% foreign currency threshold for their sale proceeds.

However, analyst Robert Besseling, head of the Exx Africa business risk consultancy, said growing back the economy on buoyant global gold prices was “unrealistic”.

Besseling also says that “growth will be impeded by foreign exchange shortages and a weakening national currency, as well as rampant hyperinflation,” adding that investors were likely to be put off by economic and political instability.

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He added that “companies are struggling to secure inputs, and export capacity is already at a limit due to poor infrastructure.”

Mining giant RioZim, the country’s top producer, also halted production in June after failing to cover its operational expenses.

For the moment, the government has yet to get a handle on gold being smuggled out of the country.

Related: Zimbabwe First Lady Denies Links To Gold Smuggling

Artisanal miners, many of whom have joined the gold rush to escape poverty, are thought to be the source of much of the smuggled gold.

Last month, the head of Zimbabwe’s artisanal and small-scale mining federation was busted with 6kg of gold worth over US$300 000 in her hand luggage just before boarding a flight to Dubai.

Six other people have been arrested over the case. One of them, an airport intelligence officer, allegedly mentioned President Emmerson Mnangagwa’s wife and son as the owners of the contraband.

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Prosecutors and government officials have accused the president of namedropping to mislead investigators and evade justice.

The scandal is suspected to be just a tip of the gold smuggling iceberg diverting hundreds of millions of dollars out of the country. Home Affairs minister Kazembe Kazembe recently estimated that Zimbabwe loses at least US$1,2 billion a year through the illicit gold trade.

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