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Zimbabwe used to be one of the largest gold producers in the world.
However, economic challenges at the beginning of the millennium resulted in production falling as many large-scale producers scaled down operations. Some large mines shut down as they felt that the money they were getting from the sale of their gold to Fidelity Printers and Refiners at the height of hyperinflation could not sustain their operations.
The void created by established mining houses was readily filled by small-scale miners, who rose to the challenge and at one time contributed 60 percent of the 29 tonnes of gold delivered to Fidelity Printers and Refiners in 2005 despite operating with rudimentary equipment.
However, from producing 17 tonnes in 2004, figures show that latest deliveries by small-scale miners to Fidelity Printers and Refiners, an arm of the Reserve Bank of Zimbabwe, were a paltry 959kg, 41kg shy of a tonne.
This massive drop in production should be a cause of concern for the country as it has serious implication for the economy, especially as gold mining has always been a major contributor to foreign currency earnings.
Questions need to be asked whether this plunge in production by small-scale miners was because the majority of small-scale mines are no longer functional or they have found an alternative market.
If the latter is the case, we can only surmise that the bulk of the gold produced in the country by small-scale miners is being smuggled abroad as Fidelity Printers and Refiners is the only gold buying agency in the country.
In a story carried in the business section of Chronicle, miners said there was rampant smuggling of gold because of low mineral prices being offered by Fidelity.
Fidelity, according to miners, was paying 11 percent less on the prevailing international gold prices. With international gold prices hovering at about $1,260 a tonne, miners are losing about $140 for every tonne they deliver.
Fidelity needs to review the commission it charges miners to boost production. While it is understandable that Fidelity cannot buy gold from miners at prevailing international prices, charging a commission of more than 10 percent is a bit steep.
We understand, and miners too must appreciate that after buying local gold, Fidelity has to identify international buyers and there are costs involved in this.
Nevertheless, claiming an 11 percent commission is on the high side for what is largely a middle man’s role. Most of the work in the production of the gold is done by the miners who sweat it out while the role of Fidelity is mainly to export the mineral.
In this light, it would be prudent for Fidelity to reduce its charges.
As things stand now, it is Fidelity and the country which are losing out. Miners who are risking it by smuggling are still making their money while commission from gold sales payable to the Reserve Bank of Zimbabwe subsidiary has plunged.
We believe that Fidelity will not lose anything if it slashes its commission even by as much as 50 percent. Small-scale miners have proved that they can be the backbone of mining in the absence of large-scale producers and all must be done to assist them.
There could be no better way of showing support for the indigenisation programme than making sure miners derive maximum benefits from the operations.
Online Reporter