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Tapiwanashe Mangwiro
Business Reporter
RECORD high international gold prices have brought the much-needed reprieve to Zimbabwe’s mining sector, cushioning it against plummeting prices of other metals.
To the contrary, gold prices have surged on global markets to unprecedented levels, driven by economic uncertainties and geopolitical tensions that have reaffirmed the yellow metal’s reliability as a safer haven.
Economic analysts pointed out that the soaring gold prices were offsetting declines in other key minerals, particularly platinum, which has been facing challenges, and will play a crucial role in bolstering Zimbabwe’s foreign currency reserves.
Between them, gold and platinum account for well over 50 percent of mineral export earnings for Zimbabwe.
Last Wednesday, gold hit a record high of US$2 600,11 per ounce following the US Federal Reserve’s aggressive half-percentage-point interest rate cut, aimed at stimulating the country’s economy.
This surge in gold prices marks a continuation of recent upward trends, providing a timely boost for Zimbabwe.
According to Fidelity Printers and Refiners, local gold deliveries increased significantly from January to August 2024. Total deliveries reached 20,7 tonnes, compared to 19,3 tonnes during the same period last year.
This represents a 7,2 percent increase, driven by both large-scale and small-scale mining activities.
Large-scale miners delivered 8,5 tonnes of gold, up from 7,7 tonnes in 2023, marking a 10,4 percent increase.
Small-scale miners, who play a critical role in Zimbabwe’s mining sector, saw a 3,4 percent rise in output, delivering 12,1 tonnes compared to last year’s 11,7 tonnes in the same period.
While gold production is rising, local platinum output, another key mineral export for Zimbabwe, has faced challenges, specifically related to low prices on global markets.
The World Platinum Investment Council reported a 1 percent year-on-year decline in Zimbabwe’s platinum production, with 125 000 ounces (oz) produced in the second quarter of 2024, compared to 126 000oz in the same period last year.
Despite this slight dip, platinum production is expected to reach 504 000oz by the end of 2024, a marginal decrease from 507 000oz in 2023, but still significantly higher than the 480 000oz produced in 2022.
Economist Mr Tinevimbo Shava said the record-breaking gold prices would cushion the domestic economy from the challenges posed by lower global platinum prices and production levels.
“Gold’s price rally is proving to be a lifeline for the mining sector.
‘‘Even with platinum output slightly down, the gains from gold are offsetting these declines and ensuring that Zimbabwe continues to benefit from mineral earnings,” Mr Shava said.
He added that, with global uncertainties driving investors towards safe-haven assets like gold, the trend was likely to continue in the short to medium term.
The importance of this development cannot be overstated, as the country’s mineral exports are a critical source of foreign exchange.
Gold is Zimbabwe’s single largest export, while mining in general accounts for about 90 percent of export earnings.
Analyst Ms Sheila Mpemba noted that the increase in gold prices would help Zimbabwe alleviate its foreign currency shortage challenges, which have plagued the economy for years.
“With foreign receipts from gold set to rise, Zimbabwe is in a better position to address its foreign currency woes. This will help stabilise the local currency and ensure more liquidity in the formal market,” Ms Mpemba said.
The Reserve Bank of Zimbabwe recently reported a 9,5 percent increase in foreign currency receipts for the first half of 2024, with US$6,15 billion received from January to June, up from US$5,61 billion during the same period in 2023.
Export receipts, particularly from minerals like gold, accounted for 55 percent of the total foreign receipts during this period, underscoring the vital role that mining plays in the national economy.
While the country’s reliance on mineral exports remains strong, economist Dr Prosper Chitambara highlighted the need for policy consistency to ensure the sector’s continued growth.
He warned against frequent changes to mining laws, which could undermine investor confidence.
“For Zimbabwe to fully capitalise on this gold price boom, we need regulatory consistency. Constantly tweaking mining laws creates uncertainty, which could deter both local and foreign investors,” Dr Chitambara said.
He further emphasised the importance of addressing the country’s power challenges, which have been a persistent issue for miners.
“Uninterrupted power supply is essential for the mining sector. With gold prices at record highs, any power disruptions could significantly impact production levels and the overall earnings from the sector,” Dr Chitambara added.
He called for enhanced coordination between the Government and the mining industry to ensure that power shortages do not undermine the country’s ability to benefit from high gold prices.
Despite challenges in other mineral
sectors, Zimbabwe’s mining industry remains optimistic, buoyed by the rising gold prices.
The gains in gold deliveries, coupled
with strong foreign receipts, present an opportunity for Zimbabwe to shore up its foreign currency reserves and stabilise its economy.
Online Reporter