The Sunday News
Dumisani Nsingo, Senior Business Reporter
GOLD miners are hoping that the new formal market-based foreign exchange trading system to be introduced by the Reserve of Bank of Zimbabwe (RBZ) will enable them to cover their cost of production.
RBZ recently cancelled the gold support price facility, which was cushioning primary gold producers against disparities between the official exchange rate, which stood at 25 and the actual costs of production incurred.
Fidelity Printers Refiners, which buys gold from miners on behalf of the Government, general manager Mr Fradreck Kunaka could neither confirm nor deny the suspension of the gold support price facility but hinted that it was the prerogative of the Ministry of Finance and Economic Development.
“Incentives came from Treasury (Ministry of Finance and Economic Development) thus the ministry is better placed to comment on the issue of incentives,” he said.
The gold support price facility was introduced in the first quarter of 2019 by the central bank following depleted deliveries of the yellow metal to Fidelity Printers and Refineries. The facility was hailed as a reflection of Government’s commitment to providing incentives to productive sectors that have a potential of facilitating economic growth.
Chamber of Mines of Zimbabwe chief executive officer Mr Isaac Kwesu, however, confirmed the cancellation of the gold support price facility as Government has since introduced a Foreign Exchange Auction System, which comes to effect on Tuesday.
“It is our hope that it’s going to be an efficient auction system if it will compensate that disparity between the current interbank exchange rate and the obtaining exchange rate from other alternative exchange. It’s our hope that it will be an efficient auction that will reflect full conditions of the market. If it happens like that the loss of value that was being incurred by exporters will be minimised,” he said.
The adoption of a Foreign Currency Auction System is expected to bring transparency and efficiency in the trading of foreign currency in the economy.
“As long as the volumes are adequate, we think it will run efficiently, the real issue is to ensure that exporters specifically remain viable if we have to support the interbank market, it’s a chicken and egg situation. That auction market requires volumes and these volumes come from exporters so these exporters must be viable to be able to remain in business . . . ,” said Mr Kunaka.
Before the introduction of the gold support price Zimbabwe’s value of gold exports had sharply been coming off triggered by inflation and low retention of export receipts thus driving side marketing and lower production of the mineral.
“Without exporters that auction market won’t be efficient, it will be thin and thin trading means the majority of volumes will find themselves in the black market. So, we will give it a chance and the devil will only come out on how the market operates but otherwise on paper it sounds as something that we will support,” said Mr Kunaka.
The distortions between the United States dollar and the local currency exchange rate contributed to the rising inflation, which negatively affected the mining industry among other sectors in terms of both retention and accessing raw materials.