Gold output rebounds after Govt intervention

Tapiwanashe Mangwiro Business Reporter GOLD deliveries by small-scale miners, who account for most of Zimbabwe’s output, to Fidelity Gold Refinery have recovered to the January 2024 levels after Treasury reversed the 15 percent value-added tax (VAT) on gold deliveries. The miners delivered 1,6 tonnes or 55,59 percent more gold in the second quarter of this […]

Gold output rebounds after Govt intervention

Tapiwanashe Mangwiro

Business Reporter

GOLD deliveries by small-scale miners, who account for most of Zimbabwe’s output, to Fidelity Gold Refinery have recovered to the January 2024 levels after Treasury reversed the 15 percent value-added tax (VAT) on gold deliveries.

The miners delivered 1,6 tonnes or 55,59 percent more gold in the second quarter of this year, which reached 4,52t from 2,9t in the first quarter.

Both miners and analysts attributed the surge in deliveries to the removal of the VAT levy. The small-scale miners account for about 60 percent of Zimbabwe’s gold deliveries.

In January, small-scale miners delivered 1,26t, which then dropped to 864 kilogrammes and 770kg in February and March, respectively, after the VAT on deliveries was introduced. In April, small-scale miners delivered 1,2t.

Following discussions between Treasury and the miners, which started in May and led to the removal of the tax, deliveries have started picking up.

The tax was scrapped through Statutory Instrument (SI) 105 of 2024. Small-scale miners have delivered a cumulative 3,3t; 1,68t of which was brought to Fidelity in May and 1,62t in June.

SI 105 of 2024 reads: “The principal regulations are amended by the insertion of a new schedule after the First Schedule as follows; Second Schedule (Section 13) zero rate: supply of gold to Fidelity Gold Refinery (Private) Limited . . .”

This move comes after a brief period in January 2024, when the 15 percent VAT applied to deliveries, causing serious cash flow challenges for small-scale miners.

According to the Chamber of Mines of Zimbabwe (CoMZ), the law fuelled side marketing of the precious commodity, the country’s single largest export earner.

Mr Isaac Kwesu, the CoMZ chief executive officer, welcomed the change, noting that the VAT had complicated operations for many miners.

“With miners required to pay VAT of 15 percent to Zimra (Zimbabwe Revenue Authority) from money paid to them by Fidelity and be refunded when the gold buyer remits the payments, most small-scale miners were left with no cash flow to fund operations,” Mr Kwesu said.

“This later saw the small miners being charged 16 percent overall as they also paid a 1 percent royalty. To stay with cash flow, some had resorted to side marketing of gold.”

Economist Dr Prosper Chitambara believes the reversal of the 15 percent VAT on gold deliveries to Fidelity Gold Refinery is a significant development that will undoubtedly continue to encourage more small-scale miners to bring their gold to the formal market.

“This policy shift is expected to continue to lead a sustained recovery in gold deliveries as the financial burden on miners is eased, improving their cash flow and operational capacity.

“Consequently, we can anticipate a continued increase in gold deliveries as miners regain confidence in the system and are incentivised to comply with regulatory requirements.”

Overall gold deliveries surged to 7,74t for the second quarter of 2024, marking a significant 28 percent increase from the first quarter’s 6,04t.

Small-scale miners accounted for approximately 61,4 percent of the total gold deliveries, returning to their annual average delivery rate from the decline experienced in February and March when large-scale producers dominated.

The first quarter of 2024 closed with total deliveries of 6,04t, slightly lower than the 6,19t recorded in the first quarter of 2023 and significantly below the 7,69t delivered in the first quarter of 2022, which was a record-breaking year.

In the first six months of 2024, gold deliveries reached 13,78t, running lower than the 14,81t over the same period in 2023. The 2024 deliveries are also 13,71 percent lower than the record-breaking 15,97t delivered in the same period in 2022.

In 2023, the Government expected 40t of gold, only to realise 30t. Delivery targets for 2024 have been maintained at 40t, which is higher than the 35,1t record of 2022.

Economist Mr Tinevimbo Shava added that by removing the VAT on gold deliveries, the Government has taken a crucial step in supporting small-scale miners and stabilising the gold supply chain.

“This decision is likely to lead to a resurgence in gold deliveries to Fidelity Gold Refinery, as miners will no longer face the cash flow constraints that previously drove them towards side marketing.

“The increased gold deliveries observed in the second quarter are a clear indication that the policy change is having a positive impact, and we can expect this upward trend to continue as more miners come back on board to deliver at Fidelity.”

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