FIDELITY Printers and Refineries, a gold buying unit of the central bank, needs to be recapitalised to enable it to offer competitive prices that would kill the black market, a new report by a resources watchdog has said.
In its latest report, the Centre for Natural Resource Governance (CNRG) said the Reserve Bank of Zimbabwe through Fidelity was unable to offer competitive prices for gold, thereby creating a thriving black market for the mineral.
"By capitalising this institution, the benefits of smuggling may be extinguished and most of the gold produced in Zimbabwe will be channelled through Fidelity Printers," CNRG said in a report, Illicit Financial Flows in Zimbabwe's Artisanal & Small-Scale Mining Sector.
"This should be done immediately as gold barons are likely to pounce on the newly legalised artisanal miners as soon as the formalisation programme is implemented."
The government is currently working on a plan to de-criminalise artisanal mining (makorokoza) to boost gold production.
The CNRG report was compiled after a visit to Kurland Block in Gweru.
It said the price offered by Fidelity was 76% of the global market price.
At the time that the research was conducted, CNRG observed that Fidelity was buying gold at US$32 per gram, while on the informal market a gram of gold would fetch US$39 in Kadoma and US$42 in Harare.
It observed that "runners" were buying the gold from the miners in Kurland Block at US$28 a gram.
"This is too low and encourages black market players to enter the market," CNRG said.
CNRG was founded by human rights activist Farai Maguwu who documented abuses in Marange diamond fields.
CNRG said black marketers in the gold industry "do not remit tax and smuggle the gold into neighbouring countries where it fetches a higher price".
"Some senior government officials are gold barons and they go on to sell their gold to the same buyers who purchase gold from Fidelity," the resources watchdog said.
Last year former Finance minister Tendai Biti said the recapitalisation of Fidelity Refineries required US$50 million to enable it to refine all the gold that was mined and produced in Zimbabwe before it was exported.
He said government was in talks with regional financiers and was prepared to surrender equity as part of the recapitalisation.
"We require an amount of about US$50 million to recapitalise Fidelity Refineries so that all gold that is mined and produced in Zimbabwe is refined at Fidelity before it is exported," Biti said.
Smuggling of minerals is rife in the country, attributed to low prices thereby denying the country the much-needed revenue through taxation.
According to the Minerals Marketing Corporation of Zimbabwe, the smuggling of gold is costing the country over US$50 million per month.
A recent report by the African Development Bank showed that at least US$12 billion had been allegedly spirited out of the country in the last three decades through illicit financial flows ranging from secret financial deals, tax avoidance and illegal commercial activities.