The Reserve Bank of Zimbabwe (RBZ), through Fidelity Printers and Refiners, has increased the Gold Development Initiative Fund (GDIF) for small-scale gold miners to $200 million from $150 million in an effort to encourage miners to deliver their gold through formal channels.
The development comes after the country's gold deliveries have gone down 20 percent to 10,8 tonnes in the first five months of 2019 from 13,59 tonnes during the same period last year due to low foreign currency retention levels, smuggling and crippling foreign currency and power shortages.
The reduction of foreign currency retention levels for small-scale miners to 55 percent from 70 percent has created arbitrage opportunities for smugglers, which are believed to have smuggled in excess of 40 tonnes of gold to South Africa.
Reserve Bank of Zimbabwe Governor Dr John Mangudya recently told The Herald that the country will prioritise gold production and the central bank will make funds readily available to improve production in the gold sector.
"RBZ has planned to fully finance FPR in order to capacitate the miners to increase gold production in the country," he said.
"We have, thereby, increased the GDIF to $200 million from $150 million last year as part of efforts to encourage miners, especially small-scale, to deliver the yellow metal through the formal channels."
Dr Mangudya said gold was essential to Zimbabwe in as much as oil was to Nigeria, Libya and Angola, hence should be fully funded at all times to earn the much-needed foreign currency.
Gold contributes 38 percent of country's total earnings and contributes over US$1,5 billion annually.
"RBZ shall ensure that FPR is well-financed in order to cater for financial requirements of gold producers and that they are paid on a timeous basis," he said.
"We shall also ensure that we set up gold service centres in various gold producing areas to ensure gold mobilisation and other processes are made easy."
Dr Mangudya said small-scale miners are still drawing down from last year's $150 million gold facility and over $120 million has so far been drawn down.
Some quarters were still advocating for 100 percent foreign currency retention threshold to encourage the delivering of all gold to FPR and miners are seeking audience to meet RBZ to address their plight.
Dr Mangudya said RBZ will not go back with the 55 percent foreign currency, as forex will be needed for other critical raw materials.
"We understand miners' concerns and we shall continue engaging the miners to find long lasting solutions for the industry, but we will retain the 55 percent forex for miners and 45 percent for other critical commodities," he said.
"The country will need 45 percent to import critical raw materials like wheat, maize, drugs and fuel."
Given the crippling forex shortages and power outages, Dr Mangudya is now doubtful of reaching 40 tonnes of gold, but now believes 35 tonnes are attainable.
Gold Miners Association of Zimbabwe (GMAZ) chief executive Mr Irvine Chinyeze said the GDIF alone was not enough to improve deliveries.
"The review of GDIF is a welcome initiative, but more needs to be on forex retention levels to woo miners to deliver to Fidelity and avoid arbitrage opportunities," said Mr Chinyeze.