Gold leakages hit Zim

HARARE - Zimbabwean authorities should seriously engage their South African counterparts to plug gold leakages estimated to be between 100 kg and 300 kg, legislator Paradzai Chakona told Parliament.

This comes as gold leakages have largely been a result of low monitoring and accountability coupled with high taxes.

“The level of smuggling is commensurate with expected gold recovery trajectory in Zimbabwe,” he said.

He noted that as part of efforts to curb the leakages, government-to-government discussions should also look into how the South Africa Revenue Services’ (SARS) rebate system — used by licensed smelters of scrap metal from that country — was being abused.

“The South Africa link is that these institutions send agents into Zimbabwe and offer to buy gold at 100 percent of international prices, avoid paying taxes and smuggle gold.

“They refine the gold and sell it to Rand Refinery and claim VAT rebate for recovering gold from scrap at a rate of 14 percent which is way above any price Fidelity Printers and Refineries (FPR)  or local players make in dealing in gold,” he said.

He recommended that all gold assaying and refinery should be done by FPR which has a capacity to refine 50 to 100 tonnes per annum.

However, the country was producing below 50 percent of annual refining capacity therefore there was no need to construct new gold refineries.

Chakona also pointed out that the tax regime needed to be revised particularly for the small-scale gold mining sector so that the incentive to avoid paying taxes was significantly reduced.

“The current seven percent royalty and two percent presumptive tax affect small-scale miners who then avoid FPR which is compelled by law to collect such taxes,” he said.

He also urged the Mines ministry to work out mechanisation models for small-scale miners after formalising their claim ownership, resource definition and establishment of support services across mining areas.

“Again this is business and therefore mechanisation must be on a commercial basis as a way to assist the small-scale miners to formalise profitable development of their businesses.”

The legislator recommended that it was government’s prerogative to capacitate FPR to operate commercially adding that the fragmented marketing arrangement introduced in 2009, affected the refinery’s ability to accumulate enough gold stock to kick-start refining.

“In this regard, FPR should be able to buy all the gold produced locally so that it can start refining and consequently secure accreditation to the London Bullion Market Association (LBMA) within the next 12 to 18 months,” said    Chakona.

This comes as Zimbabwe remains on course to be re-admitted into the LBMA after the country for the first nine months of the year produced 10 468kg, according to Chamber of Mines of Zimbabwe.

The country seeks re-entry into LBMA after it was disqualified in 2008 when production dropped to an all-time low of three tonnes, a figure far below the mandatory annual production of 10 tonnes required by the prestigious club.

The upsurge is driven by improved productivity in the gold mining sector and firming international prices.

Government has projected the output to rise to 15 tonnes.

The country’s gold sector, which reached an all-time high of 29 000 kg in 1999,  is gradually recovering from a decade-long economic crisis that hit rock bottom in 2008 as hyperinflation reached 500 billion percent, and causing mine closures.

The LBMA is a wholesale market for the trading of gold and silver.

Trading is conducted among members of the LBMA, overseen by the Bank of England.

Most of the members are major international banks or bullion dealers and refiners.

Five members of the LBMA meet twice daily to “fix” the gold price in a process known as the London Gold Fixing.

Zimbabwe’s ouster followed numerous production problems, financial constraints, a worsening power crisis and the non-payment of a huge debt owed to producers by FPR, a Reserve Bank of Zimbabwe subsidiary, which, at the time, was the sole buyer and exporter of gold in the country.

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