THE Reserve Bank of Zimbabwe intends to unbundle its gold buying and printing division, Fidelity Printers and Refiners, into two units to enhance efficiency and increase transparency in the operations of Zimbabwe’s sole authorised buyer of gold.
Well placed sources said the gold buying unit, ZimGold, will come under direct control of the central bank, as the country prepares to return to marketing its gold with the London Bullion Marketing Association.
Our Harare Bureau also understands that initiatives to bring ZimGold under the direct ambit of the RBZ come as the central bank has invited officials from LBMA to assess the company’s operations.
The LBMA is situated in London and is the premier global platform for the buying and selling of the precious metal. It requires members to maintain defined rules of conduct or operation.
This comes as the RBZ announced in February that it had set aside $50 million for accelerated gold production to raise output to 30 tonnes from 13 tonnes. Gold makes about half of Zimbabwe’s mineral exports. According to the Chamber of Mines, gold production is expected to grow 8.7 percent this year to well above the regulatory threshold of the LBMA.
Growth in gold production is critical for economic growth in Zimbabwe. Gold exports accounted for 51 percent of exports between 2009 and 2014 and was the second biggest foreign exchange earner at $564 million behind platinum, which raked in $574 million.
Gold production registered a 25 percent growth in the first quarter on the same period last year to boost the mining sector’s growth for the period to $452 million in value terms.
The apex bank believes unbundling will enhance ZimGold’s efficiency and focus to meet the stringent standards of the LBMA, where Zimbabwe was expelled in 2008 when output dipped below 10 tonnes. But Fidelity Printers and Refiners had made an initial application last year advising the LBMA that Zimbabwe would refine more than 10 tonnes and would seek re-admission on the premier London market.
Zimbabwe was de-registered from the LMBA after gold production fell below three tonnes in 2008 as a result of delayed payments to miners by the central bank, which was also the sole buyer of the metal.
This resulted in many mining companies closing down, only to re-open in 2009 when the RBZ deregulated the industry, which allowed gold miners to independently sell their bullion, mainly through South Africa.
ZimGold has since February been operating as an independent entity to reduce its reliance on and prepare for its eventual weaning from Fidelity Printers and Refiners, which carries many other activities.
Fidelity Printers and Refiners, apart from gold buying through ZimGold, is involved in commercial production of paper products, security printing, making of packaging products, assaying and refinery of gold and minting of medallions, coins (suspended), and tokens.
RBZ Governor John Mangudya said earlier this year that formation of a special purpose vehicle in partnership with Zimbabwe Mining Development Corporation would enable it to meet its target of $1.5 billion revenue from gold in the next five years.
Unbundling of ZimGold from Fidelity Printers and refiners comes as the government has centralised gold buying once again, which had been decentralised at the height of the economic meltdown in 2008.
The export of unrefined gold outside Fidelity is illegal and producers deliver their gold to avoid the incidence of leakages of gold.
Gold Buying Centres are securely housed in selected ZB Bank branches namely Mutare, Masvingo, Zvishavane, Kadoma, Kwekwe, Gweru, and Gwanda. According to the central bank, Bindura and Chinhoyi ZB Bank branches were still under consideration.
Other gold buying centres are in Harare, Bulawayo and Filabusi.