Govt scraps VAT on gold deliveries Professor Mthuli Ncube

Business Reporter

FINANCE, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, has scrapped the requirement for gold miners to pay 15 percent Value Added Tax (VAT) on the value of deliveries to Fidelity Gold Refiners.

Zero-rated goods are products that are exempt from value-added taxation (VAT).

Statutory Instrument 105 of 2024, gazetted on Wednesday effectively zero-rates gold deliveries to Fidelity. 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 follows a brief period earlier this year when the 15 percent VAT applied on gold deliveries by miners, which created significant cash flow challenges for small-scale miners. The sector is critical to Zimbabwe’s gold production, accounting for roughly 60 percent of national output.

Chamber of Mines of Zimbabwe chief executive officer, Dr Isaac Kwesu, welcomed the change, noting that the VAT had complicated operations for many miners.

“With miners required to pay VAT of 15 percent to Zimra from money paid to them by Fidelity and to be refunded when the gold buyer remitted the payments, most small miners were left with no cashflows to fund operations,” Dr Kwesu said.

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

The re-introduction of the zero rate is expected to bolster gold deliveries to Fidelity Gold Refiners. Official figures show deliveries decreased by 2,4 percent from 11,45 tonnes in the first five months of 2023 to 11,2 tonnes in the same period in 2024.

Small-scale miners, who play a pivotal role in the sector, delivered 5,8 tonnes while large-scale producers contributed 5,37 tonnes.

For the year 2023, gold deliveries to Fidelity stood at 30,1 tonnes while the 2024 gold deliveries target is 40 tonnes.

Dr Prosper Chitambara, senior economist at the Labour and Economic Development Research Institute of Zimbabwe, said the zero- rated VAT for gold deliveries also dovetails with the economic plan set by the monetary policy.

“The reversion to zero-rated VAT for gold deliveries is a strategic move by the Government. This policy shift is not just about easing the operational burdens on miners but also aligns with broader economic goals, particularly the need to build up foreign reserves.

“Gold remains one of Zimbabwe’s key export commodities and by encouraging increased deliveries to Fidelity, the Government is ensuring that more gold enters formal channels. This does not only improve our reserve levels but also strengthens our balance of payments position,” he said.

“Additionally, with the introduction of the new Zimbabwe Gold (ZiG) currency, it is imperative to have substantial gold reserves backing this currency.

The credibility of ZiG as a stable medium of exchange and store of value is heavily reliant on the robustness of our gold reserves.

“Therefore, facilitating smoother operations for miners through this VAT reversal indirectly supports the stability and acceptance of ZiG in the market.”

Gladys Shumbambiri-Mutsopotsi, a financial analyst and commentator, added her perspective saying the SI came at a time when it was truly needed.

“The timing of this VAT reversal is particularly significant given the current high prices of gold on the international market. This provides an excellent opportunity for Zimbabwe to maximise its foreign earnings from gold exports,” she said.

By reducing the financial strain on miners, especially the small-scale operators who contribute substantially to the country’s total gold output, the Government is capitalising on the favourable global market conditions.

Furthermore, boosting income through increased gold production and formal deliveries can have a ripple effect on the broader economy. Increased gold revenues can translate to higher tax revenues and royalties for the Government, which can then be re-invested in critical sectors such as infrastructure, healthcare and education.

“Thus, this policy change is a win-win for both the miners and the national economy,” said Sumbambiri-Mutsopotsi.

The reversal of the VAT on gold deliveries seeks to alleviate immediate operational challenges for miners and secure long-term economic stability and growth.

Through fostering an environment that encourages formal gold deliveries, the Government is taking steps to enhance its foreign reserves, support the new gold-backed currency and boost national income during a period of high gold prices.

You Might Also Like

Comments