Analysis of New Gold Buying Framework in Zimbabwe With a Special Emphasis on Artisanal and Small-Scale Gold Mining



Fidelity Printers and Refiners (FPR) announced a new gold trading framework on Tuesday, 26 May 2020. Mainly, the new measures relate to different gold payment arrangements for deliveries from Artisanal and Small-Scale Gold Mining (ASGM) and Large-Scale Mining (LSM). With effect from 26 May 2020, FPR is now paying a flat fee of US$45 per gram of gold from ASGM. Gold deliveries from LSM are now being paid 80% in US$ transferred to the relevant company’s nostro bank account and the remaining 20% being liquidated to local ZW$ at the prevailing official exchange rate.  The changes are not limited to payment arrangements for gold deliveries but include new requirements for gold buyers. Large gold buyers must now produce a minimum of 50kgs of gold per month to get a gold buying license from FPR. Small gold buyers need to be licensed as agents for FPR with attendant terms and conditions which were not specified.

FPR’s press statement on new gold trading arrangements did not disclose the reason for the changes. One would assume though that FPR and by default the Government of Zimbabwe intends to take advantage of the rising gold prices in the midst of the Corona virus pandemic.  While gold has taken some hit as a result of the impact of COVID19 on the commodity supply and demand chain, its price has risen as investors sought a safe haven due to the low returns in US$ denominated securities. According to Bloomberg data, gold has risen by 5.3% so far this year and may go higher still. It is worthwhile for Civil Society Organisations (CSOs) like the Zimbabwe Environmental Law Association (ZELA) to analyse the significance of the new gold trade arrangements in terms of how much they will impact on gold mobilisation and curbing rampant gold leakages with a special emphasis on ASGM. Further attention is to be paid to gaps in the new arrangement and recommendations to government, artisanal and small-scale miners (ASMers) associations like Zimbabwe Miners Federation (ZMF) and CSOs, on realising full benefits to the nation from gold.

The bias on ASGM is hinged on the fact that the sector, for the past 3 years, from 2017 to 2019, delivered more gold to FPR than LSM. ASGM sector accounted for 63 percent (17 478,74kg) of total gold deliveries (27 650,26kg) to FPR in 2019. Directly, the sector directly benefits over 1 million people and over 3 million indirect beneficiaries. This makes ASGM an important shock absorber to Zimbabwe’s lack of formal employment challenges, making it a critical source of income generation amidst economic contraction and unreliability of rain fed agriculture. A big red flag on ASGM has been raised by COVID-19 pandemic which has doubled down pressure on health challenges which were generally problematic to the sector. ASMers lack capacity to disinfect their overcrowded working areas and to buy masks and hand sanitisers.

Understanding the role of FPR in gold trade

It is significant to note that FPR via the Reserve Bank of Zimbabwe (RBZ) enjoys a monopoly in gold buying, refining and export. This monopoly was established by the 2014 National Budget Statement with effect from 01 January 2014. More details on the necessity of FPR’s gold monopoly are disclosed in the RBZ’s Monetary Policy Statement (MPS) of 2014. RBZ explained that this arrangement is an important step for Zimbabwe to refine gold and seek for readmission at the London Bullion Market Association (LBMA) in order to directly export gold without going through the Rand Refinery. Prior to 2006, Zimbabwe was an accredited member of LBMA. Its membership was lost when gold production fell below the required annual production of 10 tonnes in 2007. In addition to FPR’s monopoly in gold trade, RBZ directed that small scale gold producers will benefit from being paid in a transparent manner based on the ruling international gold price. To date, Zimbabwe’s accreditation to LBMA remains in limbo. Gold from Zimbabwe is still being exported via South Africa’s Rand Refinery.

What made FPR to bend?

For the first time in more than 5 years in Zimbabwe, annual gold deliveries to FPR from ASGM plunged in 2019 by 20%. In 2018, gold deliveries from ASGM peaked to 21,678.42 kgs and fell by 4,289.68 kgs in 2019 to 17,478.74 kgs. Prior to this plunge, annual gold deliveries from ASGM phenomenally grew from 3.9 tonnes in 2014 to 21.7 tonnes in 2018, a whopping 556% increase. The decline of ASGM gold deliveries in 2019 was attributed “…to electricity shortages, coupled with inadequate equipment for small scale miners to access deep gold reefs and gold leakages through smuggling” by RBZ’s MPS, 2020. However, ASGM players felt that the decrease of foreign currency retention threshold of 70% from 55% introduced in 2019 mainly contributed to the plunge in gold deliveries.

Whilst FPR referenced its gold price to international market gold price, foreign currency withheld by FPR was liquidated at the prevailing market rate. Therefore, in real terms, prices offered by FPR were not competitive because the official exchange rate has always been eclipsed by black market rates. Latest gold delivery data from FPR shows that between January to April 2020, ASGM delivered 4,300.61 kgs of gold, a 19% decline over a comparable period in 2019; 5,332.37 kgs. If we are to compare the gold delivery figures between January and April for 2018 and 2019, ASGM deliveries plunged by 14% from 6,169.29 kgs to 5,332.37 kgs respectively. Thus, the sharp decline in gold deliveries for the first four months in 2020 forced FPR to bend to the demands of Artisanal and Small-Scale Miners (ASMers) who have always appealed for a 100% cash payment in US$.

 The accelerating decline of gold deliveries from FPR comes at a time when black market exchange rate for US$ and ZW$ has been spiralling out of control. When the new gold trading arrangements were announced, the black-market rates were offering roughly 200% more in comparison with the official exchange rate pegged at US$ = 25 ZW$.

 Given that from the illicit gold market, payments are done 100% using US$, price offered by FPR were becoming less and less competitive. Furthermore, the boom in international gold equilibrium market price which offered US$54.8 per gram gold at a time when FPR announced the new gold trading measures eroded the competitiveness of FPR’s gold payment methods. The changes made by FPR, also, are closely aligned with changes brought by RBZ which removed restrictions for local trade transactions in US$ as part of a cocktail of economic measures to respond to COVID-19 pandemic.

Sifting the impact of the new gold trading arrangements

The US45 flat fee per gram of gold for deliveries from ASGM mining has already been applauded by the Zimbabwe Miners Federation (ZMF) in their press statement issued on 27 May 2020. However, ZMF raised concerns that FPR deviated from its promise for transparency in gold pricing hinged on what is obtained from the international market, LBMA rates. Therefore, the fixed rate of US$45 will not be responsive to gold price movements on the international market. On the day that FPR announced the new gold trading measures, the international market offered $54.8 per gram of gold. Thus, FPR is paying 17.88% less than what is offered on the international market bearing in mind the price can change?

The price difference is quite significant, and it leaves a gap for illicit gold trade to continue thriving. It appears that FPR wanted to match the illicit market price per gram of gold of US$45. As is the norm, the illicit market responded by hiking its price from US$45 to US$48 per gram. If the changes on the international market remain buoyant, unless adjustments are made timely, the impact of the new trading requirements are less likely to achieve the intended results of mobilising more gold deliveries to the formal market. As it stands, FPR is likely to reverse the trend of falling gold deliveries from ASGM although it might fall short of extinguishing the illicit gold market. Already, ZMF during their press conference delivered a day after FPR came up with the new gold trading framework demanded the following options;

1. A ratio framework as is the case for large scale producers is recommended as it enables scientific tracking of mineral prices. We also propose the fair compensation of any surrendered portion in line with market developments in order to converge the world and local price of gold to minimise side marketing and gold leakages; or

2. Full compensation in US dollars in line with prevailing world gold price.

The commitment by FPR to pay ASMers 100% cash in US$ for gold deliveries while well intentioned, it can present huge challenges. Before this announcement was made, FPR was struggling to pay 55% cash in US$ for gold delivered by ASMers citing COVID-19 impact on importation of cash. Therefore, FPR’s capacity is likely to be further stretched and result in delays for gold payments to ASMers. If this happens, the illicit market is ready to pounce and may offer prices below US$45 per gram offered by FPR because ASGM is heavily a cash business – cash payment upon delivery of gold is the norm.

There are arbitrage risks created by FPR’s new gold trading arrangements. Large scale gold producers can funnel their gold as small scale producers in order to get payment US$45 per gram that is offered to ASGM. In the past, different royalty rates for AGM and LSM including different payment arrangements for gold deliveries created arbitrate opportunities for LSM to funnel their gold under ASGM. In response, the 2019 Midterm Budget Review Statement increased royalty rates of ASGM from 1% to 2% to narrow the gap of 3% royalty fee for gold below US$1,200 from LSM.

Further to the press statement released by FPR on 26 May 2020, FPR explained during a press conference that the new gold buying requirements are designed to flash out foreign buyers who have no interest in gold production. It is important to understand that licensed foreign buyers were fingered in illicit gold trade.  As part of the new gold buying requirements for large scale gold buyers, one must have a mine producing not less than 50 kgs of gold per month. FPR will also license small scale buyers to mop out gold deliveries from artisanal miners. If implemented, the flashing out of foreign buyers can deliver a critical blow to the illicit market for gold in Zimbabwe. It remains to be seen if the foreign gold buyers who have been affected by the new changes are going to invest in gold production in order to retain their gold buying licenses.

It is also worth noting that prior to this press statement by FPR, RBZ had since 2016, directed FPR to buy gold from artisanal on a no questions asked basis. Without discounting the positive intentions of buying gold on no questions asked benefits – de facto decriminalisation of artisanal mining, the measure created huge risks. Examples include the disregard of the country’s Gold Trade Act and the international frameworks on Due Diligence on Responsible Mineral Supply Chains and for failing to curb the flow of blood gold into the formal market.  The new FPR makes no reference on whether this policy would continue or not.  As ZELA we believe this could be an ideal opportunity for RBZ to reverse on this policy position and instead push Government to formally recognise the ASM sector which directly involves over 1 million people and indirectly benefits around 3 million people. A formal recognition of the ASM sector and a move to license them would allow for responsible mineral resource sourcing and tracing.

Gold price alone is not enough to remove oxygen for illicit gold market

While the move by FPR to improve prices offered for gold deliveries from ASGM is quite important, it is not enough to remove oxygen for illicit gold market. Ministry of Mines and Mining Development (MMMD) must chip in by enhancing transparency and accountability in the administration of mining titles through computerisation of the long overdue mining cadastre system. Ease of doing business in ASGM must be given priority by government. For instance, the gold mobilisation committee is accused of chocking ASGM due to its rent seeking behaviour motivated by the knowledge that the bar of compliance for ASGM is too high. Artisanal mining must be prioritised in the long overdue reform of the old Mines and Minerals Act with compliance burden being distinguished with those of LSM.


  • FPR must align price for gold deliveries from ASGM with international market to promote transparency and responsiveness of its gold price. Instead of coming out with a flat fee of US$45 per gram of gold, FPR must offer prices aligned to the international market as demanded by ZMF.
  • FPR must not only care about the golden eggs but the goose that lays them too. Considering the vulnerabilities of ASGM in COVID-19 times, FPR must push for ringfencing of a portion of royalties for investment in COVID-19 prevention mechanism in ASGM – disinfection of hot spots, provision of hand sanitisers and masks.
  • Arbitrage opportunities must be removed by ensuring that the gold payment arrangements for ASGM and LSM are not differentiated except that FPR must continue paying ASGM in cash and LSM through bank transfers.
  • A comprehensive reform package is needed to remove oxygen from the illicit gold trade by expanding focus to include legal and financial support to formalise ASGM. Therefore, reform of the Mines and Mines and Mineral Act must carter for ASGM and undue delays to this reform process must be avoided.
  • FPR must have established clear milestones for re-joining the LBMA to ensure the country benefits from refining and export of gold directly to the international market as was the case before 2007.
  • FPR must seize the opportunity to align its gold trading practice in line with OECD’s Due Diligence Guidelines on Responsible Mineral Supply Chains.

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