At least 75% of Zimbabwe’s small-scale jewellery companies have closed down since the country “dollarised” last year, as accompanying legislative and administrative changes triggered a spike in licence fees and created hurdles in accessing gold.
The bankruptcies have cut the number of players in the industry to 50 from about 5 000 in the last four years and most of the survivors are concentrated in the country’s major cities of Harare, Bulawayo and Mutare.
In February last year, the Ministry of Mines and Mining Development converted the jewellery licence fee into United States dollars and pegged it at $1 000, renewable every year.
Operators are also obliged to pay $2 400 for gold dealership licences.
Fidelis Dhana, Jewellery Council of Zimbabwe chairman, said the liberalisation of the gold marketing the same month also scrapped a quota previously reserved for local jewellers from Fidelity Printers & Refiners – the gold-buying division of the Reserve Bank of Zimbabwe plunging their operations into an acute viability crisis.
“Only a few people are still operating. The majority have shut down as there are no raw materials. Gold is the major mineral that we use, and it’s not available because of the new gold marketing environment,” Dhana said.
As a result, the majority of the small-scale jewellers now rely mainly on recycled gold while others have had to supplant gold with silver.
“The problem is people are used to gold,” Dhana said. “They are not into jewellery made from minerals such as silver, brass and copper. They don’t like the stuff.”
The challenges have seen capacity utilisation declining to just about 10-15% from 20% last year, 0,5% of this is for gold remodelling while 14,5% is for silver production.
Dhana said the Jewellery Council’s engagement with the Mines ministry over licence fees to save the industry has been a wild-goose chase.
He said the body had also asked government, with limited success, to reintroduce the jewellery industry gold quota under the new gold marketing regime under the rubric of the Indigenisation and economic Empowerment Act.
“We have asked government to reintroduce the gold allocation that we used to receive from the central bank as a way of empowering the sector, but it has not done anything yet,” Dhana said.
“But as government talks about empowerment, we are closing down. The jewellery sector is one of the most critical sectors that must be considered for empowerment. We are a sector which can add value to the country. We can also create employment.”
Technically, quotas are not consistent with market liberalisation.
Fidelity Printers & Refiners says the industry can still buy gold directly from the company, provided they obtain the necessary authorisations from the Finance and Mines ministries and other relevant authorities.
“We’re yet to see requests from the Jewellery Council,” Terence Machawira, Fidelity Printers company secretary, said.
“If a person comes with the relevant papers with the relevant authorisations, why should we deny them? If they follow the right channels, they will not face any difficulties in buying gold.”
Dhana said the viability crisis has also forced the industry to suspend its apprenticeship training programme, adding this would have long-term quality implications for the industry.