Government will remove royalty fees if gold producers increase output by at least five tonnes, Mines and Mining Development minister Walter Chidakwa has said.
BY TATIRA ZWINOIRA
Royalty fees on gold are 1% for small scale and 3% for large producers.
Speaking at the inaugural gold sector awards held last week, Chidakwa said there were on-going discussions involving the Gold Mobilisation Technical Committee, Finance minister Patrick Chinamasa and the Reserve Bank of Zimbabwe on how to incentivise gold producers.
The discussions started four weeks ago, he said.
Chidakwa said the government was willing to forgo the royalty fees of about $25 million as the multiplier effect from an increase of gold would allow for such a move.
“The discussion that we had was, if it is possible for us to remove royalties completely to zero. If you calculate the amount of money that we get from royalties it works up to $24 million or $25 million. If we agreed here and today that if we achieve 20% on the 23 tonnes [expected 2017 gold tonnage] and we said we will then remove royalties’ and committed ourselves to it and structure it in such a way that royalties becomes due and payable only if we do not achieve the 20%,” he said.
“We are discussing. Let me say this to you, this discussion is a very mature discussion the minister of Finance asked me to extend this message to you. It is not the revenue per se that is important to us, but we can forgo $25 million if you add another five tonnes of gold. It may not come to the government, but it can increase the amount of gold that the government can put on the table as the governor was talking about borrowing money against gold.”
The incentive is meant to lure small-scale artisanal gold miners to remit their output to Fidelity Printers instead of selling it on the parallel market in South Africa and Mauritius.
Small-scale gold miners have been increasing output.
According to the central bank, 45% of these small-scale artisanal gold miners contributed to 9,7 tonnes to gold production in 2016 with that the number expected to exceed 50% by the end of next year.
Reserve Bank of Zimbabwe governor, John Mangudya said the formal sale and delivery of gold to Fidelity Printers and Refiners would enhance the economy’s capacity to leverage on its gold reserves, and hence, generate the much-required foreign currency to liquefy the economy.
“Given the importance of the gold sector to national output and foreign currency generation, the Reserve Bank has taken a keen interest in supporting this sector,” he said.
The government has embarked on a number of initiatives to ensure gold goes through formal channels. The measures include registration of 344 buying agents by Fidelity, establishment of mobile gold buying units, flexible gold buying times, and cash incentive, among others.
In the State of the Mining Industry Survey Report 2016, respondents raised concerns on the non-deductibility of royalty as a tax expense and felt that it was double taxation. The survey was conducted by the Chamber of Mines.