Home » Zimbabwe’s Gold Crisis: How Power and Currency Woes Hit the Mining Sector

Zimbabwe’s Gold Crisis: How Power and Currency Woes Hit the Mining Sector

A look at the factors behind the decline in the country’s gold production and the prospects for recovery.

by Motoni Olodun

Zimbabwe, once a leading gold producer in Africa, has seen its output drop by 15% in 2023, according to official data. The decline was mainly due to electricity shortages and currency instability, which hampered the operations of small-scale and artisanal miners who account for over 60% of the country’s gold production.

The southern African nation produced 30.11 tonnes of gold last year, falling short of its target of 40 tonnes, the data from Fidelity Refineries, the sole buyer of gold in Zimbabwe, showed. This was also lower than the record high of 35.38 tonnes achieved in 2022 when the government introduced incentives and timely payments to miners.

Zimbabwe is not alone in facing challenges in the gold mining sector. Several other African countries, such as Ghana, Mali, Burkina Faso, Guinea, and Tanzania, have also experienced declines or stagnation in their gold output in recent years, due to factors such as illegal mining, environmental issues, security threats, and regulatory uncertainty.

However, Zimbabwe’s situation is more acute, as the country is grappling with a deepening economic crisis that has eroded the value of its local currency, the Zimbabwean dollar, which was reintroduced in 2019 after a decade of using multiple foreign currencies. The currency volatility has made it difficult for miners to plan and budget, as well as to access imported inputs and equipment.

Moreover, Zimbabwe has been suffering from chronic power cuts, as its aging coal-fired plants and its hydroelectric dam at Kariba struggle to meet the demand. The power outages have disrupted the operations of mining companies, especially those that rely on electricity to pump water and process ore. Some miners have resorted to using generators, but this has increased their costs and reduced their profitability.

The government has acknowledged the problems facing the gold mining sector and has pledged to address them. It has also announced plans to increase its stake in some mining companies, as part of its strategy to boost its revenues and achieve a US$12 billion mining industry by 2023.

However, some analysts and industry players have expressed doubts about the government’s ability and willingness to implement the necessary reforms and policies to revive the sector. They have also raised concerns about the lack of transparency and accountability in the management of the gold sector, as well as the potential for corruption and political interference.

Despite the challenges, some gold miners have managed to maintain or increase their production, thanks to their resilience and innovation. These include the state-owned Kuvimba Mining House, which operates some of the country’s largest gold mines, such as Freda Rebecca and Shamva; Caledonia Mining Corporation, which operates the Blanket Mine and has recently completed a shaft expansion project; Padenga, which diversified into gold mining from crocodile farming; and RioZim, which operates three gold mines and has plans to expand its output.

These success stories show that there is still potential for growth and development in Zimbabwe’s gold mining sector if the right conditions and support are provided. Gold is one of Zimbabwe’s major foreign currency earners, alongside tobacco and platinum, and it could play a key role in the country’s economic recovery and transformation.

Source: CNBC Africa


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