On the straw after decades of disastrous management, Zimbabwe is banking on lucrative gold revenues to support an economy ravaged by corruption, hyperinflation and most recently the coronavirus pandemic.
The global health crisis has not tarnished the wealth of the precious metal: an ounce of gold reached a new record in August, passing for the first time the symbolic mark of 2,000 dollars.
Zimbabwe intends to make it a miracle cure for a battered economy plagued by unemployment, lack of cash, gasoline and even electricity and water.
The mining sector usually accounts for 60% of the country’s exports, earning a billion dollars a year, and attracts 50% of foreign direct investment, President Emmerson Mnangagwa recently recalled.
If the economy of this southern African country is to contract by 10% this year, it could rebound to + 4.5% in 2021, according to projections by the International Monetary Fund. And the mining sector should drive this growth.
The government expects annual revenues from mining exports reaching more than 10 billion euros in 2023. With gold in the lead.
The mining sector will go from a contraction of 4.1% in 2020 to growth of 7.7% next year, according to projections by Zimbabwe’s Minister of Finance Mthuli Ncubel in a budget presentation.
But gold and its finery also attract corruption, contraband and scandals which only emerge, but multiply.
Small and large traffic
Mining activity is dominated by small businesses, facilitating petty trafficking. The government recently estimated that more than a billion euros vanish each year, with individual miners feeding illicit gold trades.
Yet the Minister of Finance recognizes that the small structures of miners contribute up to more than 70% of production.
Last week, a mining official was arrested at Harare airport before boarding for Dubai, with six kilograms of the precious metal in her hand luggage, worth more than 300,000 euros on the International market.
The prosecution accuses Henriette Rushwaya of belonging to an organized network, operating on a large scale: “It is a classic example of the modus operandi of organized crime”, declared the prosecutor Garudzo Siyadhuma during a hearing.
The government has established rules to try to reduce wastage. But in the opinion of many observers, they are largely ineffective.
“The money is not recovered in the regular system,” said economist Persistence Gwanyanya to AFP.
Zimbabwe’s old demons also risk thwarting the government’s ambitious plan: currency shortage, weak currency and hyperinflation. The government’s bet to bet on gold to get out of a dying economy is “unrealistic”, according to specialist Robert Besseling of the business risk consultancy Exx Africa.
“This plan does not take into account the extremely high political and economic risks in the country, which will discourage many investors,” he explains, not to mention the export capacities limited by the poor facilities.
The leading gold producer in Zimbabwe, RioZim announced in June that it was stopping production, mainly due to a shortage of foreign currency.
The restrictions on the possession of foreign currencies enacted by the Zimbabwe Central Bank, aggravated by a fixed exchange rate, put the few large operators in difficulty. Gold exporters are only allowed to convert 70% of their sales revenues into foreign currency, the rest being denominated in Zimbabwean dollars.