The public media recently reported that on a monthly basis, Zimbabwe is losing gold worth US$100m through smuggling. This is bad news for the country as this has a direct impact on the fiscus!
The Business Times reported recently that gold deliveries had plunged by 73% and the situation could not be any worse. Huston we have a problem!
Most of the gold is smuggled through our porous borders with South Africa being the preferred destination regionally and Dubai being the international one. Our gold should be headed to Fidelity but of late gold deliveries have plummeted with small scale miners preferring instant greenback payments from illegal market merchants.
The question is how can the country rectify the anomaly?
- Cancel all local gold trading licences except Fidelity,
- Invite international and local traders to set up Gold Banks,
- Independent Gold Banks to complement Fidelity in the trade of gold,
- The Gold Banks to also provide access to capital for small scale miners and machinery,
- Gold Banks to keep records and remit taxes
Those buying our gold in Dubai and South Africa should be invited to set up local offices—this helps to reduce smuggling as they will have access to gold directly from the miners.
Botswana did it with their diamonds and there is little smuggling of their precious minerals. Our current system encourages smuggling which comes at a huge opportunity cost to the country. We also have a successful tobacco system which we can draw lessons from.
Fidelity is not going to match prices offered by shady dealers as their prices are too low and takes time to be processed. The end result is miners are now selling a small percentage to Fidelity inorder to keep up appearances—the real deal is smuggling!
Is it feasible to capacitate Fidelity and avail them with more hard cash to match parallel market rates? Where will the funds come from? An additional question is what will stop illegal merchants from increasing the premium? They will fight for control of their turf and deliveries to date shows this is an unwinnable war.
