Gold Prices Soar But Zimbabwe Not To Benefit

This is the best that Zimbabwe can do: licensing small scale gold and diamond miners who get robbed blind by the political connected and cross-border conman. The fruits of their labour is largely bought for song and spirited out of the country. Zimbabwe itself does not benefit. This is unlikely to change, as mining companies are still operating at 25% capacity or less, despite the promises of the Inclusive Government in April this year

Harare, Zimbabwe, 07 October 2009

Gold prices shot to over US$1000 an ounce yesterday on the international market as investors fled a sinking US dollar. There were also rumours that China and Middle Eastern countries had met to conspire to dump US dollars as the pricing currency for oil.

Gold mining companies everywhere are celebrating. The Rand in South Africa will now almost certainly strengthen significantly, as it does whenever gold prices firm.

But Zimbabwe, with gold deposits that have been officially estimated to last more than 75 years if mined to capacity every year, is unlikely to benefit from this windfall, as it should if the Inclusive government knew what it was doing.

Despite grandiose pronouncements in the Short Term Economic Recovery Programme STERP) unveiled by Finance Minister Tendai Biti about increasing capacity by 60% in industries, despite repeated reference to the same discredited and moribund STERP by every government minister who opens his mouth, the truth of the matter is that Zimbabwe's industries are only operating at 25 percent capacity.

That is a 75% loss of revenue right off the bat.

Mugabe, in his yawn-inducing speech to parliament today, also lamented the struggling mining sector, saying they suffer from lack of parts and foreign currency to import machinery since theirs is now "obsolete"

Talk about dying of thirst with your feet in clear, clean water!

As it is, Zimbabwe's mining companies are on autopilot.

So skint are they that one gold mining company I know of is failing to even buy new share certificates to issue to those who buy its shares on the Zimbabwe Stock Exchange.

The Inclusive government, both whose programmes (STERP and the 100-Day Wishlist) were declared by Prime Minister Tsvangirai to have performed "dismally", is content to watch this state of affairs fester while they fight about giving each other jobs.

The Chiadzwa Diamond Fields sit idle for the nation, plundered by an elite and all the government does is fight about who gets what perks and position. Even as ACR, the company that first prospected Chiadzwa, announced that it had found even larger deposits, Zimbabwe continues to wander the world with a begging bowl, begging for alms.

Put together, the potential of the gold and diamond deposits in this country as well as the continued discovery of platinum deposits on the Great Dyke, means that this country should actually be turning down IMF loans instead of begging for them.

But neither the MDC nor ZANU PF have the wits or desire to see this economy soar as it should within a year, with the right policies. Their colonial mindsets, stuck in the the Africa of yesteryear, still sees foreign aid as the bedrock of any Third World Country.

Younger and modern leaders are lacking, which means we will continue to watch our resources gathering dust while we plead poverty.

The one thing you can sure of, however, is that our mineral resources, just as they were when Rhodes was still alive, will now be shipped off to South Africa to add to the wealth of that country.

The chorus of praise and "profiles" being published in the state media for Patrice Motsepe, the South African mining billionaire should give you an indication of who it is that is moving in while Zimbabweans watch.

Yes, the South Africans are not investing heavily on the Zimbabwe Stock Exchange, but they are also quietly working their way into the Zimbabwe gold, diamond and platinum mining industries.

Motsepe held a meeting with Mugabe and Biti about six months ago and since then, he has been a regular visitor to Harare and a frequent guest at the Miekles Hotel in Harare.

Zimbabwe will eventually start getting revenue from taxes, which will not be much. But that is way into the future. The model established by the government, where they give foreign investors in the gold, platinum and diamond mining industries long tax break (as long as 15 years in one instance), means that we will watch and wait while other, better governed nations fill their coffers with the windfall from this gold price bonanza, which is likely to last for a bit of time.