Eddie Cross's Website

The Gold Industry in Zimbabwe

One of the greatest empires in Africa was established by migrants to Zimbabwe who settled in the region now known as the Masvingo Province of Zimbabwe. Here they established their capital which today is known as 'Great Zimbabwe' and this refers to a complex of stone structures which are the largest such structures south of the pyramids in the Nile Valley. We do not know a great deal about them, but the evidence of their presence and activities is everywhere in form of smaller stone structures, many quite intricate, across the country. What we do know was that they were traders and knew how to produce and work gold which was traded internationally.

In the late 19th Century gold was discovered on what is known known as the Witwatersrand or given its modern name Gauteng, better known as Johannesburg. This was a string of farms encompassing a ridge or outcrop with gold seams that today seem unimaginable. In months, a city sprang up as the find drew in speculators and miners from across the globe. It was one of the greatest such discoveries in world history.

Cecil Rhodes was busy making a fortune from diamonds at Kimberly, far to the north of Johannesburg and turned down an offer to buy the farms encompassing the ridge. When finally, drawn by the immense wealth being extracted from the find, he decided to take action, a small portion of what he had been offered, cost him an immense sum of money in those days. Shocked by his failure to see the potential, he hired one of the best geologists in the world in the USA to come out and look at the situation and give him advice on the way forward.

Rhodes was convinced that the gold discoveries on the Rand stretched northwards across the Limpopo River into what was to become Southern Rhodesia. As soon as the geologist arrived he took him on a tour of the main find and then north and together they toured Southern Rhodesia in a ox drawn cart and on horseback. When they got back to Bulawayo - then one street with a few buildings, they sat around a fire late at night where Rhodes asked his consultant what he thought. The man said to Rhodes that there was a lot of gold in Southern Rhodesia but it was very disbursed and in small, fractured deposits, nothing like the Reef.

His advice changed Rhodes's world. He drew a map in the sand and said that the reef on the Rand dipped to the East and the real wealth was to be found in the open veldt where deep mining would encounter the gold seams and be able to extract the gold for processing and sale. Rhodes woke up his secretary, put him on a horse with instructions to ride to Kimberly where the telegraph was located and send an instruction to his brokers to sell his holdings on the Rand and buy the farms on the open veldt to the east. This became the largest producer of gold in world history and established some of the deepest mines ever developed. Out of that decision came some of the largest mining companies in the world, even today.

In Rhodesia the settlers came for the gold that Rhodes had been trying to locate and found out exactly what the American geologist had stated - small, often quite rich deposits. The Globe and Phoenix Mine at KweKwe was opened up and produced 8 grams of gold per tonne of ore. Small mines were opened up across the country in what became known as the bluestone districts. But never the great wealth that was located in South Africa and which established that country as what it is today.

When Zimbabwe came to Independence in 1980, we were a significant but small gold producer with several hundred mines located across the country. Some quite deep and still operating after a century of activity, but most were small, often family businesses because of the nature of the deposits. The Central Bank held a monopoly on refining and sales.

Then came two major changes - the price of gold began to move upwards after a long period of stability brought about by the ever increasing output of South Africa. South African production peaked at about 600 tonnes of gold a year and then began to decline as the resources were exhausted and mines closed down. The second thing that happened was the near total collapse of the formal economy of Zimbabwe between 2000 and 2008. Up to 5 million people left the country to try and find a living elsewhere. But at home in Zimbabwe, the young people began to discover what their ancestors in the Monomatapa Kingdom discovered, you can dig gold bearing rock out of shallow mines, get this milled and then sell the gold for real money.

In a very short space of time, up to half a million people started small scale mines in gold districts. In response many established miners and even commercial millers, started to process the output of the small scale miners at their plants. They often purchased the raw gold and then either traded the product or delivered it to the national refineries in Harare. What has become known as the 'Makorokozas' or small scale miners, has become a frequent sight throughout the country.

As a consequence, Zimbabwe is now possibly the 5th or 6th largest gold producer in the world and is trading about 100 tonnes of gold annually, not all of it produced in the country but traded here from other gold bearing regions in southern Africa. At present prices of around US$1850 an ounce, this volume of gold has a market value of US$3,5 billion. That is about half the production of the largest producers in the world, including South Africa and if it was marketed properly here would make a huge contribution to our economy. But it is not traded properly, and that is a real problem.

Our industry consists of about 600 formal mines with a declared output today of about 20 tonnes per annum. I say 'declared' because many of the small mines do not sell all their production to the national refinery. There are at least 500 000 small scale informal miners - there could be more but it is nearly impossible to find out as they come and go seasonally and depending on their individual circumstances. It is thought that this group produces at least 50 tonnes a year and about 30 tonnes is traded from other countries.

The national refiner is Fidelity Printers and Refiners Limited - a wholly owned subsidiary of the Reserve Bank of Zimbabwe. In the past year they have handled 37 tonnes of gold - a third of my estimate of total activity. This is a sharp increase over previous years and this is probably due to the fact that they are paying a premium over world market prices.

But they are not paying for gold deliveries in 100 per cent hard currency. They pay part in US dollars and part in local RTGS. For both, they have to print money to buy the currency and to pay the local currency portion. This contributes to money supply and is part of the reason for the collapse of the local currency taking place. However, the problems do not stop there, the bank has taken to issuing small gold coins, but sells them below cost and in local devaluing currency. As a result, they are snapped up when produced and can be sold after a short spell for double the purchase price and sold anywhere.

But the worst part of this whole sorry saga are the conditions under which the small scale miners must conduct their activity. They have no legal standing for their operations, no security over the resources they discover. They operate in areas controlled by criminal gangs who force them to sell their raw gold for much less than it is worth. This is then smuggled into South Africa where 6 refineries in the private sector, buy the raw gold in Rand. The Rand is then sold to importers in Zimbabwe to fund goods purchased in SA for export to Zimbabwe, often via smugglers who do not pay duty.

We need to clean up the whole system. Introduce buyers who will pay for gold in hard currency on delivery at world market prices. We need to give these small miners some form of secure rights to the resources they mine. We need to help them do so efficiently and safely. If we did it would transform the industry and I think we would very rapidly see output doubling or more.

Eddie Cross
Harare, 12th February 2023