The Government, through the Ministry of Finance, Economic Development and Investment Promotion, has scrapped the requirement for gold miners to pay a 15 per cent Value Added Tax (VAT) on the value of deliveries to Fidelity Gold Refiners.
Statutory Instrument 105 of 2024, gazetted on Wednesday effectively zero-rates gold deliveries to Fidelity. It reads in part:
The principal regulations are amended by the insertion of a new schedule after the First Schedule as follows; Second Schedule (Section 13) Zero Rate: Supply of Gold to Fidelity Gold Refinery (Private) Limited.
Earlier this year, the Treasury implemented a 15 per cent value-added tax (VAT) on gold deliveries by miners. Consequently, gold deliveries declined due to the tax, which posed significant cash flow challenges for small-scale miners.
Gold producers say the Zimbabwe Revenue Authority (ZIMRA) had started charging a 15% VAT backdated to 01 January 2024.
By zero-rating gold deliveries to Fidelity Gold Refineries, authorities hope to encourage more sales to the refinery.
Chamber of Mines of Zimbabwe chief executive officer, Isaac Kwesu, welcomed the change. He told The Herald:
With miners required to pay VAT of 15 per cent to Zimra from money paid to them by Fidelity and to be refunded when the gold buyer remitted the payments, most small miners were left with no cashflows to fund operations.
This later saw the small miners being charged 16 percent overall as they also pay a 1 percent royalty. To stay with cashflows, some had resorted to side marketing of gold.
Official figures show deliveries to the refinery decreased by 2,4 per cent from 11,45 tonnes in the first five months of 2023 to 11,2 tonnes in the same period in 2024.
Also speaking to The Herald, Prosper Chitambara, senior economist at the Labour and Economic Development Research Institute of Zimbabwe, said:
The reversion to zero-rated VAT for gold deliveries is a strategic move by the government. This policy shift is not just about easing the operational burdens on miners but also aligns with broader economic goals, particularly the need to build up foreign reserves.
Gold remains one of Zimbabwe’s key export commodities, and by encouraging increased deliveries to Fidelity, the government is ensuring that more gold enters formal channels. This not only improves our reserve levels but also strengthens our balance of payments position.
Additionally, with the introduction of the new Zimbabwe Gold (ZiG) currency, it is imperative to have substantial gold reserves backing this currency.
The credibility of ZiG as a stable medium of exchange and store of value is heavily reliant on the robustness of our gold reserves.
Therefore, facilitating smoother operations for miners through this VAT reversal indirectly supports the stability and acceptance of ZiG in the market.
The government aims to achieve a target of 40 tonnes of gold deliveries to Fidelity Gold Refinery in 2024.
