By James Tsabora  – Mining and Mineral Law Consultant

The framework for import and export of minerals piques the interest of global investors. Investors’ curiosity centres on the major question of whether it is possible to export gold from a gold producing state, and if so, the regulatory controls associated with the export. Despite the increase in regional and international frameworks that directly impact trade, the export of minerals have largely remained the preserve of the laws of the exporting state. The question is therefore what controls exist in the export framework of any state.

Zimbabwe is a major exporter of gold, and investors have retained a serious interest in Zimbabwean gold despite the ever-shifting socio-political and economic situation that has prevailed in Zimbabwe since the turn of the millennium. This write up is an investor advisory note on the main features of Zimbabwe’s gold trading framework as of 2024.

Gold Export out of Zimbabwe

Trading in gold in Zimbabwe is regulated under the Gold Trade Act. The main anchor of the Act is to prohibit the trading or dealing in gold by unauthorized or unlicenced persons.  

The Act criminalises the unauthorized possession of gold, regulates the awarding of permit and licenses for possession of and dealing in gold.

Dealing in gold means to buy, sell, barter, pledge, exchange, give or receive, or offer or expose for sale, barter, pledge or exchange, or have any other dealing or transaction whatever.

The export of gold requires the exporter to be a holder of a gold dealing licence, which is issued subject to any conditions set by the Minister responsible for finance.

A gold exporter is required to apply for a licence and pay the requisite gold export licence fees in terms of the Gold Trade (Licences Fees) Notice, 1978. In 2023, the Notice was amended to the effect that an exporter must pay USD200 000,00 for a permit/licence to export gold.

The licence granted under this Notice is called the gold dealing licence, and allows the holder to buy, refine and export gold.

The granting of a gold dealing licence is the exception in Zimbabwe; in practise, gold export regime is more tightly controlled. There is a general reluctance for the government to grant persons a gold export permit. Thus, because of this practical restriction, gold in Zimbabwe is exported almost solely by the Reserve Bank of Zimbabwe through its gold exporting subsidiary.

To control the trade of gold in Zimbabwe, the Reserve Bank of Zimbabwe incorporated a company, Fidelity Gold Refiners (Pvt) Ltd (formerly Fidelity Printers and Refiners Pvt Ltd), which in turn was granted the gold dealing licence in terms of the Gold Trade Act. In recent years, Fidelity has exhibited monopolistic tendencies; it has proceeded to engage and license other persons/entities to buy gold as its agents only. These gold buying agents of Fidelity are given a gold buying agency licence which allows them to buy gold on behalf of Fidelity in areas where Fidelity does not have gold buying centres. This licence costs USD2 500 per annum.

In June 2024, the Government passed the Value Added Tax (General) (Amendment) Regulations, 2024 (No. 69), which removed the 15% VAT payable by gold miners when delivering gold to Fidelity.

The Reserve Bank of Zimbabwe regularly opens a window of opportunity that allow large scale companies to export some portion of gold subject to several favorable conditions. These actions are undertaken in terms of Exchange Control Regulations Statutory Instrument 109 of 1996. A notable example is as follows:

In June 2021, in terms of Exchange Control Circular Directive 4 of 2021, the Zimbabwe central bank issued a statement that miners who delivered gold above their average monthly output would be entitled to a retention level of 80% (instead of the designated 75%) on the incremental portion of gold delivered to Fidelity.

Further, large scale producers who qualify for the 80% retention threshold would be entitled to export directly the gold equivalent to the incremental portion of gold delivered to Fidelity. Fidelity would facilitate the exportation process of the qualifying gold. The 5% royalties payable would still apply.

The incremental export incentive scheme was renewed and extended in 2022 in terms of Exchange Control Directive 3 of 2022.

In 2023, this incremental export incentive was discontinued through Directive 2 of 2023 issued in February 2023. The Circular stated in specific terms that ‘the incremental export incentive scheme has been discontinued with effect from 01 February 2023’.

In substitution, the new regime for export incentives pegged the export retention threshold at 75%, and the remaining 25% of the export proceeds to be sold to the RBZ at the prevailing interbank rate, with effect from February 2023.

This regime was maintained for 2024 through RBZ Circular Z56 of 2024, dated 8 April 2024. Small -scale gold producers however retain 100% of their export proceeds.

Fidelity Gold buys gold; it proceeds to refine it and sell to other refineries and other entities out of Zimbabwe. It can sell to other entitles once it is assured that the destination of the gold would be a gold refinery.

Gold Import from Zimbabwe

Interested importers are required to first communicate their intention to Fidelity through a Letter of Intent addressed to the General Manager. The Letter of Intent from the prospective buyer must be accompanied by company documents showing the company articles and Memorandum of Association, beneficial ownership and tax compliance details, among other documents.

Once the letter reaches the office of the General Manager of Fidelity, s/he submits a Letter of Response, highlighting the terms and conditions upon which Fidelity offers the gold.

Once the prospective buyer is agreeable, s/he sends an Acceptance Letter to the General Manager.

Thereafter, a Contract is drafted between Fidelity and the prospective buyer. A critical clause in the contract is the statement by Fidelity that delivery of the requested quantity is subject to availability.

This correspondence leads to the registration by gold buyers with Fidelity for purposes of buying gold.

The buyer and Fidelity enter into a prefinancing model, whereupon gold is availed by Fidelity after 10 days at a price discounted by 3% LBMA.

There is also an even smaller window for ‘direct export’ that can be used by large-scale producers, with full authority of Reserve Bank and facilitation by Fidelity. Fidelity will facilitate all the assaying and export processes to destination.

Roughly, the process is as follows:

• The prospective exporter must have the gold dealing licence stated above.
• The exporter must be a large scale producer, who delivers a large quantity of gold to Fidelity. Fidelity confirms to Reserve Bank possible payment challenges, and receives authority and approval from Reserve Bank Exchange Control authorities for the export of gold to a refinery outside Zimbabwe.
• Fidelity proceeds to semi-refine the gold and export it to a refinery outside Zimbabwe; the receiving foreign refinery does the final refining process and the gold is sold on behalf of the Zimbabwean large-scale gold producer.
• The Zimbabwean large-scale producer receives the proceeds of the gold sales directly into its bank account in Zimbabwe within a few days of delivery to the final refinery.

The Exchange Control authorities in Zimbabwe confirmed with us that this route can be considered in exceptional circumstances. In 2023, it was used in respect of gold export by one of Zimbabwe’s largest gold producers. In relation to this example, the gold producer in Zimbabwe was allowed to ‘directly sell’ to a refiner outside Zimbabwe, but through facilitation by Fidelity, which is the sole holder of the gold buying licence. In reality, Fidelity does the actual sale, and retains its 5% royalties from the submitted gold.

In our view, this route is rather an informal and exceptional arrangement that is difficult to seek with authorities in ordinary circumstances. It requires delivery of large quantities of gold as would make it difficult for Fidelity to pay to the producer in good time.

Accordingly, gold import is far easier a route than gold export in terms of legal process in Zimbabwe. Investors with a gold export permit still must be subject to the involvement and facilitation by Fidelity, and payment of a hefty licence fee. Gold producers appear to be restricted to sell their gold through Fidelity Gold Refiners, which, in turn can export the gold to international markets. The central bank regularly introduces gold export incentives for producers, which creates windows of opportunity for more profitable sales for producers, or even ‘direct sales’ of gold albeit with Fidelity Printers’ facilitation.  For international investors, importing gold from Zimbabwe is a less challenging option than gold export. Gold import has less costs, bureaucratic hurdles, extremely few regulatory restrictions and other controls, and is also quicker.