News / National
Fidelity Gold Refinery gold supply zero-rating policy shows promise
18 Jun 2024 at 12:17hrs | Views
The zero-rating of gold deliveries to Fidelity Gold Refinery (FGR) has started bearing fruits as the local currency, the Zimbabwe Gold (ZiG) continues to strengthen while gold miners have been alleviated of operational burdens.
Through Statutory Instrument 105 of 2024, the Government recently abolished the 15% Value Added Tax (VAT) requirement for gold miners delivering to Fidelity Gold Refiners, providing a significant relief to the industry.
The zero-rating of gold deliveries is significantly enhancing Zimbabwe's foreign reserves, providing a substantial boost to the country's economic stability. By incentivizing formal gold deliveries, the Government will accumulate a significant amount of foreign exchange, which will serve as a robust backing for the Zimbabwean currency, ZiG.
This will have a positive impact on the economy, as a strong foreign reserve position supports currency stability, reducing the risk of exchange rate fluctuations and promoting confidence in the ZiG.
The fortification of the Zimbabwean currency, ZiG thwarted the attempts of detractors to undermine the ZANU PF Government by exploiting the anticipated devaluation of the local currency. As gold reserves increase, the ZiG is fully backed, fostering economic growth and stability.
A stable currency, bolstered by ample foreign reserves, creates a conducive business environment, thereby neutralizing the machinations of detractors and paving the way for economic prosperity.
The exemption from VAT payments has significantly ease cash flow challenges for small-scale miners, who are the backbone of Zimbabwe's gold production, accounting for 60% of the country's total gold output. By removing this tax burden, these miners are now having more financial resources to invest in their operations, enhancing productivity and efficiency. They are also able to pay their workers promptly, improving their livelihoods.
The increased financial resources will make them reinvest in their businesses, expanding their capacity and increasing gold production as well as meet their financial obligations such as loan repayments, on time.
The imposition of a 15% VAT on gold deliveries to Fidelity Gold Refinery had led to a decline in gold deliveries, as small-scale miners were opting for side marketing and smuggling. For example, aggregate gold deliveries decreased by 5% year-over-year, from 2,876kg in May 2023 to 2,734kg in May 2024.
The removal of VAT is expected to incentivize miners to sell their gold through formal channels, resulting in increased gold deliveries to Fidelity Gold Refiners. This development will enhance Zimbabwe's creditworthiness, making it more attractive to foreign investors and improving access to international credit markets.
Additionally, the country will be better positioned to meet its foreign exchange obligations, including debt servicing and essential goods imports. The move will also provide a buffer against external shocks, such as global economic downturns and commodity price volatility.
Through Statutory Instrument 105 of 2024, the Government recently abolished the 15% Value Added Tax (VAT) requirement for gold miners delivering to Fidelity Gold Refiners, providing a significant relief to the industry.
The zero-rating of gold deliveries is significantly enhancing Zimbabwe's foreign reserves, providing a substantial boost to the country's economic stability. By incentivizing formal gold deliveries, the Government will accumulate a significant amount of foreign exchange, which will serve as a robust backing for the Zimbabwean currency, ZiG.
This will have a positive impact on the economy, as a strong foreign reserve position supports currency stability, reducing the risk of exchange rate fluctuations and promoting confidence in the ZiG.
The fortification of the Zimbabwean currency, ZiG thwarted the attempts of detractors to undermine the ZANU PF Government by exploiting the anticipated devaluation of the local currency. As gold reserves increase, the ZiG is fully backed, fostering economic growth and stability.
A stable currency, bolstered by ample foreign reserves, creates a conducive business environment, thereby neutralizing the machinations of detractors and paving the way for economic prosperity.
The exemption from VAT payments has significantly ease cash flow challenges for small-scale miners, who are the backbone of Zimbabwe's gold production, accounting for 60% of the country's total gold output. By removing this tax burden, these miners are now having more financial resources to invest in their operations, enhancing productivity and efficiency. They are also able to pay their workers promptly, improving their livelihoods.
The increased financial resources will make them reinvest in their businesses, expanding their capacity and increasing gold production as well as meet their financial obligations such as loan repayments, on time.
The imposition of a 15% VAT on gold deliveries to Fidelity Gold Refinery had led to a decline in gold deliveries, as small-scale miners were opting for side marketing and smuggling. For example, aggregate gold deliveries decreased by 5% year-over-year, from 2,876kg in May 2023 to 2,734kg in May 2024.
The removal of VAT is expected to incentivize miners to sell their gold through formal channels, resulting in increased gold deliveries to Fidelity Gold Refiners. This development will enhance Zimbabwe's creditworthiness, making it more attractive to foreign investors and improving access to international credit markets.
Additionally, the country will be better positioned to meet its foreign exchange obligations, including debt servicing and essential goods imports. The move will also provide a buffer against external shocks, such as global economic downturns and commodity price volatility.
Source - Byo24News
