The decision to eliminate the 15% Value Added Tax (VAT) on gold deliveries to Fidelity Gold Refinery (FGR) has been welcomed by many. This change, announced through Statutory Instrument 105 of 2024, is expected to strengthen Zimbabwe’s currency and ease the financial burden on gold miners. By removing VAT on gold deliveries, the government aims to increase formal gold sales, boosting Zimbabwe’s foreign reserves, which support the local currency, ZiG. Strong foreign reserves help stabilize the currency, reduce exchange rate fluctuations, and build confidence in the ZiG, leading to a more stable economy.With more gold backing the ZiG, the currency becomes stronger, supporting economic growth. A stable currency creates a better business environment, countering any efforts to undermine the government by predicting currency devaluation. Small-scale miners, who produce 60% of Zimbabwe’s gold, will benefit from the VAT exemption. They will have more money to invest in their operations, improve productivity, pay workers on time, and expand their businesses. This financial relief helps them meet obligations like loan repayments.Previously, the 15% VAT led to a drop in gold deliveries, with miners turning to side markets and smuggling. For instance, gold deliveries fell from 2,876 kg in May 2023 to 2,734 kg in May 2024. Removing the VAT is expected to bring miners back to formal channels, increasing gold sales to Fidelity Gold Refiners. This will improve Zimbabwe’s credit rating, attract foreign investors, and enhance access to international credit markets. It will also help the country manage its foreign exchange obligations and provide a buffer against global economic challenges and commodity price changes.In summary, the VAT removal on gold deliveries to FGR is a strategic move to bolster Zimbabwe’s economy, support its currency, and aid small-scale miners. This policy is expected to lead to increased gold production, economic stability, and improved investor confidence.
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