As the gold price touched all-time highs late August 2011, Zimbabwe’s government was not, as would be expected, doing all it could to ensure the country capitalised on the boom.
Instead, the government was moving to cancel a foreign-owned gold mining company’s licence over a local ownership law.
Consistent with its determination to miss out on the 2000s commodity boom, the government was willfully disrupting the operations of one of the few foreign investors who had bet on Zimbabwe when most were avoiding the country like the plague.
The circumstances are different, but this week’s news that the country’s gold output fell 29% in the first half of the year, which coincided with the precious metal’s price rally to six-year highs, will raise fears about history repeating itself.
Is Zimbabwe failing to capitalise on another boom?
Gold’s six-year peak, on the back of safe-haven demand, saw the precious metal touch US$1 500/oz yesterday, amid jitters triggered by escalations in the US-China trade war.
Meanwhile, Zimbabwe’s mines, which produced a record 33 tonnes last year, are treading water.
The mines, unhappy about surrendering 45% of their foreign currency to the central bank in exchange for the local currency, are also battling shortages of electricity and fuel.
Small scale producers, who produced most of last year’s record haul, have been particularly hit by the fuel crisis. Many of the smaller producers rely on diesel.
It is also believed that unhappiness about the current payment arrangements has given rise to smuggling.
Just as it was during the last commodity boom, the Zimbabwe government’s policies and ineptitude have ensured the country squandered opportunities to profit from good prices.
Back then, it was the indigenisation policy that undermined new investment into mining, while hobbling those few intrepid investors who had dared stay in Zimbabwe.
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