Post date: Aug 16, 2011 3:6:21 PM
Zimbabwe's economy is reaping the profits from soaring world gold prices, while stocks take a plunge abroad but analysts say low production of the precious metal in the southern African nation means it cannot reach it's full potential.
SHAMVA, ZIMBABWE. REUTERS - Zimbabwe's gold mines, which shut down at the height of a political and economic crisis in 2008, have started to recover.
The recovery has been driven by record prices worldwide for the precious metal, a stable economic environment following the adoption of multiple foreign currencies to replace a worthless local unit and the removal of restrictions on bullion trade.
The country is expected to rebound to at least 13 tonnes of gold this year, up from a mere 3 tonnes in 2008, although it's a long way off the peak output of 29 tonnes recorded in 1999.
But despite the boost, economist John Robertson says Zimbabwe could be producing much more.
"For Zimbabwe the very high gold price is important because we are a gold producer, but unfortunately our gold production is still below half of what it used to be so we are not able to take full advantage of the high price these days because we are simply not producing enough of it to get full benefit," Robertson said.
He puts the problem down to a lack of faith in the country's future political and economic status.
"I think we are relinquishing, we are forfeiting the prospects of enormous growth in this industry which comes through in lots of other ways, we have a very slow employment growth rate in the mining sector, it could grow much faster, we could be building entire towns to go with new mining companies, but this sort of development is not taking place at the moment because of lack of funding and lack of funding comes from lack of confidence in the future than the limited lack of resources," he said.
One of the reasons analysts have said finances have not been forthcoming is concern among external investors about the proposed Indigenisation and Economic Empowerment law being championed by President Robert Mugabe.
The empowerment law seeks to transfer majority shareholding in foreign-owned firms, including mines, to black Zimbabweans. The government has given mines a September 30 deadline to transfer majority stakes to local shareholders.
The most recent figures from the World Gold Council show that as a group, on a net basis, central banks bought about 208 tonnes of gold in the first half of this year.
The gold buying comes as the sovereign debt crisis in the eurozone, the debt ceiling crisis in the US, and the general willingness of the world's central banks to print more money have demonstrated the precariousness of a global monetary system.