VICTORIA FALLS, June 18 (NewsDay Live) - Zimbabwe's gold industry is increasingly being forced to finance its own expansion after struggling to secure offshore funding, exposing deep concerns among international lenders over the country's investment environment. This, if left unaddressed, threatens efforts to increase production despite record global bullion prices.
The warning, delivered by Chamber of Mines Gold Producers Committee chairman Qubeka Nkomo at the Chamber of Mines annual conference this Thursday, lays bare one of the biggest constraints facing Zimbabwe's largest foreign currency-earning sector.
Ncube said the industry's ability to unlock its full potential was being undermined by an increasingly uncompetitive operating environment characterised by high production costs, expensive borrowing and a heavy fiscal burden.
He added that most gold producers failed to access offshore financing for expansion projects and instead relied on internally generated cash flows, a financing model that weighs down growth.
"Most gold producers are struggling to raise offshore capital for their expansion projects and are, therefore, relying on internally generated cash flows to finance expansion activities," he said.
He revealed that financiers were making stringent demands, including physical gold as collateral and escrow accounts to reduce counterparty risks.
"Some financiers are demanding that gold producers lodge physical gold as collateral and maintain escrow accounts to mitigate counterparty risks," Ncube said.
The comments highlight the growing disconnect between favourable global commodity markets and Zimbabwe's domestic investment climate.
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While international gold prices continue to support strong profitability across the sector, producers say structural weaknesses are preventing the industry from translating the commodity boom into accelerated investment and higher output.
"The mining industry continues to face a high-cost structure characterised by high electricity tariffs, a high cost of capital and high fiscal charges," he said.
Although elevated international gold prices are currently cushioning producers, Ncube warned that the sector's profitability remains vulnerable.
"While gold producers are currently enjoying attractive prices, any slide in prices will result in viability challenges due to the high-cost structures," he said.
The remarks underscore the fragile economics facing an industry that remains central to Zimbabwe's export earnings and foreign currency generation.
Industry executives argue that unless production costs are reduced and access to long-term capital improves, Zimbabwe risks missing a rare opportunity to maximise the benefits of sustained global demand for gold.
He said the challenges should be addressed urgently if the country is to attract fresh investment into the sector.
"To unlock the full potential of the gold industry, there is a need to resolve all the growth impediments and ensure that the operating environment is competitive enough to attract the required capital to expand operations," he said.
