Zimbabwe's ambitious plan to capture more revenue from its booming gold sector through a reformed royalty regime faced immediate scrutiny from a major investor, highlighting the balancing act between increasing state income and maintaining a competitive investment climate.
In a significant policy shift outlined in the 2026 National Budget, the government proposed harmonising and increasing royalties on gold producers.
A key provision raises the royalty rate from 5% to 10% for all gold sold at prices exceeding $2,500 per ounce (see table below), with the higher rate applying to the full sale price.
Source: Zimbabwe 2026 National Budget
This measure directly targeted the windfall from record-high gold prices (see chart below), which exceeded $4,000 per ounce in October 2025.
Source: Zimbabwe 2026 National Budget
The government's stated aim was to ensure the mining sector contributes a "fair share" to the national treasury during commodity booms and to eliminate distortions and tax arbitrage between small- and large-scale miners.
The reform was part of a broader strategy to transform the mining sector—projected to grow by 7.3% in 2025—through value addition, improved geological data, and community benefit-sharing.
However, the proposed fiscal changes prompted a cautious warning from a key industry player.
London-listed Caledonia Mining, which operates the Blanket gold mine in Zimbabwe, stated that the new royalty and tax rules could lead to "lower profitability and cash generation than current market expectations" if implemented.
Caledonia identified two specific concerns from the budget: the proposed jump in the gold royalty rate from 5% to 10% on high-priced gold.
A change to capital expenditure (capex) deductions, where the current 100% upfront tax deduction would be spread over a project's life.
The company noted this would affect the timing, though not the total amount, of its tax liabilities.
This forced Harare to reverse its plan to double the gold royalty rate, opting instead to implement the higher levy only when bullion prices exceed $5,000 per ounce.
The final bill approved by parliament's lower chamber last month maintained the 5% rate for prices between $1,200 and $5,000 per ounce.
The 10% rate will only apply when gold prices surpass $5,000.
The government seeks to fund national development and its strategic mining reforms through increased revenue.
Zimbabwe’s gold production has reached a new peak, with 42 metric tonnes produced in the first 11 months of 2025, exceeding the previous record of 37 tons set in 2024.
The mining sector in general was expected to record growth of 7.3% in 2025 and 6.3% in 2026, respectively.
This positive growth trajectory is also expected to be sustained at 5.7% in 2027 and 5.4% in 2028, as shown above.
Zimbabwe’s willingness to listen to concerns raised by Caledonia was commendable.
However, this to some extent demonstrates that no adequate consultations were made before the gold royalty overhaul.
Inasmuch as Zimbabwe seeks to leverage its mineral wealth, consultations with the industry players are of paramount importance to avoid decisions that do not sustain investor confidence in the country’s mining sector.
Mathew Nyaungwa, Editor-In-Chief, Rough & Polished
