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How Violence and Turmoil are Disrupting Zimbabwe’s Mining Sector?

Over the past 20 years, the Zimbabwe economy has been on a declining trajectory. Long before the current political and economic woes, gold and tobacco have long been Zimbabwe’s most lucrative source of income and foreign currency. What was once one of Africa’s most diversified and self-sufficient economies, has imploded and the state is struggling to ensure adequate collection and management of revenue.

Zimbabwe is a mineral rich country with up to 40 different minerals and 800 operating mines. Mining in Zimbabwe makes up 5% of the countries GDP as well as providing 4.5% of employment to the population. With 60% of the countries land surface made up of ancient rocks that host a rich variety of mineral resources, the mining sector provides a myriad of business opportunities in Zimbabwe.

Famous sites, such as the Great Dyke, which conserve the worlds largest deposits of chrome as well as the second biggest deposit of platinum, promise to increase the revenue of the mining sector and international attraction in investing in Zimbabwe.

Since the withdrawal of colonial rule, Zimbabwe has implemented several projects to simultaneously improve the economic efficiency of the mining sector, and see its mines and mineral reserves returned to Zimbabweans. President Robert Mugabe introduced a law demanding that at least 51% of each of the country’s platinum mine to be owned by local people, and since the decriminalisation of artisanal mining in 2013, the country’s total gold production rose from under 15,000kg in 2012 to nearly 25,000kg by 2016.

Mining could prove to be big business in Zimbabwe, with mineral exports responsible for 60% of the country’s export earnings as of October 2018, and the mining sector contributing around 16% of national GDP. The mining sector operations accounted for over 60 percent of Zimbabwe’s foreign currency receipts in 2019, with the mining sector contributing about 16 percent of national GDP, according to the Chamber of Mines.

Zimbabwe expects its economy to expand by 7.4 percent in 2021 from a projected contraction of 4.5 percent this year due to the effects of the COVID-19 pandemic.

The sector is chasing a government aim of growing annual exports to US$12 billion by 2023 up from US$2.7 billion attained in 2017. There is an interesting mix of minerals on which this target is being proposed, including chrome. This prospective has been hamstrung by an inefficient sector, which has neglected to fulfil its 2019 gold output target of 40 tons, and arrived at a value estimated to be approximately just $3bn.

A key contributing determinant is the country’s lax licensing laws, which allow foreign companies to own 100% of a mine licence for any product, save platinum and diamonds, in perpetuity. This has resulted in several firms holding cheaply-acquired licences for years, with no pressure to develop them into producing mines, cutting into Zimbabwe’s potential production and depriving smaller and local companies from the opportunity to develop projects.

Lucrative diamond fields were discovered in Marange in 2006, criminal gangs in government quickly formed dodgy companies that were registered in tax havens such as Mauritius and began pillaging the resource. The late former President Robert Mugabe in 2016 referred to as much as $15 billion having been stolen from the Marange diamond fields between 2009 and 2015. One of the companies which participated in the loot was initially forced to shut down, though, the company was secretly brought back into operation in 2019.

The 344 percent envisaged minerals output is part of government’s quest to revive and grow the country’s economy and attain Upper Middle income economy by 2030. President Mnangagwa is on record saying agriculture and mining will be the key anchors on which Vision 2030 will be attained.

The ZANU-PF led government policies have precipitated massive inflation, currency upheavals and constant energy shortages which in turn, has led to a process of de-industrialisation, GDP shrinkage, 80 per cent unemployment and a massive exodus of the country’s own residents. The lack of transparency and manipulation of gold prices aided by the state’s monopoly has had a negative impact on more than 500 000 artisanal and small-scale miners.

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There is a grave concern on the rampant theft and smuggling of Zimbabwe’s mineral wealth by organised crime syndicates linked to the country’s ruling elites. In 2019 Finance Minister Mthuli Ncube estimated that between 30 to 34 tonnes of gold is smuggled into neighbouring South Africa alone. President Mnangagwa made remarks where a company based in UAE confirmed buying US$60 million worth of gold from Zimbabwe through the parallel market. No one was arrested even though the company which spoke to President Mnangagwa volunteered the identities of the individuals to him.

Similarly, on October 26, 2020 police arrested Zimbabwe Miners Federation president, Ms Henrietta Rushwaya at the Robert Gabriel Mugabe International Airport in possession of 6kg of gold, which was allegedly destined for Dubai. She is now in court and is jointly charged with Ali Mohamed, Stephen Tserayi, Raphios Mufandauya and Gift Karanda.

The arrest of Ms. Henrietta Rushwaya is confirmation of a complex web of illicit financial flows perpetrated by organised criminal syndicates. It is clear that the Rushwaya case is just but one of the many undetected cases of resource leakages through our porous ports of entry.

Names of members of the First Family have popped up in a number of high-profile cases of illegal dealings in the mining sector, according to media reports. In a recent case involving an attempt to smuggle gold by former Zimbabwe Football Association chief executive Henrietta Rushwaya, one of her accomplices told the police that the gold belong to Mnangagwa’s wife.

Gold is earmarked to contribute about 4 billion U.S. dollars to the 12 billion dollar target, platinum US$3 billion while chrome, iron, steel, diamonds and coal will contribute US$1 billion. Lithium is expected to contribute US$500 million while other minerals will contribute US$1,5 billion, according to the government report. Zimbabwe boasts of the world’s second largest known chrome ore deposits, with 900 million tonnes of untapped ore.The global reserve is estimated at about 7,5 billion tonnes.

In January 2014, in flagrant pursuit of rentier profit, the Zimbabwe Reserve Bank through its subsidiary entity Fidelity Printers and Refineries arrogated to itself a legal monopoly over the buying and selling of gold from producers, large and small.

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Artisanal and small-scale miners who dig with little or no machinery and often without licences and who produce 63 percent of reported gold production are attacked and killed by armed “machete gangs” intent on taking over their diggings or simply robbing them.

Chrome miners have also been affected by lack of weighbridges, mining equipment and under-capitalisation. The sector did not have a value addition and beneficiation policy.

Ruling party politicians have been accused of backing illegally encroaching artisanal miners or even machete gangs. There is also tension between artisanal miners and the industrial mining companies that hold most exploration rights, according to International Crisis Group (ICG) report.

Adding to the sector’s woes, miners are forced to sell through a subsidiary of the country’s central bank, which often pays late and at rates substantially below the world gold price. Zimbabwe has lost billions of revenues from mineral resources which are being unlawfully shipped out of the country.It is estimated that more than $1.5 billion worth of gold leaves Zimbabwe illegally each year.

Meanwhile, Government has been urged to expedite the country’s membership into the Extractive Industry Transparency Initiative (EITI) as part of measures to improve openness and instil confidence in the mining sector. The mining sector waits anxiously for major tax reforms in respect of foreign currency taxes and retention thresholds. The mining industry has for a while been battling government for timeous gold and chrome payments as well as a review of foreign currency retention thresholds.

Unfortunately, Zimbabwe is losing over $20 billion per year, if all minerals and semi-precious gems being smuggled are accounted for. The country has enough resources to finance its own recovery and development, only if looting and corruption in the mining sector is resolved.

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