HomeOpinion & AnalysisRegistering makorokoza with RBZ a game-changer?

Registering makorokoza with RBZ a game-changer?

Legend has it that Zimbabwe holds a prodigious gold resource base of an estimated 13 million tonnes.

BY VINCE MUSEWE

At a rate of extracting the gold at a paltry 30 tonnes per annum, it will take about 260 000 years to exhaust these reserves!

There is the argument that as long these resources are buried in the ground, they are worthless and, of course, that is true.

However, investors actually need to estimate the value of the potential resource base before they factor-in the cost of extraction which can then prove the viability of any mineral extraction project.

The secret is to do the exploration and then package the opportunity attractively.

The Zimbabwean mining sector is technically classified into three categories: large-scale, small-scale and artisanal mining.

The sector comprises both legal and illegal operators, mechanised and semi-mechanised mines of varying sizes in terms of output, employment and capitalisation.

The official distinction between artisanal miners and small-scale miners in Zimbabwe is based on the scale of operation and degree of mechanisation; the law expects both categories of miners to be registered.

However, in reality, small-scale miners are generally registered whereas many artisanal miners operate illegally.

Of the three classes of mining, artisanal mining employs by far the most people: 500 000 to 1,5 million.

We, therefore, need a comprehensive data base of who is doing what and where, if we are to make any headway in regularising and maximising output in this essential sector.

Small-scale and artisanal miners produce a third of Zimbabwe’s total gold output.

For example, in 2019 small-scale miners delivered 17.478 tonnes, this being approximately 60% of total production.

Gold output was 22 tonnes in 2016, 24.8 tonnes in 2017, peaked in 2018 at 33 tonnes (a 10-year high), then down to 28 tonnes in 2019, and further declined to 19 tonnes in 2020 due to many reasons.

It is estimated that about 50% of gold output mined by artisanal and small- scale miners is lost to smuggling.

It is estimated the country loses about US$100 million a month from gold smuggling which works out to US$1.2 billion of lost export proceeds per annum.

We have to revisit the gold sector model in its totality and this must include a comprehensive and clear framework of exploration, production, beneficiation and marketing.

The contentious issue has always been the Fidelity Printers and Refiners (FPR) monopoly as the sole authorised gold buyer.

However, this has since been corrected by the Reserve Bank of Zimbabwe (RBZ) with the unbundling of Fidelity in December 2020 and lately large-scale gold miners may export above their monthly average output directly offshore.

The gold refining business will now be separate and owned jointly between the RBZ and gold miners who will have a majority share (60%) in the business.

Access to market at best price and prompt settlement must be the principle if we are to do justice to our gold miners.

Currently some incentives for registered small-scale gold miners are already in place where banked miners can receive 5% in US dollar based on deliveries to Fidelity and a lower royalty fee of 3% is levied to small-scale producers whose output does not exceed 0.5kg per month.

In 2016 Zimbabwe published a study on the best practices in supporting the growth of the Artisanal and Small Scale Mining (ASM) sector.

The study focused on how to create a conducive environment which nurtures ASM development and encourages the application of best practices for mining, occupational health and safety which promotes environmental protection within the sector.

The study identified key indicators for good ASM support practices which include:

  • A consistent policy regime which includes availability of demand-oriented services (technical, legal, socio-economic and environmental). Incentives for formal (legal) ASM e.g. import duty exemptions, taxation relief to upcoming ASM companies;
  • Improved access to finance/ credit, and access to free markets. Harmonisation of government departments and other stakeholder institutions into the ASM sector policy administration and implementation; and
  • Avoiding a multiplicity of agencies separately seeking to collect fees from, and regulate ASM activities. A transparent and appropriate legal framework and strict monitoring of compliance with the legal framework and penalties against violations.

The study further recommended:

  • Appropriate ASM technological interventions which can enhance the economic sustainability without compromising on their environmental sustainability;
  • Encouraging and incentivising legalisation or formalisation of ASM;
  • Technical solutions which need to be accompanied by education and training, and be affordably replicable;
  • Supporting the ASM sector through provision of health and social insurance cover;
  • Protecting the environment from mercury pollution, cyanide pollution, acid mine drainage, river siltation, erosion and deforestation, landscape destruction and cultural damage;
  • Decentralisation of markets to help curb illicit dealings by cutting off unnecessary exploitative intermediaries, who are the main culprits in smuggling, while at the same time ensuring that miners get higher profits for their produce; and
  • Technical and financial support to the ASM sector before projects can be regarded bankable.

The issue of registering as many small-scale miners is therefore a first and necessary step.

There is rampant illicit mining without regard for safety, health and the environment.

Small-scale miners currently operate in an extremely dangerous occupation which includes lack of personal safety, serious health hazards and there is continual harassment from the police and fatal fights among fellow miners.

Registration must, therefore, be an attractive proposition and at least address these issues.

The RBZ could also offer concessionary working capital loans for machinery and equipment as it did before under the Gold Development Initiative Fund (GDIF) in 2016.

The fund sought to capacitate small-scale miners and boost gold production from that segment of producers. At inception, the GDIF which was administered by Fidelity, was $20 million and had increased to $150 million by end of 2018.

Under the fund, small-scale miners could acquire loans for procurement of mining machinery from local manufacturers at a 10% interest rate.

In addition, funding for exploration and working capital could also be availed.

This was quite effective in increasing output.

We, however, must realise that there will always be unregistered and illicit mining, but we must do our best to minimise it and make it unprofitable and unappealing.

It is interesting to note that in the 90s Zimbabwe was among the international best in terms of innovative technical and financial support to the ASM sector.

Things fell apart with the collapse of employment opportunities in the agriculture sector in 2000 and the subsequent migration of millions of unemployed rural folk and farmers into gold mining as a fall-back position.

 The 2016 study concluded that; “Zimbabwe needs to retrace and improve its strategies in the sector to regain its former glory among the ASM best cases.

The country lacks on the ‘social and welfare’ side of ASM.

The framework for technical support exists in the country and can further be developed, but that framework is currently under-resourced.

The mines and minerals act needs to be revised or amended to specifically address ASM issues, such as ASM access to mineralised ground, simplification of licensing procedures and improved prices/ flexibility in minerals marketing.

The elaboration of the legal and regulatory framework for ASM needs to take into consideration the different types of minerals being mined and the specificities of different regions and mining operation”

If these and other issues can be addressed, we can indeed regain our former glory and increase small scale mining output significantly.

So one can conclude that the RBZ step to register artisanal and small scale miners is the first step in the right direction.

That, coupled with complimentary policy initiatives as enumerated above, can surely change the ASM gold mining game?

Vince Musewe is an independent economist and can be contacted on vtmusewe@gmail.com

These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Institute of Chartered Secretaries & Administrators in Zimbabwe. Email- kadenge.zes@gmail.com and Mobile No. +263 772 382 852

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