Candid comment: Mining-Government must get its priorities right

CONCERNS raised by Minister of Finance, Tendai Biti, in his mid-term fiscal statement about the mining sector not making a meaningful contribution to the fiscus have drawn attention to the priorities that the government needs to focus on.

In the face of drying-up aid, Zimbabwe needs to craft guidelines that will ensure that companies that invest in the mining sector have clearly stated beneficiation policies in order to ensure that most value addition to the country’s minerals is done in the country. As things stand, the country is exporting ore for processing in other countries, thus accruing economic benefits to foreigners at a time when Zimbabwe is desperate for both revenue and employment creation.

Zimbabwe is already a major producer of platinum and chrome. The relief with which platinum and chrome production was received has yet to transform into a miracle healing for the country’s sick economy. If anything, the Finance minister has had to introduce punitive penalties for chrome producers who, instead of processing chrome in Zimbabwe, have decided to just crush it for export.

It is important that mining companies realise that most benefits accruing from minerals, which are not renewable, should be to the host country. Perhaps, as a minimum requirement when companies invest in mining, the government needs to state the minimum level to which they should beneficiate minerals, among other things. This would be a more helpful way of empowering locals and ensuring that all Zimbabweans benefit from the country’s wealth instead of policies such as the indigenisation law that have not only scared off potential investors but are set to benefit only a few well-connected individuals who are already rich.

It is with the hindsight of experiences from the mining of other minerals that Zimbabweans need to exercise caution in the excitement that has followed the green light from the Kimberley Process on the sale of diamonds. Zimbabwe needs to copy models from countries that have used minerals as a springboard from which to revive their economies and should not get carried away by the certification to devise systems that, in the long term, will prove disastrous to the fiscus. This is certainly true of the chrome sector.

While foreign investment is a laudable development in an economy, care must be taken to ensure that it benefits the host economy and does not allow companies to line their pockets without leaving a legacy of development. It is with this in mind that the government should get commitments from its partners in the diamond sector to ensure that it has not surrounded itself with sharks whose only motive is to fatten their bottom lines.

Zimbabwe should move away from being an exporter of raw materials when it can ensure that those who want to exploit its resources make a significant contribution to the development of the country through technology transfer and other downstream benefits like employment creation. The prevailing situation where turnover from the sector topped US$1 billion against a US$44,8 million contribution to the fiscus is untenable and cannot be addressed through punitive taxes only.

Minister Biti’s concerns that “minerals are an irreplaceable wasting resource, hence, there is need to maximise tax revenue from mineral extraction and also encourage investment”, needs to be pursued with vigour.

Edwin Dube