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Tackle leakages at grassroots

Editor’s Memo:Faith Zaba
fzaba@zimind.co.zw

GOLD deliveries to Fidelity Printers and Refiners have been dropping over the last two years. They plunged by 73% in September to close at 1,36 tonnes from 2,8 tonnes in the comparative period in prior year owing to rampant smuggling.

In the first nine months of the year, deliveries dropped by 20% to 14,76 tonnes compared to gold delivered during the same period in 2019. This year’s gold deliveries are expected to end the year at 25 tonnes, nine tonnes less than what was delivered in 2018 when prices were much lower than this year. More than 34 tonnes were delivered in 2018.

The high-profile court case, involving suspended Zimbabwe Miners Federation president Henrietta Rushwaya over charges of attempting to smuggle gold bars weighing 6kg to Dubai, the United Arab Emirates, has sparked debate in the country on leakages of the precious mineral and how much smuggling is costing the country. Zimbabwe needs to have an open discussion about this issue, if not for our sake but for future generations.

Gold is, as central bank governor John Mangudya described, “our treasure in Zimbabwe in as far as oil is to Angola and Nigeria”.

The yellow metal is the country’s chief export product. It contributes 38% of the country’s total earnings and more than 60% to the mining sector, which is the highest foreign currency earning sector in the economy. Unfortunately, for the country, an estimate of 50% of artisanal and small-scale mined gold is lost to smuggling.

Small-scale mining in Zimbabwe is prone to illicit financial flows, lack of accountability, non-enforcement of compliance to the laws governing the sale of the precious mineral and selective application of the law, with the rich elites exploiting the gold sector with impunity. There are known gold syndicates operating above the law. The problem in Zimbabwe is that there are no checks and balances in the gold industry compared to other sectors. Instead of selling gold to Fidelity as required by law, many have turned to smuggling, mainly to the Middle East and large parts of Central Asia.

If the country is to achieve its ambitious plan of growing the mining sector annual earnings to US$12 billion by 2023, with gold expected to contribute US$4 billion, certain changes need to be made to plug the leakages from smuggling. As Zimbabweans, we cannot continue to watch the rampant theft and smuggling of the country’s mineral wealth by organised crime syndicates linked to the ruling elites.

While Zimbabweans believe in the principles of the presumption of innocent until proven guilty, what happened on October 26, more than anything exposes how porous our ports of entry are and proves that the country is losing billions of revenues from mineral resources, which are being smuggled out.

Finance minister Mthuli Ncube last year estimated that between 30 to 34 tonnes of gold were smuggled into neighbouring South Africa alone. There have been several arguments on the Fidelity monopoly. Organisations such as the United Nations Industrial Development Organisation and Southern Africa Resource Watch contend that the government’s monopoly as the official sole buyer of gold through Fidelity, among other policies, provide fertile ground for illegal gold mining and smuggling to thrive and the attendant violence characterising the opaque operations. Both institutions underscore that the Reserve Bank of Zimbabwe lax marketing system contributes to gold leakages.

However, there is another argument that government should cancel licences of all agents and capacitate Fidelity to buy directly from the miners as the Grain Marketing Board does with maize. This would mean strengthening the compliance enforcement mechanisms.

Removing the 2% royalty fees on small scale and artisanal miners could help ensure that all the gold is delivered to Fidelity.

Government needs to weigh whether it is better to earn revenues from the 2% royalties or just do away with it and get the 1,5 tonnes being smuggled out. There is need to tighten security at the port of entry.

It is a complex matter. We are under extractive political and economic institutions. Leakages in minerals are simply a manifestation of extractive work at play. Political instability tends to accelerate the use of political advantage to extra economic benefits to safeguard political power.

The problem of leakages needs to be addressed at a foundational level. There has to be political stability to allow the building of strong, independent institutions that work on their mandates professionally. This is what will reduce leakages as citizens will know that key economic, political and civil institutions will do their jobs without fear or favour.

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