BY MTHANDAZO NYONI
GOVERNMENT’S policy of buying gold on a no-questions-asked basis is creating chaos and fueling criminality in the mining sector, the Zimbabwe Coalition on Debt and Development (Zimcodd) has said.
To funnel gold produced by artisanal miners into the formal market, the government introduced a policy to buy gold without preconditions in 2014 through the national budget statement.
It was also a stopgap measure to facilitate the registration of artisanal miners.
In its latest report, Zimcodd said Fidelity Printers and Refiners (FPR) is still buying gold without asking questions which may be contrary to the Gold Trade Act.
“It is almost seven years now since the introduction of buying gold on a no-questions-asked basis. Instead of leveraging this moratorium to promote registration and formalisation of artisanal miners, chaos, conflict and criminality festered,” Zimcodd said.
“What this means is that one can use violence or even kill to secure gold and easily dispose of it to Fidelity Printers and Refiners without any questions asked. The know-your-client rules which allow traceability of gold have been set aside.”
Zimcodd said the government has also been hesitant to rejoin the London Bullion Market Association (LBMA) after dropping out in 2007 for failing to produce the 10 tonnes of gold required for membership.
“It is key to note that in 2012, gold production surpassed the 10 tonnes required to join LBMA. Currently, gold from Zimbabwe is being refined in South Africa as the country lacks international accreditation,” it said.
“The prices offered by FPR for gold are not very competitive while in many cases it struggles to pay miners in United States dollars for gold deliveries. All this pushes a lot of gold into the black market, which in turn breeds a fertile ground for criminality and conflict.”
“Essentially, the gold mining sector has become a high-risk and conflict-affected area that requires attention by promoting responsible gold mining, trading and export measures,” the report said.
During the anti-corruption day in 2019, President Emmerson Mnangagwa disclosed he was approached by a gold buyer in Dubai who revealed that he was buying U$$60 million worth of gold in Zimbabwe from the black market.
“Cases of smuggling gold via the airport are increasing. This shows that the gold mining sector in Zimbabwe is susceptible to trans-boundary organised crime which has no respect to the rule of law and can easily contribute to violence and other illicit behaviour.”
The Zimbabwe Environmental Lawyers Association carried out a research on border control of mineral flows in Zimbabwe, which analysed the legislative, institutional and border control systems.
The research revealed institutional weaknesses on border control systems and practices that lead to smuggling of gold and other minerals from the artisanal and small-scale mining sector (ASM).
Other factors included contested mining taxation laws, lack of coordination among the several government departments involved in mining that led to red tape, monopoly by FPR as the sole gold buyer and limited human resources capacity.
“All these factors combine to create a fertile ground for conflicts in the artisanal and small-scale mining (ASM) sector as criminals, illegal dealers and gangs compete to buy or access gold on the cheap from the ASM sector for illegal export which is more profitable than declaring the gold to Fidelity Printers. Such a situation fuels violence and conflicts at mine sites,” Zimcodd said.
A Transparency International Zimbabwe (TIZ) report titled US$12 billion mining economy by 2023: What are the key enablers?, notes that the mining sector was detached from the rest of the economy.
The report said the sector was characterised by excessive investment incentives, including provisions for carrying over losses indefinitely.
TIZ said such incentives, apart from the harmful tax holidays, limit the capacity of the state to benefit from the sector.
“However, it should be noted that the current scenario benefits the political elites who seem to be content with the status quo considering that the law considers ASM (artisanal and small-scale miners) as illegal, but the proceeds (mainly gold) are sold officially through the government buyer, Fidelity Printers. Despite political pronouncements captured in the 2019 and 2020 national budgets, Zimbabwe has been hesitant to join the Extractive Industries Transparency Initiative (EITI),” TIZ said in the report.