Gold smuggling: Root causes that urgently need addressing
Gold smuggling is currently the topical issue in Zimbabwe after the arrest of a local man who was caught with R11 million at OR Tambo airport. According to Home Affairs Minister Kazembe Kazembe, Zimbabwe is losing $100 million worth of gold every month through international smuggling rings.
Whilst smuggling is cancer that needs to be uprooted gold mining in Zimbabwe has myriad challenges that need to be dealt with to minimise or stop gold smuggling.
The Fidelity monopoly hurting the industry
Zimbabwe has one sole gold buyer of gold, Fidelity Printers and Refiners (FPR). Fidelity as it is popularly known in the mining circles at times fails to timely pay gold miners. As early as last year one of the country’s biggest miners RioZim stopped production due to delays in payments for deliveries to Fidelity, which left the company unable to meet its operational expenditures. RioZim in June 2020 said it was owed US$2.46 million and 65.48 million Zimbabwe dollars (US$2.6 million) by Fidelity for gold deliveries. RioZim also temporarily halted production and sued Fidelity and the central bank for $92 million over late payments in 2018. Metallon in 2019 was forced to put its mines on care and maintenance because of the unsustainable costs of running them without proper compensation for its proceeds from the government of Zimbabwe. Where payments were received the company claimed, they would only amount to a third of the total owed. Between 2016 and 2019, Metallon lost US$82m and Metallon
claimed for US$132m for the lack of profit and procurement, including interest.
The sole buyer is also known for going for days to weeks without paying small-scale miners who are heavily reliant on the payments. As I write this, Mutare and Bulawayo miners have reported the entity has no cash to pay for submissions. This leads to ASM shunning the country’s buyer leading them only submitting a small portion of their bullion to Fidelity. The rest of the gold is channelled to alternative markets creating a fertile market for illegal buyers who in turn smuggle the metal out of the country.
Formalisation, formalisation and formalisation
For one to be recognised as a legal miner they have to be issued with a mining title from the Ministry of Mines and Mining Development (MMMD). Usually, when one applies for a mining title they are ready to start mining. In gold-rich areas like Mashonalandwest, Midlands, Mashonaland Central getting a mining title is currently taking between 4 – 6 years with some having to re-apply after paperwork goes missing. This leaves many miners with no alternative but to mine illegally whilst awaiting a visit from the MMMD inspectors.
Mining illegally makes it difficult for one to transport their gold to the country’s sole gold buyer as miners fear arrests from the Minerals Flora and Fauna Unit (MFFU), a section within the Zimbabwe Republic Police that is mandated to monitoring and curbing illegal activities particularly that involves precious resources such as minerals.
These types of illegal miners will sell to unregistered buyers who frequent the mines. What is most concerning about such practice is that majority of ASG miners in Zimbabwe mine illegally therefore it is a possibility that the bulk of the gold produced is likely not getting into government vaults depriving the country of much-needed revenue.
The MMMD must process applications to a month tops. It is totally baffling that the country is losing over US$100million monthly yet the Mines Ministry continues to be underfunded and resulting in a snail pace to formalise miners. Excuses from MMMD of an influx of mining title applications without urgently addressing the matter continuously leads to chaos in the gold mining industry.
Capacitate Mines Ministry and increase branches
We were shocked when we visited the Chinhoyi Ministry of Mines office by the state of geological maps of the province. Some staffers at the Ministry use personal laptops as the ministry lacks the necessary equipment. In a province with an area of 57,441 km² and over 4000 applications the office only had two vehicles. Yes, Just two vehicles! If inspectors have to visit a claim at Chilimba over 6hours away it means in two days only that place can be served whilst more and more applications keep on pilling.
Mining has drastically increased across the country and there are no signs of slowing down. Government has to increase branches to improve efficiency in service delivery.
Gold trade Act and what’s on the ground – disastrous
The gold trade act (Chapter 21:03) regulates the trade and dealings in gold. It generally prohibits the possession of gold by unauthorized persons. This is disastrous as it is estimated that there are between 500,000 and 1,5 million artisanal and small scale miners operating in zimbabwe and of these only 16% are registered according to the mines and minerals regulation act Chapter 21;05. whilst 84% remain unregistered according to Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU). It simply means the precious mineral is mainly in the hands of the unregistered.
Even local alternative buyers pay better
Some buyers are known to be buying at a price higher than Fidelity and pay cash on the spot. This drives miners (legal and illegal) to these buyers. Sometime this year a Bindura buyer (whom we shall refer to as Josh) recently was reported to be buying at US$60/g whilst Fidelity was buying at US$49/g equating to more than US$11 000 more per kg! This means miners (legal and illegal), licenced and unlicensed buyers who buy gold from miners will naturally flock to Josh and guys like him for higher returns. Logically there is no way Josh and buyers like him will sell at a loss to Fidelity. One can automatically assume buyers like Josh are the major proponents of smuggling the metal out of the country.
Not all areas have registered buyers
In an interview with Mining Zimbabwe Mines and Mining Development Dep Minister Hon Polite Kambamura said in Makaha, the area has small scale mining activity taking place but there is no Fidelity Agent near the area or nearby Mutoko centre. The miners are therefore expected to board a bus to Marondera the capital of Mashonaland East province 148km away. Surely can we expect a miner to go that far to sell only a gram of gold?
Gold smuggling an African problem
Billions of dollars worth of gold are being smuggled out of Africa every year through the United Arab Emirates in the Middle East – a gateway to markets in Europe, the United States and beyond – a Reuters analysis has found.
Customs data shows that the UAE imported $15.1 billion worth of gold from Africa in 2016, more than any other country and up from $1.3 billion in 2006. The total weight was 446 tonnes, in varying degrees of purity – up from 67 tonnes in 2006.
Much of the gold was not recorded in the exports of African states. Five trade economists interviewed by Reuters said this indicates large amounts of gold are leaving Africa with no taxes being paid to the states that produce them.
In a nutshell, gold smuggling is a problem that is prevalent and the common factor in gold-producing African countries are restrictive policies on gold trade.
Conclusion
Although citizens should be concerned about the increasing rate of gold smuggling, they should also scrutinize the reasons leading to the practice becoming prevalent. Like the late legendary Music Icon, Dr Oliver Mtukudzi said “Wongorora Chikonzero chaita musoro uteme”, a lot needs to be done to curb smuggling.