Caledonia, Gold Export and the Law in Zimbabwe
On 4 May 2023, Mining Zimbabwe reported that Caledonia Mining Corporation Plc has commenced the direct sale of gold produced from the Blanket Mine to a refiner outside Zimbabwe.
By James Tsabora (PhD) & Reginald Mutero (LLM)
This was a massive development in Zimbabwe’s mining community since the area of mineral export is of concern to many mineral producing countries.
This is because the export of minerals is a means to achieve an end. Seeking to create more jobs, some countries restrict the export of unprocessed minerals in an effort to encourage the creation of higher-value downstream processing jobs on the domestic market.
Export restrictions of raw materials are also used to meet other objectives. As a result of differing objectives, different countries have different regimes for the regulation of the exportation of minerals.
Africa is usually an exporter of raw minerals and an importer of beneficiated minerals. In addition, firms in extractive industries are often multinationals based outside the country where they operate and have sizeable market power. Unrestricted, these may quickly deplete natural resources in a country.
The importance of restricting the export of minerals is due to several reasons. A critical reason why it is necessary to restrict the export of mineral resources is to ensure sustainable development, to ensure that future generations may also exploit the remainder of the natural resources for their own needs. This paper seeks to examine the frameworks for export of gold in Zimbabwe, in light of the bold announcement by Caledonia Mining Corporation Plc.
The Gold Trade Act
The trading and dealing in gold are regulated under the Gold Trade Act. The main anchor of the Act is to prohibit the possession of gold by unauthorized persons and regulate dealings in gold trade. The Act further criminalises the unauthorized possession of gold and regulates the awarding of permits furthermore, license systems for possession of and dealing in gold.
Dealing in gold means to buy, sell, barter, pledge, exchange, give or receive, or offer or expose for sale, barter, pledge or exchange, or have any other dealing or transaction whatever.
The Act also relates to the export of gold; a holder of a licence may, with the authority of the Minister, export gold. In practice, however, the trade and export of gold is further regulated by the Reserve Bank of Zimbabwe (RBZ).
The involvement of the Reserve Bank of Zimbabwe (RBZ) in the regulation of trade and export of gold is necessary and unsurprising. Central banks deal with the question of currency applicability and for a long time, the world used the ‘gold standard’ when it came to valuing currencies Zimbabwe still uses the gold standard.
The Zimbabwean central bank is empowered to impose mineral export restrictions under the Reserve Bank Act. Section 7 empowers that bank to buy, sell or deal in precious metals, and hold in safe custody for other persons gold, securities or other articles of value in order to fulfil its international obligation.
In order to control the trade of gold in Zimbabwe, the Reserve Bank of Zimbabwe incorporated a company, Fidelity Gold Refiners (Pvt) Ltd which in turn was licenced as a dealer in gold in terms of the Gold Trade Act. The other gold buyers so licenced buy the gold as agents of Fidelity Printers and Refiners (Pvt) Ltd.
As a result, gold in Zimbabwe is solely being exported by the Reserve Bank of Zimbabwe through its subsidiary the Fidelity Printers and Refiners (Pvt) Ltd.
This means the trading relationship in the Act does not allow the traders to trade gold outside Zimbabwe. Therefore, there is a State monopoly in the export of Gold to other countries as the authorised dealers would only sell gold to RBZ through its subsidiary Fidelity Printers and Refiners (Pvt) Ltd.
However, there is a key caveat in the that Reserve Bank of Zimbabwe is reported to have resolved to sell a 60% stake in the gold refinery business. if this succeeds, it remains to be seen how the gold export regime will work with the majority of Fidelity Refinery being in private hands.
Depending on the specifics of the new system, it may mean that the export of gold has been liberalised.
The Reserve Bank of Zimbabwe regularly allows large-scale companies to export some portion of gold subject to several conditions. For example, in June 2021 Zimbabwe’s central bank allowed large-scale gold mining companies to directly export a portion of their bullion.
This was announced in an official circular released by the Reserve Bank of Zimbabwe stated that miners who increased gold production above their average monthly output would be allowed to export that portion directly.
This is the law and system of gold export that is being utilized by Caledonia Mining. Under the law and system, Fidelity Gold Refinery is the only gold refinery that can process unrefined gold in Zimbabwe. FGR is a subsidiary of the RBZ; it possesses a gold dealing licence and can facilitate the export of gold by gold-producing companies such as Caledonia.
It must be said that the Gold Trade Act was passed as law in 1940, and continues to define the face of Zimbabwe’s gold export regime. There are several issues with this law that militates against effective gold trade, especially in light of the incremental contribution of small and medium-scale gold producers.
What is happening is that there are several practices in the gold trade system that are solely due to practice, but cannot be traced to legal provisions. The practice has filled gaps and holes in the law, and to date, this appears to have worked.
However, there is no doubt that there are several ad hoc approaches that have been embraced in order to ensure the system works. What this calls for, therefore, is a reconsideration of this ancient law so that it bravely accommodates developments in mineral export, and the progressive demands of Zimbabwe’s economic order.
The authors are consulting legal experts in mining law, property rights and governance. They can be reached at the following emails: [email protected] (+263783371045) and [email protected] (+263772290922) and write in their personal capacity.