Breakdown of the 2022 ZWL $3 billion Mining budget
The 2022 National Budget allocated ZWL$3 billion to finance the amendment of the Mines and Minerals Act, operationalisation of the mining cadastre system, decentralisation of operations, opening of closed mines, hiring, and capacitating mining extension officers, mineral value addition and beneficiation, the establishment of gold services centres.
Vongai Mbara
First things first! It is very commendable that the government has increased the allocation of resources towards supporting key US$12 Billion Mining industry enablers in nominal terms.
In last year’s National Budget, the Ministry of Mines and Mining Development was allocated ZWL$1.4 billion.
However, this year’s budget allocation might not be adequate to fund the above-mentioned critical programmes given the fact that the economy is operating in an inflationary environment.
Amendment of the Mines and Minerals Act
As indicated in the 2022 National Budget, the amendment of the Mines and Minerals Act remains on the Government’s mining policy and legislative agenda.
However, the lack of finalisation of the amendment to the archaic law remains a major concern.
In its 2022 National Budget submissions to parliament, Zimbabwe Environmental Law Association (ZELA) called for the finalisation of the Mines and Mineral Amendment Bill.
It has taken almost five years for the bill to be tabled. The bill is envisaged to help curb rampant and indiscriminate mining activities, mainly involving small-scale miners who are ravaging land across the country.
Hiring and capacitating of mining extension officers.
The introduction of extension officers that will work in communities will regulate mining activities.
The extension workers will help to monitor, control, and advise miners on mining issues on the ground. It may also help to reduce environmental degradation being caused by some artisanal and small-scale miners.
The extension officers can offer technical assistance and ensure that miners comply with the environmental, health and safety laws.
Decentralisation of operations of the Ministry of Mines and Mining Development
If done properly, decentralisation can reap the benefits of efficient service delivery in the mining sector as well as sustainable and good governance of the country’s mineral resources.
Decentralisation allows responsibility-sharing and can help deconcentrate provincial mining offices since Zimbabwe only has five mining provinces.
It will allow dispersion of higher-level government mining agents throughout the country’s mining communities and enable them to quickly disseminate vital mining information and offer assistance timeously.
It can promote participation of the local mining communities in the mineral development projects in their areas as well as promote accountability in line with Section 264 of the Constitution on Devolution.
Operationalisation of the Cadastre system
The 2022 National Budget allocated ZWL$ 146 million to roll out the new cadastre system to the rest of the provinces during 2022.
The computerised mining cadastre system is a great stride and efforts to finalise it are commendable as the system presents opportunities to address mine ownership disputes, loss of potential revenue from mining claims as awarding, administration, and security of mining titles especially in the ASM sector will be enhanced.
Of late, the Ministry of Mines and Mining Development has been attributing the failure to finalise the computerisation of the mining cadastre system to foreign currency challenges.
If the lack of foreign currency is a key determinant for the finalisation of the system, then sufficient foreign currency should be availed to the Ministry of Mines and Mining Development.
The Parliament Portfolio Committee of Mines and Mining Development must make use of quarterly reports that the Ministry submits to parliament to check if adequate resources are being disbursed and spent on the operationalisation of the cadastre system to other provinces as the Ministry is committing to do.
Establishment of Gold Services centres
The government has set aside US$10 million of the Special Drawing Requirement resources for the opening of the Bubi gold centre as part of the measures to improve gold production in the Artisanal Small-scale sector.
This is commendable as allocation of adequate resources towards procurement of essential equipment for both the Mill and the miners is critical to the success of the gold service centre concept.
The Bubi Gold service centre was established to promote mechanisation and other technical service delivery programmes for ASGM. However, Government must address other critical challenges affecting the realisation of the Government’s objective of setting up the Bubi Gold centre.
Zimbabwe Mining Development Corporation (ZMDC) which is a partner in the Bubi Gold service centre has strong legacy issues in terms of mismanagement, corruption, failure to attract investments and running down productive mines.
Other challenges which need to be addressed include electricity shortages, loss of tributes by miners affiliated to Bubi Milling Centre (BMC), lack of mining claims by the miners, disputes between ZMDC and miners over lack ZMDC’s lack of transparency on dividends sharing ratios, loss of mining claims due to forfeiture by the Ministry of Mines and farmer – miner disputes
Mineral Beneficiation and Value Addition
As part of measures to promote mineral beneficiation and value addition in chrome, gold and diamond value chains, the Government proposes to implement measures to facilitate the establishment of more diamond cutting and polishing factories, processing of coal to coke, setting up of gold milling centres and banning the exportation of unprocessed chrome and chrome concentrates.
This is commendable as the measures are in line with the African Mining Vision (AMV). The government’s move to scale up value addition and beneficiation presents an opportunity for the country to fight Illicit Financial Flows (IFFs) and generate a fair share of revenue from the sale of its chrome products.
The Government must attract sufficient investments to improve the capacity of the country to implement mineral beneficiation and value addition programmes, especially in the chrome sector.
Opening of closed Mines
Efforts to resuscitate closed mines through attracting investments are commendable. The Government must improve transparency and accountability in the mining sector to reduce the risks associated with attracting investments in the mining sector in Zimbabwe.
Transparency and Accountability in the utilisation of Rebate Facilities
The 2022 National Budget disclosed updated information on the tax revenue forgone through awarding of tax rebates or concessions.
This very important disclosure was missed in the 2021 National Budget. In its submissions to parliament, ZELA called for the 2022 National Budget to disclose the revenue that is foregone through tax expenditures for public and parliamentary scrutiny.
For the period between 2016 and 2021, the Government lost ZWL$ 6551 million worth of revenue out of ZWL$ 33 112 million which was the value for the imports subjected to tax rebates in the mining sector.
To move a step further on transparency and accountability of tax expenditure on duty concessions, the Government must publicly disclose the cost-benefit analysis that is being done to ascertain whether the tax expenditures are achieving their intended objectives.
There are high chances of redundancy of tax incentives if no cost-benefit analysis is done on tax expenditure on duty concessions and rebates.
Observations on the operations of Mining Corporates that are beneficiaries of Tax rebates.
The Minister of Finance and Economic Development noted that a number of non-compliance issues and deficiencies exhibited by mining companies that are benefiting from tax rebates.
These include false declarations of minerals produced, export of unpolished granite, no submission of monthly returns to the Ministry of Mines and Mining Development and false declaration of physical addresses.
These non-compliance issues expose the country to risks of Illicit Financial Flows (IFFs) in the mining sector.
There are high chances that the country has been losing a lot of revenue through tax evasion and tax avoidance.
Mining corporates enjoy tax rebates when they spend on Corporate Social Responsibility programmes.
According to the Minister, beneficiaries of tax rebates are failing to demonstrate execution of corporate social responsibility programmes on the ground.
Enhancing transparency and accountability in the administration of rebate facilities
To improve transparency and accountability in the administration of tax rebates being given to mining corporates, an applicant of tax rebate will need to file a transparency report.
Some of the compliance issues that will be included in the transparency report going forward include; submission of a ZIMRA tax clearance report for the period prior to application, for exporting companies, CD1 Form discharged for the period prior to application, evidence of the execution of Corporate Social Responsibility programmes, submission of monthly returns to the Ministry responsible for Mines and Mining Development.
This is a positive move and if these measures are implemented, this will likely lead to plugging of loopholes in the government’s revenue mobilization in the mining sector as these measures are clearly targeting to weed out cases of tax evasion and avoidance and strengthen mining companies’ compliance with mining tax laws. Parliament must exercise its oversight role on the implementation of the proposed measures.