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US$12bn mining economy unattainable without clear policy

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US$12bn mining economy unattainable without clear policy

Zimbabwe’s goal to achieve a US$12 billion mining economy by 2023 has been deemed unattainable if it continues operating without a mining development policy, a situation that has created a lot of policy and legal reversals as well as inconsistencies in the sector. 

Vongai Mbara 

Speaking in its 2022 budget submission, the Zimbabwe Environmental Law Association, (ZELA) said the absence of a mining development policy is holding back the industry’s potential to transform the economy. 

“Due to the absence of a mining development policy in Zimbabwe, there is no clear overarching mining policy direction on exploration, production, beneficiation, marketing and transparency and accountability of mineral revenue,” ZELA said. 

“This has often created lots of policy and legal reversals and inconsistencies.” 

The environmental watchdog said although the government, over the years, has been making efforts to develop a mining policy, these efforts have not yet led to a final policy being adopted and implemented. 

“Finalisation and ensuring that transparency and accountability aspects are incorporated into the policy in line with the constitution of Zimbabwe and international best practices like the Extractive Industries Transparency Initiative (EITI) will assist in defining government’s overall intention, direction and measures that need to address cross-cutting issues including illicit financial flows (IFFs), shareholding arrangements and community benefit sharing,” the Environmental lawyers said. 

“By finalising the mining policy and implementing it, the government will also be providing the basis of amending laws regulating mining in Zimbabwe.” 

ZELA added that there is a need for the government to develop policies for unique mineral value chains like gold and gemstones. 

“In the gold sector, there is no clarity with regards to the government’s policy direction on who should invest in the gold value chain, models of partnerships within the sector, accountability of gold including measures to curb criminality and illicit gold trade,” it said. 

ZELA also emphasized the need for a gemstone policy framework. In its recent IFFs study in the gemstone sector, ZELA pointed that citizens, local authorities and the central government were not optimising benefiting from the gemstone value chain due to lack of clarity on policy and legislation on the production, trade beneficiation, model of partnerships, among other issues. 

While NDS 1 alludes to the importance of transparency and accountability as a prerequisite for achieving both the US$12 billion mining economy and the target to turn the country into a middle-income country by 2030, Zela noted that the 2022 national budget strategy does not mention the need to adopt a comprehensive policy framework to address the opacity in the mining sector. 

Zimbabwe has not adopted EITI despite the government’s renewed interest to join EITI as expressed in the 2019 and 2020 national budget statements. ZELA said the amendment to the Mines Act which provides opportunities for the country to strengthen transparency and accountability in the mining sector is yet to be finalised. During the Mid-Term Budget Review presented in July, Finance minister Mthuli Ncube indicated that the Bill was being discussed at the cabinet-level. 

Zesa switches off Ziscosteel

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Zesa switches off Ziscosteel

Zimbabwe Electricity Supply Authority (ZESA) has disconnected the power supply from the defunct giant steel manufacturer, Ziscosteel, over a ZW$40 million debt.

Vongai Mbara

This comes only 2 weeks after Zesa threatened to switch off mining houses over a US$37 million legacy debt, which it blames for crippling the power utility’s operational efficiency.

Yesterday, ZISCO group chief executive officer, Dr Farai Karonga, confirmed the development and said the figure has been accumulating since the company ceased operations.

“The debt is historical as it dates back to the days when the company stopped operating. It is a legacy debt that was accrued over a long period of time,” he said.
“But I’m glad to inform you that the Government is committed to paying the bill and as we speak, the issue is being addressed,” said Dr Karonga.

The Government assumed all Ziscosteel debts under the Zisco Debt Assumption Act.

Ziscosteel used the same power supply line with Redcliff Municipality, ZimChem and another Zisco subsidiary, BIMCO, which have been negatively impacted by the development.

Dr Karonga said these entities were consuming most of the power in their water pumping processes. Redcliff used 70 per cent of power while ZimChem, which is located within the Ziscosteel plant, consumed 22 per cent with the remainder being used by ZISCO and Bimco.

Dr Karonga said the disconnection will have a negative impact on businesses around Zisco hence plans were underway to disband the line so that each institution can have its own supply line and for accountability purposes.

“As Ziscosteel we have had to rely on the use of a diesel generator, which is not only expensive but also can only supply power for a short time. ZimChem is the worst affected as they have since ceased operations,” he said.

“As you might be aware, they were now commencing the production of chemicals for use in the road rehabilitation but that has since been derailed,” said Dr Karonga.

The development comes at a time when the adjudication process for Zisco potential investors is underway as the Government ramps up efforts to revive the company. ZISCO has received bids from seven potential investors from which one will be given the task to revive the steel giant.

The company is pursuing a roadmap that involves modernisation and financial sustainability.

The Redcliff-based steel manufacturing firm ceased operations in 2008 due to poor management and poor capitalisation.

US$50 million funding for gold miners

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US$50 million funding for gold miners

Fidelity Printers and Refiners (FPR) is eying the government to budget US$50 million into the gold sector through the Gold Development Initiative Fund (GDIF) in an effort to achieve the US$4 billion gold sector by 2023.

Rudairo Mapuranga

Fidelity Acting General Manager Mr. Peter Magaramombe during a tour to assess the company’s operations by the Edmond Mkaratigwa Parliamentary Portfolio Committee on Mines and Mining Development said the company was seeking assistance of the committee in getting the funding under the 2022 National Budget.

Magaramombe said Fidelity was hoping to allocate US$20 million to approximately 150 artisanal and small-scale miners in 2022 while US$30 million will be channeled to medium and large-scale miners.

“The GDIF seeks consideration for allocation of funding under the 2022 National Budget through the assistance of the Portfolio Committee of Mines and Mining Development.

“The Total Funding Requirement is US$50 million for the year 2022. This will be allocated as follows: –

“Artisanal Miners, Small Scale Miners, and Gold Value Chain Players – US$20 million. Approximate 150 miners are expected to benefit from this funding.

“Medium and Large-Scale Miners – US$30 million,” Magaramombe said.

The Fidelity boss said the whole gold sector was in need of US$1 Billion annual funding if a notable growth and development of the sector was to be achieved.

“As at end of October 2021, the GDIF had an outstanding funding pipeline consisting of proposed transactions amounting to just above USD$20 million. This amount is a fraction of the aggregate gold industry funding demand which is currently standing at USD$1 billion annually for the next 5 years (Zimbabwe Chamber of Mines, 2019),” he said.

Through the GDIF, Fidelity wants Artisanal Gold Miners to benefit through the establishment of Gold Service Centres and privately owned Custom millers across the country. Mills will enable Artisanal Miners to have access to processing equipment.

The GDIF is expected to be funding for capital expenditure and working capital to ensure project viability for small-scale miners while for medium and large scale miners the funds will support ongoing exploration, the ramping-up of installed capacity, resuscitation of closed/ dormant gold mining assets, mine development, the establishment of new mines and working capital and for Gold Value Chain Players. The funds will help to maintain their capacity to facilitate the supply equilibrium required for the operation of the gold trade.

Fidelity to buy gold below 5g, confident of 100ton target

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Fidelity to buy gold below 5g, confident of 100ton target

Fidelity Printers and Refiners (FPR) is confident that gold deliveries to the country’s sole gold buyer and exporter, will reach the projected 100 tonnes delivery by 2023 as the sector is poised to fetch an annual revenue of US$4billion.

Rudairo Mapuranga

Fidelity acting General Manager Mr. Peter Magaramombe said this during a tour by the Parliamentary Portfolio Committee on Mines and Mining Development at the company’s headquarters in Msasa yesterday.

The Fidelity boss said, achieving the 100 tonnes gold production and delivery target was possible but all stakeholders in the gold industry were supposed to work together to ensure that gold production increases at the same time deliveries to Fidelity increase.

“Achievement of the 100 tons target by 2023 is feasible though it involves multi-stakeholders. FGR has put in place a number of interventions to effectively play its role towards achieving the target” Magaramombe said.

Magaramombe said Fidelity Gold Refiners (FGR) is in the process of finalising the mechanisms that will result in purchasing 5 grams and below from the artisanal and small scale miners and implementation is set for the new year (2022) as a measure to mop all the gold mined by the ASM which sometimes end up in the hands of smugglers.

The upward price review (100% USD cash to small-scale miners) and reduction of royalty to 1% for small-scale miners and artisanal miners has played a major role in boosting gold deliveries from the two groups.

Currently, there are no delays in payments that were previously experienced as a result of excessive scrutiny by foreign banks whenever FGR was suspected to be dealing with red-flagged institutions or individuals resulting in the company managing to achieve an encouraging gold turnout.

FGR according to Magaramombe has already identified areas where gold buying centers will be established in the coming year to enhance accessibility and convenience to artisanal and small-scale mining groups.

He said FGR has plans to open its buying centers seven days a week to enhance the convenience and reduce potential leakages upon relaxation of COVID–19 restrictions.

Outside of the Msasa Head Office, FGR currently has eleven gold buying centers strategically located to buy gold produced in those regions that are Kadoma, Kwekwe, Chinhoyi, Bindura, Masvingo, Mutare, Zvishavane, Gweru, Bulawayo, Filabusi, and Gwanda.

Zimbabwe mine workers overtaxed

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Zimbabwe mine workers overtaxed

MINE workers’ unions have bemoaned overtaxing of employees in the sector saying this leaves them with little disposable income, making it difficult to survive during the current economic hardships.

Last week, unions representing miners toured mining firms throughout the country to carry out awareness campaigns for workers on labour and sexual harassment rights.

Industrial Zimbabwe Youth Committee chairperson Tafadzwa Chidindi said from the five-day campaign, it emerged that mineworkers were overtaxed.

“Of the workers we interviewed and interacted with, our findings were that seven out of 10 complained of pay-as-you-earn (Paye) deductions which they said left them with nothing on their payslips,” he said.

“At Old Nick Mine in Bulawayo, workers feel they are being overtaxed and showed us their payslips, where the minimum wage was $30 500 for the mining sector. The Zimbabwe Diamond and Allied Mineral Workers Union (Zidamwu) negotiated that 52% of the total amount should be in United States dollars, while 48% is paid in local
currency.

“After statutory deductions such as National Social Security Authority (Nssa), Paye and others, employees said they end up taking home around $19 000, which is less than US$150.”

Chidindi said at Old Nick Mine, most workers had $1 200 deducted by Nssa, and they were unhappy about it saying the social security authority’s deductions should not exceed $450.

The unions decried lack of participation by women in the mining sector.

“The absorption of female employees in the mining sector is still low. Some mines do not even have ablution facilities for ladies at the workplace,” he said.

“At Old Nick Mine, there are few female workers regardless of the fact that it is located a few metres from the Zimbabwe School of Mines.”

In Gwanda at Farvic Mine, most underground workers were said to be employed under fixed-term contracts despite a 2003 statutory instrument, which states that they should be permanently employed.

“Their payslips stated that they were permanent employees, yet in reality, they are being considered as temporary employees. We also visited Zimbabwe Zhongxin Electrical Energy Company in Hwange, which produces electricity using gas,” Chidindi said.

“The Chinese owned company has around 100 Chinese and around 30 local employees. The plant hasn’t been commissioned as yet and after the commissioning, the company said it would then be able to absorb more locals.”

NewsDay

More children increasingly participating in gold mining activities

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More children increasingly participating in gold mining activities

The reduced economic activity brought about by the prolonged lockdown to slow down the spread of Covid-19 may be fuelling child labour in informal gold mines. 

Vongai Mbara

Last week I visited a number of mines in Mashonaland central province and I witnessed quite a number of underaged boys carrying out mining activities. 

In Mukaradzi, Mt Darwin, I met 16-year-old Norman Matutu (name changed) who is currently working at one of the gold claims in the area. 

Norman, a very petite boy dawned in a torn work suit, gumboots and a torch strapped around his head seemed very nervous as I approached him to have a conversation. 

“How old are you?”, I asked him. 

“21”, he responded with his eyes spanning around to see if anyone else was in on the conversation. 

It took a number of minutes to convince him to open up and be honest about his real age. At last, he confirmed that he was 16 years old working at a mine to earn a living. 

Norman said he was one of the scores of children working on the opencast mine with no formal contracts, protective clothing or any medical benefits. 

“I came here with a group of friends to look for work. The lockdown really affected our families such that we would go to bed on empty stomachs. When my friends and I heard that they were hiring people here, we walked over 50 km and camped here,” he said. 

Norman took me to where he sleeps and it is a black plastic bag rested over a shrub which he shares with three of his friends who are 15, 16 and 17 years old. 

Despite his age, Norman said he gets very happy when he gets an underground shift. 

“I go underground because that is where the money is. I try to not think about how dangerous it is because it will distract me. I once acquired US$15oo in a day.  It’s the money that motivates me so I get happy when I get an underground shift,” he said. 

For most families in the area, any labour that may be exploited in the collective effort to sustain their livelihood is mastered and taken on board. 

Child labour is well hidden from outsiders who visit the mine sites and many child rights cases of abuse go unreported. There is also a lack of will to address the abuses. 

“My parents were scared for me to work here but once I started sending them money, they accepted it. Now they support me,” Norman said. 

The rise in the use of child labour in artisanal and small-scale mining in the country presents a unique challenge to safeguarding children’s rights that have been universally accepted and held sacrosanct under international conventions. 

School children are increasingly participating in artisanal gold mining activities owing to inactivity and rising poverty levels worsened by a prolonged Covid-19 lockdown.  

Last year, there was an incident where 14-year-old Wisk Peter Chimwayi, a Grade 7 pupil at Rukanda Primary School in Mutoko, suffered spinal cord damage during a mine shaft collapse in Mutoko. The boy is now paralysed and in need of financial help for advanced treatment  

Speaking in an interview, Zimbabwe Environmental Law Association (ZELA) deputy director, Shamiso Mtisi said a number of Zimbabwe children were now risking young lives by taking part in the illicit practice.  

“An increasing number of children in Arda Transau along Odzi River, Penhalonga, Mudzi, Mazoe, among other areas are involved in gold mining.

“Some of these children are being forced to accompany their parents while others are in paid work,” he said. 

Mtisi said the current child rights programme being run by ZELA was overwhelmed and could not effectively reach out to all areas where the activities were taking place. 

“Preliminary information gathered indicates that there are a lot of child-headed households in need to generate income especially in the Arda Transau area.  

He said the involvement of children was exposing them to other immoral activities such as drug abuse and prostitution.  

Zimbabwe has ratified all key international conventions concerning child labour. These include the International Labour Organisation’s Conventions 138 on the minimum wage and 182 on the worst forms of Child Labour. The Children’s Act (Chapter 5:06) also exists to protect the rights of children from typical forms of abuse. 

Electronic currency might reduce ASM robberies

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Electronic currency might reduce ASM robberies

The introduction of an electronic US$ receipt for small scale and artisanal miners who deliver their gold to the country’s sole gold buyer and exporter Fidelity Printers and Refiners (FPR) might be the remedy to reduce the influx of robberies in the sector, Parliamentary Portfolio Committee Chair on Mines and Mining Development Hon Edmond Mkaratigwa implored.

Rudairo Mapuranga

Cases of armed robberies targeting large sums of money particularly for people in the small scale and artisanal gold mining sector have become a cause for concern with hundreds of millions already lost this year according to statistics.

According to Mkaratigwa, miners have become vulnerable to robbers because in most cases details of their movements and gold deliveries are known therefore there was a need for Fidelity to revise the way they remunerate miners to curb possible robberies of the miners.

“It is coming to our attention that there serious security risk in terms of the movement of cash from Fidelity to the miners, more so because it is actually becoming evident that one way or the other the criminals would know that this particular miner has received some cash payment so to actually mitigate or eradicate this challenge totally there is need revise the way we remunerate our miners.

“My proposal is that we introduce electronic bank for miners, what it means is that Fidelity will give an electronic receipt to the miner as an acknowledgement that they have collected his/her gold wealth so much in hard currency US$ to be specific, and that miner at his time be known only to him/herself can visit a bank of his choice and be able to encash the electronic receipt and convert it into US$ and that way it will reduce the chances of any criminals being aware that he got some cash,” Mkaratigwa said.

The increase in armed robberies on miners confirms that there are many guns in the country that are in the wrong hands therefore measures need to be taken to address the risk of miners falling prey.

Ministry of Mines, ZMF in Safety Awareness campaign

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Ministry of Mines, ZMF in Safety Awareness campaign

Ministry of Mines and Mining Development (MMMD) in collaboration with the Zimbabwe Miners Federation (ZMF) Mashonaland central have embarked on a safety awareness tour to improve Safety and Awareness of miners in the province.

Vongai Mbara

The workshop comes at a time where alarming numbers of mine accidents and deaths have been recorded. Recently, eight people including six Chinese nationals, died when gas cylinders exploded at SAS gold mine in Mazowe.

Addressing miners at Kwela 6 Milling Centre in Mazoe, mining engineer Eugene Gota emphasized the importance of legal compliance when handling explosives to ensure safe and sustainable mining.

“It is illegal to use explosives without a permit. We encourage our miners to acquire explosives permits first so that they can purchase them freely and legally.

“Another issue is the handling, use and storage of explosives. Miners should build requisite storage facilities for their explosives to avoid similar accidents like the ones we have seen from the past,” Gota said.

Also speaking at the workshop was Trojan representative Mr Gumede who encouraged miners to take safety precautions in their mining activities.

“The goal is to make money safely and it is very possible if we take safety precautions at our mines. Before we even start mining, it’s critical to identify dangers surrounding us and come up with solutions”.

He added, “Protective clothing is very critical.  When it comes to our workers’ safety, no compromises should be made. It’s cheaper to spend money buying safety clothing because you will lose more money if your workers get injured and your production is stopped.

“Emergency preparedness is also very important. Miners should always have first aid kits at their operations,” said Gumede.

Another critical issue that was raised was the use of mine registers. Miners were encouraged to incorporate daily registers so that workers can sign in when they go underground and sign out when they come out.

“When an accident happens, it’s easier to identify the people affected and their names if there is a daily register.  We do not want a Chegutu disaster repetition where the number and names of miners who were trapped underground were unknown,” Gumede said.

ZMF mash central chairperson, Christine Munyoro also encouraged miners to be aware of TB and silicosis which is affecting a lot of mine workers.

“Miners are greatly affected by TB and Silicosis which is caused by dust and silicon that we use at our mines. Silicosis is a permanent disease that can affect you for life, therefore I encouraged our miners to invest in effective protective clothing. Let us make sure that our workers have air-purifying respirators and gloves among other protective clothing when they go underground,” Munyoro said.

Miners were also taught the importance of regularly serving their mining equipment to avoid fatal accidents.

Mining tycoon to build ammonia fuelled cargo ship

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Mining tycoon to build ammonia fuelled cargo ship

Mining billionaire Andrew Forrest said he aims to create the world’s first ammoniapowered ship before the end of next year, part of an ambitious plan to run all his company’s fleet on a carbon-free version of the fuel.

“This is just the first,” Forrest, chairman and founder of Fortescue Metals Group said in an interview.

“We have about 100 ships on the water, and we’ll be converting all our own ships over to green ammonia at the earliest possible opportunity, well within this decade.”

The ship itself is tiny, with a transportation capacity that’s less than a 100th of the size of some of the world’s largest bulk commodity carriers.

Ammonia is considered a cleaner, possible replacement in the future for the oil-derived marine fuels that almost
exclusively power shipping today.

The announcement came on transport day of COP26, the ongoing climate summit being held in Glasgow. — Bloomberg.

State of mining industry report

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State of mining industry report

A COUPLE of weeks back, Zimbabwe Chamber of Mines published its state of the mining industry survey report looking at issues faced by the industry and prospects for 2022.

To ensure objectivity, the Chamber states that its involvement was restricted to sponsoring and facilitating access to information to its members who form a greater part of the respondents in the survey.

The report looks at  key highlights, mining business confidence, local content and corporate social investments in the mining industry, expectations of the artisanal and small-scale mining sector (ASSM), COVID-19 and mining industry outlook for 2022 prospects.

Mining sector executives are reportedly positive on the prospects of the sector to be mainly driven by improving international commodity prices and a resultant increase in capacity utilisation in the sector as output is expected to grow.

The downside threats include the continuing high risk perception of the country which is likely to limit major investments in the sector, continuing infrastructure and energy deficits, problems with access to foreign currency and increasing costs of capital and operations.

In my opinion, I don’t see how anyone can be positive about a growth in output without these key challenges being fully addressed.

An increase in mining output is key in order for us to increase our foreign currency earnings and employment in the sector.

We have definitely not been well organised and aggressive in unlocking our mineral resources and most of it has to do with the political economy of the sector.

Chrome, coal and diamond subsectors are expected to grow significantly in 2022 while platinum will continue to dominate the sector.

Major expansions are expected in the gold and platinum subsectors with expectations that gold output will reach 35 tonnes.

Capacity utilisation is expected to increase to 83% in 2022, a miniscule increase from 82% in 2021 mainly driven by gold and ferrochrome.

For the mining sector, the fiscal regime continues to play a significant role and can either stifle or enable growth.

Key fiscal issues identified which continue to undermine viability prospects include high royalty and beneficiation taxes, high environmental management levies and misaligned rural district council charges.

On the issue of access to foreign exchange, miners are not happy with the 60% retention which is viewed as inadequate to meet increasing operational costs.

Added to this, the practice of having to pay for local expenditure in foreign currency reduces funds available for importation of essential inputs and it makes sense to allow miners to pay taxes, royalties, electricity and statutory obligations in local currency and premising of taxes, fees and charges at the obtaining auction market rate.

A key input to mining operations is energy and indications are that on average, miners are facing six hours of power outage per day and this has serious repercussions on operations and output. Unfortunately, the situation is expected to worsen in 2022 and this will limit output growth prospects.

In my opinion, such matters need urgent attention at the highest level. Accepting payment for electricity bills in local currency, for example, will have a significant positive impact on the sector and rehabilitation of dilapidating power infrastructure is critical.

The issue of capital inflows into the sector remains a challenge due to subdued foreign direct investment into the economy as a whole.

Most miners indicated that they are facing difficulties in raising external capital to fund their operations, with some reporting that they had put on hold some of their projects due to capital shortage. Only improved political and macro-economic stability can address these issues.

On the issue of mining policy environment, survey findings show that most respondent executives, 74%, are expecting the mining policy environment to be suboptimal, citing delays in finalising outstanding policy matters including a mineral development policy and mining cadastre.

This falls under mining sector organisation, a matter which I have written on before. An enforceable, transparent and comprehensive regulatory framework for natural resource sectors provides a stable and predictable policy environment which increases long-term investment in the sector.

The quality and consistency of the legal, regulatory and fiscal frameworks in the sector will, therefore, always have a major influence on the growth of the sector.

On artisanal and small-scale miners (ASM), the key issues raised are the need to formalise the sector and develop appropriate legislative tools especially on allocation of mining rights. The ASM sector remains disorganised and highly risky and yet it can significantly contribute to high minerals output.

Overall, although the report tries to create a balanced perspective and to remain positive, there is still a lot to be done to get our mining sector operating at full capacity. What is clearly lacking is substantive progress on stated intentions. Everyone seems to understand what needs to be done and yet progress is very slow.

As a result, Zimbabwe’s mining sector potential remains untapped due to lack of investment in a sector that could do wonders for the economy.

I will conclude by repeating an important quote from the book: “Rents to Riches” – The Political Economy of Natural Resource–Led Development.

“Countries that are more politically inclusive are likely to enjoy better natural resource management and developmental outcomes. Countries where a greater proportion of society has a voice in policy making and where decisions are made on the basis of public goods provision to the many, rather than private spoils to the few, are more likely to benefit from welfare-enhancing policies that share extractive sector developmental riches across social, political, and economic groups in a sustainable fashion.”

That is surely the route we must take if we are to see Zimbabweans benefiting from their mineral resource endowments.

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