Mining ZimbabweLatest Mining News, Policy and Industry Updates

Imagine winning a million-dollar lottery but instead of rolling around in opulence and glamor for eternity, you plunge into perpetual poverty.

Oil has been referred to as “the black gold”. It is a priceless resource with a huge impact on a nation’s economic, environmental and social structure. The discovery of oil is capable of altering the dreams of many a country at national and community level. Upon the discovery of oil and gas, developing countries usually look to foreign investment from developed countries. By so doing they risk undermining their permanent sovereignty but proceed nonetheless because a developing country that has just struck oil often lacks the expertise, technology and financial capacity to run a capital intensive oil and gas extraction and production project.

The discovery of oil and gas, therefore, frequently forces sovereign states to enter into host government agreements with capable multinational corporations. These agreements may take the form of service agreements, joint-venture agreements or production sharing agreements. Properly managed, the oil industry is capable of spawning a host of advantages, including but not limited to, lucrative employment opportunities for local communities, attraction of public and private international project financing institutions, transfer of expertise and skills to the local people, more revenue and development of infrastructure.

However, in other countries the very discovery of this black gold has led to the collapse of the economic, social and political fabric. 

This strange phenomenon is known as the “resource curse” or “the paradox of plenty”. This theory basically denotes that countries that are rich in natural resources tend to have poor economic growth, higher poverty levels, political conflict and decaying social structures as compared to countries with little or no natural resources.

Venezuela is the perfect embodiment of the resource curse. Despite having the largest oil reserves in the world (over 300 billion barrels in reserves), the majority of its people continue to wallow in abject poverty. 

Oil wells have also been in the middle of conflict as recently observed in Mozambique and as witnessed, not too long ago, in Syria and Iraq where ISIS successfully assumed control over oil fields and started producing oil for trade on international markets. 

Other notable examples of oil driven conflict include the Baku-Tbilisi-Ceyhan (BTC) crude pipeline bombing in the skirmishes between Armenia and Azerbaijan as well as the sabotaging of the Royal-Dutch Shell Company’s pipelines by insurgents in Nigeria.

In countries like Nigeria and Ghana the curse has reared its ugly head in the form of devastating environmental impact with a huge economic effect on the local people. In the Nigerian communities of Goi, Oruma and Ikot Ada Udo as well as the western region of Ghana, local residents have complained of serious air and water pollution which has suffocated their traditional economic activities like fishing and farming. This is not surprising because oil extraction can turn into an environmental curse due to oil spills, gas flaring or hydraulic fracturing (fracking) resulting in air and water pollution. To the host communities, the discovery of oil has become a curse instead of a blessing, which should not be the case.

The resource case has also been linked to the “Dutch disease”. This emanates from the situation in the Netherlands around 1959 where the discovery and subsequent exploitation of oil and gas led to currency appreciation and a crumbling of other sectors of the economy as they could not co-exist with the powerful and valuable black gold.

Gloom, however, is not always the case. Progressive models have led to proper development and utilisation of the resource. Countries like Norway and Canada have successfully circumvented all these negative impacts associated with the discovery of oil through efficient, transparent and effective economic planning. 

The Saudi Arabian government owned company, Saudi Aramco, is arguably the most profitable company in the world. World class infrastructure is ubiquitous in the oil rich United Arab Emirates. These models can be replicated to the extent there are positives and lessons to be learnt. One of the steps that may be incorporated is the idea of effective Environmental Impact Assessments at inception of investment ideas.

Environmental Impact Assessments

At every stage of oil and gas exploration, exploitation and production it is always important to factor in public participation through Environmental Impact Assessment procedures (“EIAs”). EIAs are an international environmental law practice that emerged through instruments like the Rio Declaration, ESPOO, the UNCLOS convention and the Aarhus Convention. Cases like the Pulp Mills arbitration between Argentina and Uruguay have inducted this principle into customary international law. In terms of this principle, the public must be informed and consulted concerning proposed activities that may have a significant impact on their livelihood.

On the investor’s part, due diligence helps to mitigate the effects of the activity or may be used as a defence in future litigation. This has become even more important in light of the advancement in jurisprudence by the Dutch and English courts in cases such as the Akpan v Royal Dutch Shell plc/SPDC (Nigeria) and The Bodo Community v The Shell Petroleum Development Company of Nigeria Ltd. In these cases, it was held that an investor can be sued in its home-country (Netherlands/UK) by local communities (Nigerians) on the basis of the law of the host state (Nigeria). Shell has since agreed to pay hefty compensation packages of around £55m to compensate aggrieved Nigerians from the affected Bodo community. For the government, EIA may be a portrayal of democracy, good governance and fulfilment of state responsibility, while for the concerned citizens it signifies empowerment of their voices.

It is commendable to note that Zimbabwe has also domesticated this principle in its legislative framework. Section 73 of the Constitution of Zimbabwe provides for the constitutional right to environmental protection which is in line with the Paris Agreement. Further, the Mines and Minerals Act (s159) as well as the Environmental Management Act (s99ff) contain provisions that provide for the procedure and requirements of proper EIA. The framework already exists and simply needs to be complied with.

It should never be the case that the discovery of the rich black gold spells doom and suffering for the people of a host state. The so-called curse can be avoided by a coming together of all stakeholders. All other sectors of the economy can still function viably. The discovery of oil, if that be the case, should be a blessing and not a curse.

Takudzwa Takunda Mutevedzi is a lawyer. He is currently studying towards an LLM degree in Oil, Gas and Mining Law at an energy University in the United Kingdom. He writes in his personal capacity and can be contacted on [email protected] or Takudzwa Takunda Mutevedzi on LinkedIn.

Cement producer, PPC Limited, this week announced its divestment from the lime business. 

“The board of directors of PPC is pleased to announce that on 2 May 2021, PPC South Africa Holdings  

Proprietary Limited, a wholly-owned subsidiary of the company, entered into transaction agreements with Kgatelopele Lime Proprietary Limited, to dispose of the entire issued share capital of PPC Lime for a consideration of R515 million,” said PPC. 

But, what could this mean for Zimbabwe, which last year introduced a conservation farming programme dubbed ‘‘Pfumbvudza’’.  

One of the principles behind the Pfumvudza concept is the use of agricultural lime before planting. 

Agricultural lime is a calcitic grade soil additive, which enhances crop yields as it increases the pH of acidic soils, thereby greatly enhancing uptake of nutrients by plants. 

In addition to Pfumbvudza, Government last year introduced mandatory liming for contract farmers.  

Expectedly, the development has driven local demand for agricultural lime products.  

But, will PPC’s move to sell off its lime business, which it claimed supplied “almost 60 percent of the lime consumed in Southern Africa” affect supplies locally? 

The short answer is yes, but it is also an opportunity for other local lime producers to step up and cover the supply gap. 

Interestingly just last week, another cement producer, Lafarge Cement Zimbabwe, launched a new US$2,8 million dry mortar mix plant, which will — among other benefits — result in increased lime output.  

Lafarge CEO Precious Nyika, said the new plant will be a game-changer in Zimbabwe’s agricultural sector.   

“Our expansion project is indeed in line with the Agriculture Recovery Plan (2020–2023). 

“As a key producer of Agricultural Lime, the expansion project brings to life one of the principles, which is the Blitz Soil Conditioning Programme. 

“Lafarge currently contributes 25 percent of the total lime demand,” she said. 

Zimbabwe’s Blitz Soil Conditioning Programme is part of the Agriculture Recovery Plan, which aims to boost the production of maize, wheat and soyabean, to ensure national food security.  

Improved agricultural output in these crop segments will also help to lessen pressure on the fiscus as the country’s food import requirements begin to decline.

Business Weekly

Government has set an ambitious target in which the mining sector will generate US$12bn annually by 2023.

Business Times reporter Mona-Lisa Dube (MD) caught up with the Mines and Mining Development minister Winston Chitando (WC) and discussed the teething problems facing the sector and his plans to grow the multi-billion dollar industry.

Below are excerpts of the interview:

MD: I know that you’ve been working in the private sector prior to being in government for quite a number of years, what would you say has been the difference between the private sector and government

WC: Well, I think for me, it’s a continuation of serving the industry. And, like you correctly said, I worked in the private sector, largely in the mining industry for years, and sort of moving from the mining industry—the private sector—to the mining industry in government. So for me, it’s a continuation. And fortunately, I must say at some stage I served as vice president and then president of the Chamber of Mines of Zimbabwe, which enabled me to get a good overview of how the industry operates in Zimbabwe and also engage government on the issues that were affecting the industry.

MD: And now you have to deal with those issues?

WC: Now I have to deal with those issues. So it makes it so much easier for me.

MD: So you have a target of having the mining sector worth US$12bn and we are in 2021, how much is the mining sector worth right now?

WC: It’s probably not a fair way of assessing how we are achieving that target in the sense that most of the projects which will contribute to the 2023 target are projects which are in construction.

MD: But how much is it worth now?

WC: As we speak its worth about US$5bn.

MD: So from the US$5bn you are aiming to get to US$12bn in the two years. What’s the plan there?

WC: There are about four major contributors which will move us from where we are to the US$12bn. The first is improved gold deliveries.

As you are aware that we suffered a decline in gold deliveries but that is not a decline in capacity. If anything the capacity is increasing and a number of initiatives are being carried out. In the small scale, we are looking at formalising a number of small scale miners and capacitating them. We are also looking on the large scale, the “Zimbabwe is open for business” has attracted capital which has enabled large scale production. Notable targets include Caledonia where an agreement was signed with government where they are aiming to achieve 15 tonnes over a number of years. We also have Shamva which was officially commissioned by the President last year, which on its own will do five tonnes, five percent of the target from one mine. We have Eureka which is coming into production in July this year which will do one and a half tonnes so we have a number of these projects, which will be coupled with the policy review  framework in terms of enabling the gold sector to achieve the 100 tonnes target.

MD: While we are still on the  gold sector Minister Chitando before we move on to the other priority areas that you have as a minister of mines, you rightfully said that you’re looking at small scale miners as well as large scale. And there have been a number of issues in the mining sector. Let’s start with the small scale miners. And it’s estimated that Zimbabwe has been losing about US$200m in terms of leakages alone every year. And this has been attributed to a number of issues. They’re questioning how can the country has Fidelity Printers and Refiners as the sole buyer of gold. Are you looking into this?

WC: Like I said, well, before you asked the question, there are a number of initiatives to capacitate the small-scale and large scale miners which I cannot divulge at this stage but there will be a review of these enablers.

MD: At what point Minister, 2023 is around the corner?

WC: Very soon. It’s actually under discussion and I am very confident that by the time the policies are announced we will be in time to achieve the 100 tonnes of gold.

MD: So is the liberalisation of the gold mining sector something on the cards?

WC: I wouldn’t say so. What I am saying is we are reviewing and I wouldn’t want to reveal just yet but discussions are on going.

MD: Let’s also look at the issue to do with corruption within the mining sector. When the Zimbabwe Anti-Corruption Commission released a report on the mining sector, one of the key issues that they highlighted needs to be addressed in the mining sector is corruption. I hope you will not say it’s in this framework that you’re working on and give us a comprehensive answer as to how you are working to curb this.

WC: With corruption, what we have said before is if anyone has  any specific cases of corruption they should be reported to the ministry and to the ZACC and action will be taken. You find that there are many cases where there are allegations of corruption and if the necessary information is not passed on there is nothing we can do. Once cases are reported they are taken seriously and decisive action is taken. So what I urge members of the public is, if anyone has any knowledge of corruption that information should be passed on to the ministry.

MD: And what if that complaint is against you as the minister of mines that you have been involved corruption? We understand that there are some raised concerns about a certain incident that happened in Kwekwe. What if it’s against you, Minister Chitando.

WC: ZACC has a mechanism whether it may be a minister involved in corruption or a minister where one is free to report cases. I’m sure you are aware of ministers that have been questioned

MD: Have you been questioned for corruption by ZACC?

WC: No. But let me take this opportunity to clarify since you’ve mentioned it. Suffice to say, the matter is within the courts. But I will since you have mentioned it. The ministry, in terms of the provisions of the Mines and Minerals Act, every holder of a mining title is obligated to renew his mining title every year. We have a lot of cases where mining titles are not renewed under the use it or lose its principle, if the mining title has not been renewed  and the work is not being carried out, that mining is what we call forfeited. So all provincial offices periodically undertake what we call forfeitures, that is repossession of mining titles and is done according to law.

MD: So who does this? You as a minister?

WC: No, it’s done at provincial level. It doesn’t even come to the Harare office.

MD: So why is your name being dragged in this Mirage claim incident?

WC: That’s what I’m saying I don’t want to go too much into it. But the fact of the matter is, it was done by the province. As to why it’s being dragged you will have to ask the people that are dragging it why they are doing that because it was done procedurally. It wasn’t just that particular claim. It was the actually a bunch of claims which were forfeited in terms of the provisions of the act and once refuted what happens in a number of cases Players in the mining industry go on to apply and the applications are done in the provinces.

MD: So are you stating that you didn’t take this mine for yourself?

WC: No, not at all. What has happened in this particular case? There is an entity which is also based in the Midlands, which applied to that mine, which had been forfeited and it was granted to them.

MD: We understand that there has been a backlog in issuing of these licenses dating back to 2018. Why is this?

WC: To put it in perspective for years, the average number of mining concessions awarded per annum by the ministry averaged about 2500. At the moment, we have a backlog of about 14000 which is about six years with worth of mining applications. But that’s all owing to the Zimbabwe is open for business mantra which has seen this huge influx of applications which the ministry was not capacitated to handle. But what has happened is since 2019 and last year, more resources have been availed to the ministry. And that number is coming down. And we expect that by the end of this year we would have cleared them

MD: All 14000? What’s the plan there?

WC: We have massive resources that we are going to disburse. Just as an example in 2018 when applications were made some provincial offices had only one vehicle to service applications , to service disputes etc but we now have provincial offices having five/six vehicles to attend to all these.

MD: One of the major concerns in the mining sector has been to do with safety. We’ve been hearing about Shafts falling and just recently the Civil Protection Unit highlighted to parliament recently that they do not have the capacity to attend to mining accidents. What’s your response to this as the Ministry?

WC: Whilst I fully understand and appreciate the concern from the public and from stakeholders, let’s be clear that there are regulations, which govern the operations within the mining sector. What you are supposed to do and what are not supposed to do. And if those regulations are followed, accidents should not happen.

MD: But how do they even get to mine there before these regulations are followed. Shouldn’t there be a procedure for someone actually checking on what’s going on with any mine before we even get to the shafts falling?

WC:  Well, in all fairness, you can go and check today but if someone follows unsafe practices tomorrow, an accident will take place. Admittedly there is need to increase the level of inspections but even if you increase the levels of inspections, that does not guarantee that accidents will not happen if those operating do not follow procedures.

MD: As we wrap up as a sector how are you working into including women and young people in the mining sector and to ensure they are fully supported?

WC: Firstly, as a Ministry we have created a special desk to look into promoting women, the youth and war veterans to move into mining. Furthermore, we have some initiatives which will be roll out in the next few weeks targeting this group.

Business Times

THE Chamber of Mines of Zimbabwe (CoMZ) says engagements with the Government are ongoing to ensure mining houses receive sufficient foreign currency to meet their import requirements.

The mining industry is one of the economic pillars expected to drive the country towards an upper middle-income economy by 2030.

The extractive sector alone is set to realise US$12 billion annually by 2023.

“We are engaging Government to make sure that we have sufficient foreign currency to import and our engagements have been very broad,” CoMZ chief executive officer, Mr Isaac Kwesu, said.

He was responding to questions from Business Chronicle after international media reports that mining companies were seeking permission to pay taxes and royalties in local currency.

Bloomberg had indicated this week that the request came after the Reserve Bank of Zimbabwe (RBZ) had compelled them to convert more of their foreign exchange revenues at official rates.

However, Mr Kwesu could not be drawn to comment further on the Bloomberg report saying: “I can’t comment on something that l am not familiar with, if they (Bloomberg) got that letter, maybe they got it from the Reserve Bank.”

Under regulations announced in January this year, exporters should transfer 40 percent of their foreign currency earnings to the monetary authority, up from 30 percent.

In the report, Bloomberg is quoting a CoMZ letter to Finance and Economic Development Minister Professor Mthuli Ncube stating that those foreign-exchange losses may force miners to cut output as suppliers also demand payment in US dollars.

“But to single out that the miners want to pay taxes in local currency, I can’t comment on that one. The long and short of it is that we have been engaging Government since January to ensure that mining houses have sufficient forex,” said Mr Kwesu.

Repeated efforts to get a comment from the Finance Secretary Mr George Guvamatanga were unsuccessful as his mobile phone was not being answered.

Asked about the performance of large mining houses in the first quarter of the year, Mr Kwesu said statistics on the performance of the sector were still being compiled.

“We are now collating the statistics on the performance of the mining industry in the first quarter.

“We will only be able to know about the performance of the mining sector mid-May.

“But the industry, just like other sectors, has also been trying to navigate the Covid-19 challenges,” he said.

The Chronicle

The value of Zimbabwe’s gold export receipts jumped by more than half to US$97.06m in April 2021 from US$63.42m reported in the same period last year due to improved bullion deliveries and firming prices on the international market.

The relaxation of the Covid-19-induced lockdown and the end of the rainy season also contributed to an improved performance.

Prices of the yellow metal on the international market have increased to about US$57,000 a kilogramme from US$55,000 in January and February this year.

In written responses, Reserve Bank of Zimbabwe governor John Mangudya told Business Times that gold receipts improved last month.

“The country made total gold shipments of US$97.06m in April 2021 from US$63.42m earned during the same period last year.

From February this year the country’s gold export earnings have improved on a monthly basis due to the firming of the bullion prices on the international market,” Mangudya said.

He said the increase in gold export shipments was due to an improvement in gold deliveries to Fidelity Printers and Refiners as a result of slowing down of rains.

Gold export receipts in January 2021 were at US$53.1m from US$98.1m during the same month last year on subdued deliveries due to Covid-19 effects, heavy rains that the country has experienced in January and the failure to remove costs on small scale gold miners.

In February this year the country shipped out gold worth US$66.1m compared to gold shipments worth US$56.1m in the same period last year while in March 2021 gold export receipts reached US$81.2m compared to  US$71.9m recorded in the same month in 2020.

Overall, gold export earnings went 3% up to record US$297.46m during the first four months of the year against US$289.52m recorded during the same period last year.

Gold deliveries have bounced back for the first time in March 2021 after recording a positive improvement of 2% to reach 1.80 tonnes from 1.77 tonnes recorded during the same period last year due to the slowing down of the rains in the period under review.

Zimbabwe is losing between US$1.2bn and US$1.7bn yearly due to smuggling and unfriendly policies such as high taxes, costs and low retention levels which do not allow miners to produce at a competitive level.

Small scale producers’ subdued performances have caused a general decline in gold output in the past year with the primary producers maintaining the same output over the years.

Ironically, small scale miners are getting 100% forex retention threshold while large scale are getting 60%.

During the first quarter of 2021, total gold deliveries fell 31% to 3.977 tonnes from the 5.72 tonnes achieved in the same period last year.

From the 3.97 tonnes, small scale miners delivered 1.58 tonnes against 2.39 tonnes by primary producers.

Recently, Fidelity Printers and Refiners (FPR)  general manager Fradreck Kunaka revealed that the country could be losing over 30 tonnes yearly valued at US$1.7bn due to smuggling and unfavourable mining policies.

He said the country should totally liberalise the gold sector to combat smuggling and compete at the highest level with foreign gold buyers.

Gold Miners Association of Zimbabwe chief executive officer Irvine Chinyenze   believes the country could earn more if fundamentals are addressed.

“For now figures are okay but if challenges are addressed more gold would come through formal channels which would enable the country to earn more foreign currency from its most prized resource,” Chinyenze said.

The country’s gold output plummeted 31% to record 19.052 tonnes during 2020 from 27.66 tonnes recorded during 2019 due to Covid-19 effects, delay in payments and low foreign currency retention levels.

A recent mining report advised that President Emmerson Mnangagwa’s government should pay gold producers at world prices to woo them into selling the yellow metal through the formal channels.

The report blamed FPR’s flawed centralised gold buying scheme and called for the law to bring complicit powerful politicians to book as they are believed to be sponsors of machete gangs’ violence in Midlands and Mazowe.

Economic analysts said the 100 tonne gold output target by 2023 can be reached if the authorities put in place friendly mining policies and incentivise miners.

Business Times