Ten priorities for getting Mining moving in Zimbabwe
Zimbabwe Mining is beginning to recover after decades of isolation caused by the draconian laws of indigenisation that had the “jewel of Africa” be labelled as a no-go area for investment. As the current President took over the reins, he inspired the nation, ignited hope and had the country speaking in one voice. The hope he inspired marked the beginning of a new era and the Mantra “Zimbabwe is open for business”. As an old Chinese proverb says “it’s Easy to Destroy but Hard to Build”, the recovery is in motion, but a lot needs to be done in order to get the desired results. The following are priorities for getting Mining Moving in Zimbabwe.
By Rudairo Mapuranga
1. End corruption
Corruption in the mining industry in Zimbabwe is not well documented but too prevalent.
Recently, a forensic audit by Reynolds Tendai Muza, a forensic auditor and investigator with Ralph Bomment Greenacre and Reynolds unearthed massive corruption at Hwange Colliery Company Limited in which the minister of Mines Hon Winston Chitando was implicated. Investigations by the Mines portfolio committee also exposed that the once thriving mine was actually destroyed by very powerful persons, some of whom are currently serving in government.
Corruption is bad for business and it reduces investment, both foreign and local, therefore a direct insult to the “Open for Business” mantra. The government of Zimbabwe needs to reduce the risk and incidence of corruption in the mining sector by improving the transparency of decision-making regarding granting of mining exploration and extraction licenses; public and stakeholder access to mining revenue information, including where companies are based and where they operate, and public disclosure of the payment and application of mining revenues.
2. Institutionalise the rule of law to end statutory risk
No changes to rules and regulations without stakeholder consultations and advance notice.
Policy inconsistency in Zimbabwe has become the order of the day. The country’s economic problems could be addressed if progressive policies were to put in place. For example, in 2013, The Standard reported that, because of poor policies, Diamonds mined in Zimbabwe (a country with over 85% unemployment rate), where creating jobs in other parts of the world. It was reported that Chiadzwa Diamonds created 60 000 new jobs in India.
Also recently, the invasion of the Gadzema mine in Chegutu and also the invasion of the Gaika mine in Kwekwe by alleged artisanal miners who are allegedly led by senior government officials to create a bad name for the country and reduces FDI.
In 2011, the government published new regulations implementing an ‘indigenisation program’ which required foreign mining companies to give a 51% stake of their business to black Zimbabweans. Many companies where
Unwilling to do so and left the country. This affected the Mining industry in Zimbabwe which was predicted to be on a constant rise. The Mining regulation was implemented without stakeholder consultation leading to rapid investment fallout. However the indeginisation program has been abolished.
3. Stable economic environment
According to the World Bank, Zimbabwe’s economy is at a crossroads. The country faces challenges relating to fiscal consolidation and financial sector stabilization. A stable economy with a clear monetary policy that is well consulted and crafted helps attract foreign direct investment (FDI) and local investment without too much hustle.
A stable economy where property rights are respected and policy is consistent will help stabilize the mining sector, thereby leading to the growth of the sector through attracting the right investment.
4. Currency must be free floating and tradable.
A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in Contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.
A currency’s level has a direct impact on the following aspects of the economy. According to economics online, a
The currency’s level has a direct impact on the following aspects of the economy, Merchandise trade, this refers to a nation’s international trade or its exports and imports. In general terms, a weaker currency will stimulate exports and make imports more expensive, thereby decreasing a nation’s trade deficit (or increasing surplus) over time).
Economic growth;
Capital Flows Foreign capital tends to flow into countries that have strong governments, dynamic economies, and stable currencies, therefore, a nation needs to have a relatively stable currency to Attract investment capital from foreign investors.
Zimbabwe needs to have a relatively stable currency to attract investment capital from foreign investors.
5. Absolute minimal restrictions on lines of communication, especially the internet.
The government of Zimbabwe reportedly lost millions of dollars through delayed Revenue inflows due to the slow processing of imports and exports after the switching off internet services countrywide early this year.
Technological change plays a key role in the process of economic development. With the rise in technology, information has become a very influential and pivotal tool in doing business. Through the internet, business transactions and marketing has become popular.
Through the internet and other lines of communication, Zimbabwe has been marketed and recognized in the world mineral market. Bloggers such as www.miningzimbabwe.com have helped put Zimbabwe on the world mining map and are rated amongst the top mining sites worldwide.
Thus, the government of Zimbabwe should reduce its total control of lines of Communications, for example, shutting down the internet.
6. Improve geoscientific knowledge by revamping and recapitalising the Geological survey Dept
According to Geological survey of Zimbabwe, mining has played an important role in the economic development of this country for generations.
Despite the huge mineral potential, various technical and political reasons have deprived the mining industry of growth. The industry in Zimbabwe has lagged behind in the usage of modern equipment and technology necessary to discover new deposits, especially in virgin areas. For instance, the use of high-resolution geophysics and geochemistry, and manipulation of data in Geographical Information Systems (GIS) that have Contributed immensely to the discovery of mineral deposits in many mineral-rich countries have not been used much in
Zimbabwe.
There are over 3000 known mineral deposits in Zimbabwe. Many of them have been operating as small mines discovered on Ancients workings. Re-evaluation of some of these based on a better understanding of ore deposits and mineralisation suggests that many of the so-called small mines are more prospective in respect of larger deposits than currently perceived. For instance, all the largest gold deposits started as small mines that were expanded on the basis of better understanding of geology and ore deposits. Consequently, the large numbers of small mines in this country provide huge opportunities for exploration for important mineral deposits. Derelict mines are similarly highly potential, and many of them are worth investigating.
7. Partially privatise ZMDC
ZMDC is reportedly dead broke which led to speculations that they cannot afford to explore their numerous claims. Many assertions are constantly being thrown around which are of the view that, ZMDC is sitting on dead assets and the government has no money to give so as to carry out high risk exploration. Therefore, this has led experts into believing that, ZMDC must be listed on the stock exchange to raise money and obviously the government gets diluted to less than the controlling shareholder.
An example of the successes of privatizing is in Zambia, where Zambia’s ZCCM was a dead parastatal with decent
potential projects which then led to its privatisation. Now ZCCM owns shares in working mines that the private sector built up. Therefore, ZMDC is dead and sitting on potential ground, meaning zero value is being derived. Thus, there are valid reasons which support that, ZMDC must be privatised, owning 100% of a non-working asset is useless. According to experts, it is better to own at least 25% of a working asset.
8. Ministry of mines must go on more international road shows with seasoned mining personnel to explain Zim mineral resource potential.
Ideally, the Director of the Geological survey must lead the discussion. According to experts in the mining sector, when it comes to mining issues in Zimbabwe everyone has become an expert, this has led to totally wrong positions on the resources Zimbabwe possesses.
“For mining, everyone in Zimbabwe is an expert. Everyone can tell you how rich Chiyadzwa is and how Zimbabwe has the most resources in the world. It’s because we haven’t said ask the resources people. Totally wrong positions out there to the laymen about Zimbabwe resources. Then people get baffled why no new mines are being opened” said one expert.
According to Forbes Mugumbate, the country’s laws do not compel companies to delineate certain resources before
mining, and as a result, resources at many mineral deposits are not known.
Majority of mines operate at zero reserves or usually only calculate reserves a few months ahead of production. Small-scale producers who dominate the industry do not have the capacity to delineate reserves. However, many mines have been intermittently worked for nearly 100 years on this basis without being exhausted. This suggests that there are substantial mineral reserves at many deposits, most of which have only been sporadically worked.
9. Promote exploration seriously with good tax breaks for companies who put high risk exploration $ into the ground
It is a well-known fact that the mining industry in Zimbabwe is hamstrung by a lack of exploration. There has been a
decline in exploration activities in spite of Zimbabwe being the most unexplored and highly prospective in the world.
Although most of the large and well exposed and richly mineralized districts have been found and exploited, there is still much mineral wealth still to be discovered. No activity adds value to mining than exploration, a prosperous mining industry is a key element in achieving the president of Zimbabwe’s vision.
Exploration could lead to potential new mines and minerals that are yet to be discovered. Zimbabwe has challenges of attracting investment from mineral exploration companies, therefore, the government needs to address the effectiveness of our regulatory regime so we can provide potential investors with a stable investment climate. High
exploration companies should be awarded tax free licences to operate on finding new deposits and should also offer them with loans on operation costs.
According to Forbes Mugumbate, the structure of the mining industry in Zimbabwe is highly skewed. There is a gap between hundreds of small scale mines and a few large mines. There are many small mines with the potential to
develop into medium and large-scale.
10. Digitalise mining rights, title registration and all payments
Amidst reports of corruption, money laundering, externalization and other unscrupulous behavior by mining
Personnel, all transactions which are mining related in Zimbabwe need to be done digitally to avoid corruption and
Improve transparency.
The registration of mining rights and titles should be digitalised to improve administration and avoid double title allocations. There have been reports of disputes emanating from double title allocations digitalisation will eliminate such issues with ease.
There should be an open to public geographical locations, ownership and time validity of mining rights and titles, mining rights and title registration and payment of registration fees should be digitalised for online processing.
This article first appeared in the May 2019 Issue of the Mining Zimbabwe Magazine.