Your Excellency, in 2016, a case study was carried for the Mines and Mining Development ministry with funding from Governance and Institutional Support Project (GSIP) under the African Development Bank (AfDB). The case study was carried out by the Zimbabwe Economic Policy Analysis and Research Unit (ZeParu), in collaboration with Mines and Mining development ministry to contribute “to the knowledge base for the creation of a conducive environment that fosters artisanal and small-scale mining (ASM) development, encourages the application of best practices for mining, occupational health and safety and promotes environmental protection within the sector.’’
Your Execellency, the overall objective of the case study was to gather new knowledge and hopefully devise policies that could increase the sector’s contribution to mineral output; improve transparency; inculcate a culture of safe and responsible mining; reduce the use of hazardous substances and environmental degradation while fostering development of communities within mining areas.
There has, indeed, been an awakening of the potential of the ASM sector, which cannot only contribute foreign currency generation as has been the experience in Zimbabwe, but also create significant employment-generating activities.
Your Excellency, the mining sector is technically classified into three classes: Large, small-scale and artisanal mining. The sector comprises both legal and illegal operators, mechanised and semi-mechanised mines of varying sizes in terms of output, employment and capitalisation. The official distinction between artisanal miners and small-scale miners in Zimbabwe is based on the scale of operation and degree of mechanisation. The law expects both categories of miners to be registered. However, in reality, small- scale miners are generally registered whereas many artisanal miners operate illegally. Of the three classes, artisanal mining employs by far the most people: 500 000 to 1,5 million.
Artisanal and small-scale miners produce a third of Zimbabwe’s total gold output. For example, in 2019 small-scale miners delivered 17, 478 tonnes, approximately 60% of total production. Gold output was 22 tonnes in 2016, 24,8 tonnes in 2017, peaked in 2018 at 33 tonnes (a ten-year high), then fell to 28 tonnes in 2019, and further declined to 19 tonnes in 2020 due to many reasons. It is estimated that about 50% of gold output mined by artisanal and small-scale miners is lost to smuggling. It is estimated the country loses at least US$100 million, if not more, a month from gold smuggling which works out to US$1,2 billion of lost export proceeds per annum. Others have put the total annual loss to gold smuggling at as much as US$3 billion per annum. Whatever the quantum, it is significant and a huge loss that the country can hardly afford.
Your Excellency, according to the study, Zimbabwe’s ASM sector faces a myriad of challenges that affect productive capacity and compliance with the mining laws and environmental laws. The ASM sector generally relies on unskilled labour for the exploration and exploitation of minerals. Given the inadequate geological knowledge and mine planning skills, many ASM activities are chaotic and environmentally damaging and the workings themselves can be death traps due to poor designs. The ASM sector in Zimbabwe has no financial capacity to mechanise mining operations due to lack of viable business plans and collateral security required to access bank loans. There are also challenges related to occupational health and safety, for example most ASM sites lack protective clothing.
ASM sector issues which need attention include; minerals policy, mining legislation, environmental protection, technical training and upgrade, marketing issues, access to finance, welfare issues and value addition support.
The lack of access to credit by this sector is one of the major impediments to the sector’s growth and sustainability. Many banks consider loans to the ASM sector to be high-risk, which is largely true because the sector generally has no capacity to provide collateral and/or bankable mineral resources estimates. The Reserve Bank of Zimbabwe (RBZ) to date, has been responsive and acted as facilitator to ensure that the ASM sector has access to credit and finance.
Your Excellency, in 2016, RBZ launched the Gold Development Initiative Fund (GDIF) in an effort to capacitate small-scale miners and boost gold production from that segment of producers. At inception, the GDIF, which was being administered by Fidelity Printers and Refineries (FPR), was $20 million and had increased to $150 million by end of 2018. Under the fund, small-scale miners could acquire loans for procurement of machinery from local manufacturers at a 10% interest rate. In addition, funding for exploration and working capital could also be availed.
Lately, the ASM sector will be required to register with the RBZ and this will expedite the gathering of a database of who is mining where. Added to this, it will make it easy for registered miners to access credit and other benefits and should see a decrease in gold output leakages and a commensurate increase in output.
The RBZ has also put in place incentives for registered small-scale gold miners who are banked and can receive 5% in US dollars on deliveries to FPR and a lower royalty fee of 3% is levied on small-scale producers whose output does not exceed 0,5kg per month.
Your Excellency, the contentious issue has always been FPR’s monopoly as the sole authorised gold buyer. The unbundling of FPR in December 2020 is a positive move where the gold refining business will now be separate and owned jointly by the RBZ and gold miners who will have a majority share (60%) in the business. This should mean easy access to the market at good price and prompt settlement for registered miners. Also lately, large-scale gold miners may export anything above their monthly average output directly off-shore.
Your Excellency, issues still outstanding and needing urgent attention include: technical continuous education and training, the provision of health and social insurance cover, decentralisation of markets to help curb illicit dealings by cutting off unnecessary exploitative intermediaries who are the main culprits in smuggling, while at the same time ensuring that miners get good profits for their produce and finally, protecting the environment from mercury pollution, cyanide pollution, acid mine drainage, river siltation, erosion and deforestation, landscape destruction and cultural heritage damage.
It is interesting to note that in the 1990s, Zimbabwe was among the best internationally in terms of innovative technical and financial support to the ASM sector. This can definitely be achieved once again as the ASM sector becomes more organised and is afforded the relevant support.
Zimbabwe has an estimated gold reserve base of 13 million tonnes and only about 600 tonnes have been extracted since independence in 1980, reflecting a significant upside if we get things right. The targeted gold output per annum should really be increased from 30 to 50 or even 100 tonnes.
In conclusion, there should be no doubt, therefore, that the gold sector in Zimbabwe is operating way below its potential and policies to unlock these resources need to be a priority.
There is the need to up the skills, training and educate small-scale miners while equipping them appropriately and ensuring that they operate in a safe environment which values them as indispensable human capital and major players in the economy. The RBZ must continue on its initiatives as facilitator and resolve especially the pricing and payment issues so that we can see a reduction in leakages and a more organised, valued and prosperous ASM sector. The country unquestionably needs that.