The recently gazetted mining regulations under statutory instrument 11 of 2012 have instigated constipation. And many miners, mostly the small scale indigenous miners feel the government is misdirected and has abandoned them. They are justified, to some extent. To successfully register an ordinary gold claim measuring 10 hectares, small scale miners would need to part with $500 for the prospecting licence, $20 for the map, $200 for the claim certificate and anything up to $500 for the prospector. The total would be at the minimum, $1,200. For chrome, small scale miners will need to pump at least $2,600 in regulatory fees before registering an ordinary block. Small as the figures may seem, the background of those that get into small scale mining relegates them to a position where they may not be able to venture into mining legally again. Very few new small scale miners will be able to register claims.
By the stroke of a pen, the lives and livelihoods of many small scale miners and their wider communities in Makonde, Mt Darwin, Sanyati, Shamva, Mazoe, Gwanda, among other areas, have drastically changed for the worst.
Not only are the small scale miners going to find the heat unbearable, but the big mining companies as well. The platinum claims application and registration fees have been hiked significantly to $3 million! The diamond sector sees one needing at least $6 million to register claims. A quick scan of Zimbabwe Stock Exchange listed companies' balance sheets reveals that no more than 5 companies (excluding banks) have net cash positions exceeding $6 million. In any case, most corporates are highly geared and cumulative losses since dollarisation in 2009 top $710 million. It is therefore obvious that more than 90% of listed companies on the ZSE cannot raise $6 million in free cash flows and therefore may not participate in the diamond mining even if they had interest to diversify into the same.
Right issues have performed dismally in the past, and local shareholders have no capacity to raise cash to fund their existing businesses. Therefore given the scenario where the new regulations are barriers for even listed companies to take part in alluvial diamond mining in Zimbabwe, the most plausible explanation for those that will undertake and indeed pay the $6 million largely point to cunning indigenous investors that do not mind being fronts and stooges of foreign capital as long as it take them into the lucrative alluvial diamond mining. And life goes on!
The notion that diamond mining is capital intensive is only a myth as far as alluvial diamond mining is concerned. Ordinary people with sticks and shovels could discover alluvial diamonds in Chiadzwa, mine them illegally and make fortunes, of course with little benefit to the wider society of Zimbabweans as a whole! The government can therefore not argue that the hike in fees is to screen investors and afford those with capacity to mine to take part, at least for alluvial diamond mining.
The government has therefore created huge barriers to entry largely across the board in mining and the majority of indigenous people, whose wealth was destroyed by a decade of hyper-inflation, will be at the worst footing to enter into mining. And indeed the whole aspect of indigenisation, according to those feeling left out, becomes a zero sum game. The BEE programme in SA has largely failed in the mining sector as it created a few island billionaires who many believe are indeed fronts and stooges of foreign capital. The indigenisation of the mining sector in Zimbabwe, unfortunately, will get the same tags.
But the government’s overall motive is not at all wrong. The mining sector in Zimbabwe, in particular coal, dolomite, platinum, natural gas and others, are largely in the hands of largely. The nation continues to suffer critical power shortages when many coal concessions have been granted. But again the fact that the exchange control regulations and the restrictive pricing regime of the last decade made it difficult for long-term investors to pump money into large scale projects, especially energy projects, cannot be ignored. Nevertheless it doesn’t take away the fact that the majority of those granted concessions the last few years have not been speedy enough to begin meaningful utilization.
Makonde, for example, is known for good quality gold and most of the mountains in the area have old German gold mines with very deep, dangerous but lucrative shafts that were abandoned around the late 1930’s when German miners responded to the WW2 call up. However most areas around Gambuli extension are in the hands of speculators that pegged huge blocks they are not utilising, denying other serious miners that may be interested in doing meaningful gold mining and contributing to the good of the economy. The annual ground rental fees at the ministry of mines had gotten so low that people did ‘air pegging’, ending up pegging pieces of agricultural lands and dams because the cost was very negligent.
The recent move therefore to hike fees in the mining industry is, to some extent, a step toward the right direction. The government should in fact consider increasing the ground rental fees as these are largely linked to production and would deter investors from being largely speculative by holding on to mining claims they have no capacity to utilise. Had the government not taken the steps to dispossess De-Beers of the Chiyadzwa claims countrywide, up to this day no alluvial diamond mining would be occurring in Manicaland. De-Beers would still be holding onto its EPOs and treasury would not be getting the annual $600 million in budgetary support from ZMDC, the government company that is partnering with private investors in diamond mining.
The annual licence renewal fees for gold miners, be it small scale, at $400 per claim, are not too huge after all to cause massive outcry. A small scale gold miner on 10 hectares and doing mining should honestly afford $400 licence fees per annum, just one third of an ounce or rather 10 grams of gold. Miners doing gold mining and not affording to extract 10 grams of gold per annum to afford them to meet the annual ground rental fees should quit and rather try tobacco farming. Mining, being an extractive industry, is not for the lazy and laid back. Pretenders should therefore leave space for serious miners who have capacity not only to make money for themselves, but create significant employment opportunities and contribute considerable amounts to the fiscus in royalties and corporate tax.
The government stance to put pressure on miners to encourage production should therefore be applauded. Although the government recently hiked royalties on platinum and gold, and has huge interests in diamond mining, all these come to nothing if the overall mining output remains very low. Mining sector in Zimbabwe contributes to about 6% of GDP and 65% of total share of exports. To industrialize and graduate to being a developed country, Zimbabwe needs to harness its mining activities and graduate from most of the hand-to-mouth mining activities scattered around the country. Shamva, Zvishavane, Hwange and Redcliff are all towns that came out of successful mining companies that employed thousands of people and transformed the lives of many more Zimbabwean through direct and indirect linkages to the economy. It is high time therefore that the mining sector is corporatised to set a good foundation for growth and accelerate the status of Zimbabwe to being a developed country.
In general the mining game has changed the world over, with countries such as Guinea, Australia, Zambia, Ghana, Namibia and Zimbabwe all now wanting a bigger share and say in how their resources are exploited. This has come in the form of increasing taxes such as in Australia and Ghana. In Australia, that is expected to rake in an addition $8 billion this year. Others have hiked royalties such as in copper rich Zambia, from 3% to 6% on copper mining, whilst Zimbabwe and Guinea are garnering for shareholding in mines at 51% and 15% respectively. The Zimbabwe government nevertheless needs not be too overzealous to the extent of pushing out indigenous miners and pave way for foreign capital, crooks and mafia in an unjustly way. Although the mining sector earned $4.6 billion in export earnings since 2009 and can do more should many serious players come in, most of the money remains banked off-shore and Zimbabwe continues to suffer liquidity challenges that have slowed economic recovery.
The majority of the policy makers do not understand that the big figures of mining exports do not necessary translate to increase in GDP as the mining sector contributes only a paltry 6% to GDP notwithstanding exporting over $2 billion per annum. A very balanced approach needs to be struck that should see speculators relinquishing their speculative positions to enable serious players to embark on meaningful mining activities whilst at the same time not creating a situation that chases indigenous miners out of mining and paving way for destructive foreign capital made up of crook, thugs and mafia.
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