Presentation by Henrietta Rushwaya, ZMF President during a one and half hour Mining Webinar held on Thursday, 14 May 2020, organised by Bakertilly and Financial Markets Indaba
Capitalisation of the mining sector is a very broad topic but a fundamental one to tackle. Depending on the mineral concerned, a nuanced understanding of disincentives and incentives for capitalisation across the value chain is needed. I will not delve much on this because I must pay a special focus on a marginalised sub sector of mining, artisanal and small-scale mining (ASM). On that note, I want to thank the organisers of this online discussion for acknowledging the importance of ASM by inviting me, the leader of ASM through the Zimbabwe Miners Federation (ZMF), a mother board of all ASM Associations in Zimbabwe. The topic asks us to reflect on capitalisation issues post COVID-19. To move forward, obviously the windshield is essential, equally so, the rear-view mirror. Therefore, we must start by taking stock on lessons learnt from various capitalisation initiatives in ASM, reflecting on challenges, success and progress recorded.
The main talking points revolving on the following issues;
Mining is a capital-intensive business and the same applies for ASM. However, we must be grounded in our understanding that ASM is a front doorway of empowering indigenous people to directly benefit from mining activities through ownership and control unlike large scale mining. After the removal of the indigenisation and economic empowerment requirements for all minerals, except for diamonds and platinum, artisanal mining was designated for indigenous participation. More importantly, the Constitution on National Development, under Section 13 (4) compels the State to put mechanism to ensure locals benefit from resources in their localities – ASM, obviously fulfils this requirement. So, as we seek to open Zimbabwe for business, to attract Foreign Direct Investment in the mining sector, it is critical to ensure that foreigners must not crowd out locals across the whole value chain of ASM – from ownership of mining titles, provision of equipment and consumables, mining, mineral processing and trade.
Among the functions of the Ministry of Mines according to the government website is to promote ASM and indigenisation. All this cannot be feasible outside ASM judging by the directing our government has taken. ASM must be reserved for indigenous people post COVID-19, and foreign investors must not displace but partner with locals in ASM from mining, mineral processing and trade. The agreements must be regulated to ensure that they are not lopsided in favour of foreign nationals. For instance, 60% ownership by locals and 40% by foreigners. Other policy measures are needed to enable the feasibility of such arrangements. These include;
- Riverbed mining titles allocated to ASM because the operations have a quick turn around and low risks compared to other mining activities. This must also be extended to all alluvial mining operations.
- Mineral rights released the implementation of use it or lose it principle must be given first preference to ASM.
- The use it or lose it principle must not be aggressively implemented in ASM and compliance costs must be softened to ensure the bar is not high for locals to participate.
- Foreign investors must not own gold custom milling centres but must partner with locals so that existing local players do not find themselves lockdown from operating after COVID-19 as they cannot compete with well resources foreign players.
- Capitalisation must focus on local manufacturing of equipment, tools and consumables required in ASM instead of sourcing the goods and services outside our borders. For instance, scrap metals disposed by large scale miners can be earmarked to support fabrication of equipment and tools used in ASM like ball mills made of rims from heavy duty vehicles.
A conducive policy, legal and institutional framework is required to support capitalisation of ASM post COVID-19. Before COVID-19, government decimated local capital in ASM by indiscriminately arresting artisanal and small-scale miners (ASMers), confiscating their equipment like jack hammers, generators and compressors among others. This was all done to curb machete gang violence, fine. By the victims of machete gang violence were further victimised by being painted with the same brush with machete gang members. As a result, gold deliveries to ASM plunged.
History repeats itself, doesn’t it. Operation Chikorokoza chapera (an end to artisanal mining) in 2006 was catastrophic, gold deliveries plummeted. And Zimbabwe lost its membership under the London Bullion Market Association (LBMA) for failing to meet the minimum 10 tonnes annual production. It is sad that foreigners participating in ASM were spared but locals were victimised. The Mines and Minerals Act reform must support ASM and differentiate the burden of compliance between large scale an ASM.
Fighting corruption and over regulation of the ASM is critical, of course this is linked to the previous point, but it deserves special attention. The gold mobilisation technical committee is now a rent seeking outfit in ASM as they know that the current compliance burdens are beyond ASM. Rather than resourcing the gold mobilisation committee, focus must be placed on adequately supporting the Ministry of Mines and Mining Development which is under staffed to service the ASM – mining title applications can take up to three years, the back log places an anvil on capitalisation of ASM, lack of a modern title management system leading to multi-claim ownership disputes, technical expertise that the ministry is supposed to offer ASM in areas like geology, metallurgy, SHE, are hardly available. All this can help to support capitalisation of ASM post COVID-19 as the services are beyond reach in ASM.
Gold Development Initiative Facility (GDIF) is another vehicle run by FPR which is already in place to support capitalisation in ASM. However, the facility is not fine-tuned enough to support financial inclusion in the ASM – marginalised groups like women, youth and people living with disabilities. Of course, in September 2018, FPR earmarked US$20 million for women in mining. Only 7 women manged to benefit from this facility as at 31 December 2019. Therefore, post COVID-19, it is important to address barriers for financial inclusion in ASM to unlock finance for marginalised groups of people.
Corporate Social Responsibility (CSR) activities of large-scale mining companies must be fine-tuned to support mechanisation of ASM. Past lesson can be borrowed from Mimosa Mine. In 2015, Mimosa supported miners with equipment worth US$150,000. Our current Minister of Mines, Hon Chitando, then oversaw Mimosa. Why not ride on his powerful influence and experience to ensure ASM growth is supported by large scale miners.
ASM is also supported by local sponsors and they must not be forgotten as they are key players in partnering with mine owners to finance mining operations. Research is needed to understand the role of local sponsors, regulate the sector to ensure finance is not illicit and leveraged against at desperate ASMers.
Fidelity Printers must pay fair gold prices to ASMers to support productivity and growth of ASM. Currency challenges must be resolved. 45% foreign currency retained by FPR for gold deliveries is liquidated at a pegged rate of US$1 = 25 ZWL which a 50% discount to what is obtaining at the parallel market where US$1 = 50 ZWL. Thus, as it stands, FPR is eroding profitability of ASM, in turn, opportunities for plough back of profits are shrunk by government.