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Mukasiri Sibanda's Blog

articles on mineral resource governance

$5 Million Payment to Marange-Zimunya Trust: What We Need To Know

This article was original featured in the Business Weekly

After a false start, for Marange-Zimunya Community Share Ownership Trust (CSOT), can the $5 million payment received from the Zimbabwe Diamond Consolidated (ZCDC) herald a new beginning for local economic and social development hinged on diamond mining activities? This is particularly so, considering that that revenue from Marange has been a toxic issue- the alleged missing $15 billion and dummy $50 million cheque for Marange Zimunya COST. Compellingly, a thorough examination of this latest development is a necessity to enhance better transparency and accountability in the management of mineral to bring into public limelight emerging opportunities and risks to enhance accountability.

By extending $5 million to Marange-Zimunya CSOT, ZCDC follows the footsteps of other large-scale miners especially in the platinum sector like Zimplats and Unki Mine who gave $10 million to CSOTs in their localities. That said, a year before the 2013 harmonised elections, a $50 million dummy check was handed to Marange-Zimunya CSOT which proved to be fool’s gold in the end. Unless, $5million paid to Marange-Zimunya is reflects in the organisation’s bank account, the past has taught us not to count our chicks before they are hatched.

 It is important to state that the softening of indigenisation laws have resulted in platinum and diamond sectors being the only ones to comply with 51% indigenous equity requirement. Ideally, ZCDC, a government owned entity, should have taken lead to cede 10% shares to Marange-Zimunya CSOT.

 As a player and regulator, government should lead by example on commitment to indigenisation. Perhaps this would have been a good sign that government is keen to compel diamond and platinum mining entities to cede 10% shares to CSOTs in their districts. Without shares, Marange-Zimunya CSOT will not be legally entitled to a share of profit generated by ZCDC. In the end, future payments if any to the CSOT will be voluntary and unpredictable.

Clarity is needed if the $5 million payment to Marange-Zimunya CSOT was an advance dividend, a dividend or donation. The fact that ZCDC’s audited financial statements are not publicly available, is a cause of concern. It is difficult to pick if ZCDC paid the $5 million out of its profits and whether the community received a fair share, 10% of ZCDC’s profits.

It is important for Marange-Zimunya CSOT to complement local development plans for Mutare Rural District Council (RDC). This will create synergies and manage the risk of CSOT expenditure being linked with political campaigns. Also, ZCDC should disclose how much local taxes the entity is paying to Mutare RDC to enhance local economic and social development. There is a risk that ZCDC may not be paying a fair share of local taxes to Mutare RDC and at the same time investing in public relations activities by paying Marange-Zimunya CSOT.  

Beyond the $5 million payment made to Marange-Zimunya CSOT, it is important for ZCDC and government to consider allocating claims for alluvial diamond mining. This is important because alluvial diamond mining is no longer economically viable for large scale mining, it makes sense to follow the African Mining Vision aspiration of promoting coexistence between artisanal and small-scale miners and large-scale miners. Zimbabwe can take a leaf from South Africa which has recently allocated mining claims to artisanal miners, the so called “zama zamas” which were operating illegal. If this is done, conflicts between ZCDC and illegal gold miners which are affecting peace in Marange will managed sustainably.

After a false start, for Marange-Zimunya Community Share Ownership Trust (CSOT), can the $5 million payment received from the Zimbabwe Diamond Consolidated (ZCDC) herald a new beginning for local economic and social development hinged on diamond mining activities? This is particularly so, considering that that revenue from Marange has been a toxic issue- the alleged missing $15 billion and dummy $50 million cheque for Marange Zimunya COST. Compellingly, a thorough examination of this latest development is a necessity to enhance better transparency and accountability in the management of mineral to bring into public limelight emerging opportunities and risks to enhance accountability.

By extending $5 million to Marange-Zimunya CSOT, ZCDC follows the footsteps of other large-scale miners especially in the platinum sector like Zimplats and Unki Mine who gave $10 million to CSOTs in their localities. That said, a year before the 2013 harmonised elections, a $50 million dummy check was handed to Marange-Zimunya CSOT which proved to be fool’s gold in the end. Unless, $5million paid to Marange-Zimunya is reflects in the organisation’s bank account, the past has taught us not to count our chicks before they are hatched.

 It is important to state that the softening of indigenisation laws have resulted in platinum and diamond sectors being the only ones to comply with 51% indigenous equity requirement. Ideally, ZCDC, a government owned entity, should have taken lead to cede 10% shares to Marange-Zimunya CSOT.

 As a player and regulator, government should lead by example on commitment to indigenisation. Perhaps this would have been a good sign that government is keen to compel diamond and platinum mining entities to cede 10% shares to CSOTs in their districts. Without shares, Marange-Zimunya CSOT will not be legally entitled to a share of profit generated by ZCDC. In the end, future payments if any to the CSOT will be voluntary and unpredictable.

Clarity is needed if the $5 million payment to Marange-Zimunya CSOT was an advance dividend, a dividend or donation. The fact that ZCDC’s audited financial statements are not publicly available, is a cause of concern. It is difficult to pick if ZCDC paid the $5 million out of its profits and whether the community received a fair share, 10% of ZCDC’s profits.

It is important for Marange-Zimunya CSOT to complement local development plans for Mutare Rural District Council (RDC). This will create synergies and manage the risk of CSOT expenditure being linked with political campaigns. Also, ZCDC should disclose how much local taxes the entity is paying to Mutare RDC to enhance local economic and social development. There is a risk that ZCDC may not be paying a fair share of local taxes to Mutare RDC and at the same time investing in public relations activities by paying Marange-Zimunya CSOT.  

Beyond the $5 million payment made to Marange-Zimunya CSOT, it is important for ZCDC and government to consider allocating claims for alluvial diamond mining. This is important because alluvial diamond mining is no longer economically viable for large scale mining, it makes sense to follow the African Mining Vision aspiration of promoting coexistence between artisanal and small-scale miners and large-scale miners. Zimbabwe can take a leaf from South Africa which has recently allocated mining claims to artisanal miners, the so called “zama zamas” which were operating illegal. If this is done, conflicts between ZCDC and illegal gold miners which are affecting peace in Marange will managed sustainably.

After a false start, for Marange-Zimunya Community Share Ownership Trust (CSOT), can the $5 million payment received from the Zimbabwe Diamond Consolidated (ZCDC) herald a new beginning for local economic and social development hinged on diamond mining activities? This is particularly so, considering that that revenue from Marange has been a toxic issue- the alleged missing $15 billion and dummy $50 million cheque for Marange Zimunya COST. Compellingly, a thorough examination of this latest development is a necessity to enhance better transparency and accountability in the management of mineral to bring into public limelight emerging opportunities and risks to enhance accountability.

By extending $5 million to Marange-Zimunya CSOT, ZCDC follows the footsteps of other large-scale miners especially in the platinum sector like Zimplats and Unki Mine who gave $10 million to CSOTs in their localities. That said, a year before the 2013 harmonised elections, a $50 million dummy check was handed to Marange-Zimunya CSOT which proved to be fool’s gold in the end. Unless, $5million paid to Marange-Zimunya is reflects in the organisation’s bank account, the past has taught us not to count our chicks before they are hatched.

 It is important to state that the softening of indigenisation laws have resulted in platinum and diamond sectors being the only ones to comply with 51% indigenous equity requirement. Ideally, ZCDC, a government owned entity, should have taken lead to cede 10% shares to Marange-Zimunya CSOT.

 As a player and regulator, government should lead by example on commitment to indigenisation. Perhaps this would have been a good sign that government is keen to compel diamond and platinum mining entities to cede 10% shares to CSOTs in their districts. Without shares, Marange-Zimunya CSOT will not be legally entitled to a share of profit generated by ZCDC. In the end, future payments if any to the CSOT will be voluntary and unpredictable.

Clarity is needed if the $5 million payment to Marange-Zimunya CSOT was an advance dividend, a dividend or donation. The fact that ZCDC’s audited financial statements are not publicly available, is a cause of concern. It is difficult to pick if ZCDC paid the $5 million out of its profits and whether the community received a fair share, 10% of ZCDC’s profits.

It is important for Marange-Zimunya CSOT to complement local development plans for Mutare Rural District Council (RDC). This will create synergies and manage the risk of CSOT expenditure being linked with political campaigns. Also, ZCDC should disclose how much local taxes the entity is paying to Mutare RDC to enhance local economic and social development. There is a risk that ZCDC may not be paying a fair share of local taxes to Mutare RDC and at the same time investing in public relations activities by paying Marange-Zimunya CSOT.  

Beyond the $5 million payment made to Marange-Zimunya CSOT, it is important for ZCDC and government to consider allocating claims for alluvial diamond mining. This is important because alluvial diamond mining is no longer economically viable for large scale mining, it makes sense to follow the African Mining Vision aspiration of promoting coexistence between artisanal and small-scale miners and large-scale miners. Zimbabwe can take a leaf from South Africa which has recently allocated mining claims to artisanal miners, the so called “zama zamas” which were operating illegal. If this is done, conflicts between ZCDC and illegal gold miners which are affecting peace in Marange will managed sustainably.

Marange diamond mining impacts are not limited to Marange and Zimunya areas. There is need to ensure that communities in Chimanimani and Buhera, who bear the brunt of mining impacts like pollution of Save and Odzi rivers should be left out on community benefit schemes from ZCDC.

Marange diamond mining impacts are not limited to Marange and Zimunya areas. There is need to ensure that communities in Chimanimani and Buhera, who bear the brunt of mining impacts like pollution of Save and Odzi rivers should be left out on community benefit schemes from ZCDC.

Marange diamond mining impacts are not limited to Marange and Zimunya areas. There is need to ensure that communities in Chimanimani and Buhera, who bear the brunt of mining impacts like pollution of Save and Odzi rivers should be left out on community benefit schemes from ZCDC.

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Mutoko Warms Up To Africa Mining Vision

Mutoko IndabaConcerned that the community in Mutoko is unhinged from the main economic activity in their locality, black granite mining, Mutoko Rural District Council (MRDC) supported by The Civic Forum on Human Development (CFHD), Silveira House and Zimbabwe Environmental Law Association (ZELA) organised a district alternative mining indaba. The indaba was held at Nyamakwere hotel, Mutoko centre from 13 to 15 June 2018.

Participants comprised of mining affected communities, Community Based Organisations (CBOs), Civil Society Organisations (CSOs) traditional chiefs, local government officials, Ministry of Mines, Zimbabwe Revenue Authority and Natural Stones- a mining company. Altogether, 95 people participated at the indaba, 22 women and 73 men. Here are five interesting things to note concerning the indaba.

Africa Mining Vision inspiring Mutoko community

Government is yet to hit top gear on implementation of the Africa Mining Vision (AMV), Mutoko community certainly view domestication of the AMV as a panacea to the resource curse. Realising that Africa should not continue to squander the opportunity to hinge development on her vast mineral wealth, the Union Heads of State and Government adopted the AMV in 2009. AMV envisages transparency, equity and the optimal development of mineral resources to underpin broad-based sustainable growth and socioeconomic development in Africa. Key talking points that enabled Mutoko community to warm up to AMV include the following;

AMV encourages government to acquire knowledge of the mineral wealth potential of the country to create better opportunities to optimally gain from the disposal of mineral rights. Areas known to have high mineral wealth potential should be sold through competitive bidding to choose a bidder who offers optimal development dividend, taxes, development of local supply chains, infrastructure, skills and technological transfer.

Mutoko community was deflated to know that the country’s mining regime uses the First In First Assessed (FIFA) principle to grant mineral rights, stifling space for competitive bidding. To acquire mineral rights based on FIFA principle, an investor pays $200 for a prospecting license, $300 to get a mining title and $100 annually to renew the mining title. An ordinary block of black granite mining covers 25 hectares.

To make Mutoko community relate better to the costs of acquiring black granite mining claims, the costs were converted to livestock-goats and cattle. It costs 6 goats to get a prospecting license, 1 cow to get a mining title and 3 goats, to renew the mining title. Clearly, Mutoko community can afford to own black granite mining titles in their area.

Taking a leaf from the recent government-Zimplats deal on the release of platinum claims, Mutoko community should press government to negotiate the release of black granite claims to Mutoko Community Share Ownership Trust (MCSOT). The trust will negotiate with potential investors through competitive bidding, a process that can create better local and economic development opportunity than the current scenario.

The above is a short to medium solution, ideally, the reform of the Mines and Minerals Act to accommodative competitive bidding for the award of mineral rights in areas with high mineral wealth potential is a necessity.

Mutoko Alternative Mining Indaba Unique and Refreshing

As the Alternative Mining Indaba (AMI) celebrates its 10th anniversary, Mutoko district AMI stands out among several AMI’s achievements. The AMI was created as a response to the regional Mining Indaba, a platform in Cape Town, South Africa, for investors and government officials to discuss investment opportunities and risks in Africa’s mining sector.

Disturbed by the fact that communities affected by mining activities did not have a seat at the table at the Mining Indaba, led by the Nowergian Church Aid, CSOs started the AMI movement in 2009 as an annual event. Zimbabwe started its national AMI in 2012 under the leadership of ZELA with support from Zimbabwe Council of Churches (ZCC) and Zimbabwe Coalition on Debt and Development (ZIMCODD).

In 2013, Zimbabwe scored a first by devolving AMI to provincial and local level. Mutoko local indaba is unique and refreshing in that it is driven by Mutoko RDC through partnership with CSOs. It is Mutoko RDCs that was at the forefront of inviting stakeholders and crafting the agenda, of course through a participatory approach. Hopefully, other resource rich RDCs will be inspired by Mutoko example to spread and strengthen the AMI movement.

Limited Transparency and Accountability of Corporate Social Responsibility Activities

Although mining companies in Zimbabwe are not legally compelled to practice Corporate Social Responsibility (CSR) activities, to gain and maintain a social license to operate, it is desirable for mining companies to contribute to local economic and social development programmes. It is disheartening to note that CSR activities carried out by black granite mining companies are barely transparent and prune to capture by corrupt politicians, government officials and traditional chiefs. One company bragged that it supports national events. For example, the entity donated 1,900 litres of fuel to the recent visit by the President to enable transportation of people from different places. The visit by the President was a ZANU PF campaign rally for 2018 national harmonised elections pencilled on 30 July 2018. This raises the risk of abuse of CSR activities to finance political campaigns. Corporates, therefore, can easily go into bed with politicians to suppress policy reform process that positions mining as a tool for development as envisaged by AMV.

Another development is that black granite mining companies in Mutoko are no longer enjoying the CSR expenditure allowances for mining companies provided under the Income Tax Act. Dr Muvhuro, the human resources director for Natural Stones argued that the changes came with the reclassification of black granite from a mineral to a quarry under the new Finance Act. It is important to know that only Natural Stones is visible on CSR activities, and the other companies such as Ilford, ZIQ, CRG, Quarrying Enterprise and Surewin are barely active.

Stakeholders at Mutoko indaba discussed and agreed that black granite mining companies should come up with a publicly known formula for determining their annual CSR budgets. Further, CSR should feed into the local development plans and targets set by the local authority in consultation with local stakeholders. However, there will be room to deviate from local development plans in case of emergence.

Fiscal Linkages

Section 276 (2) (b) give local authorities powers “to levy rates and taxes and generally to raise sufficient revenue for them to carry out their objects and responsibilities.” The Rural District Council Act gives resource rich local authority the power to collect local taxes from mining activities. In this regard, Mutoko RDC collects local taxes, $1 per tonne of black granite mined. $1 is equivalent to a loaf of bread. In 2017, Mutoko collected $160,000 from black granite mining activities.

Approximately, there are 164,000 people in Mutoko, meaning that mineral income per head amounts to $0.98 per annum. There is no transparency concerning production and marketing of black granite in Mutoko. Mutoko RDC suggested that having a weigh bridge would be beneficial to independently verify production figures. In addition, there is need to engage Minerals Marketing Corporation of Zimbabwe (MMCZ) to understand how the institution to understand black granite revenue, success and challenges concerning black granite marketing.

Also, it was discussed and agreed ZELA should look at the changes in the Finance Act to come up with legal advice on opportunities for Mutoko RDC to get royalties from black granite mining. Notably, before 1994, Mutoko RDC used to get royalties from black granite mining activities which were classified under quarrying helped to construct Mutoko high school, council offices and a commercial building in town.

Environmental concerns

Black granite miners are accused of causing water stress, water sources like streams, wells and boreholes are now drying up easily. Another challenge is dust pollution linked with haulage trucks that are operating in dust roads. Blasting activities are allegedly causing houses and schools to crack. Mining activities are also destroying cultural sites.

Mutoko RDC decried the fact that it has failed to access Environment Impact Assessment (EIA) documents from Environmental Management Agency (EMA) and the mining entities operating in Mutoko. ZELA should take legal action to stop mining companies from operating without EIAs and explore legal opportunities for challenging EIAs which were fraudulently done without proper public consultations.

 

 

 

 

Ministry of Mines Must Step Up On ASM Ease Of Doing Business

Miner Zvish.jpg

Photo by Mukasiri Sibanda

My name is Edson Muzhandu. I come from Mberengwa. When I was 13 years old, I used to go with my father to look for gold in the rivers.

I realised that the gold extraction and processing methods that my father used were poor and not efficient.

l told myself that when l grew up, I want to find a better way of getting considerable gold than the little that my father would get after a day’s work.

So, when i grew up, i moved into artisanal mining and worked as a worker in someone else’s mine, but l was not satisfied by what i would be given after producing a lot.

As a result, i thought of having my own area to mine and i pegged my own claim. That was in 2017 and now i own mining area.

However, the challenge i have is that i do not have a mining certificate because the surveyor from Ministry of Mines is taking too long to assess and issue the certificate. This is my mining story.

Should We Celebrate Govt-Zimplats Deal or Worry?

On 6 June 2018, Zimbabwe Platinum Mines (Zimplats) publicly announced that it has amicable resolved a six-year long dispute with government which was seeking to compulsorily acquire part of its mining claims measuring 27,948 hectares. This dispute was pending in the courts of Zimbabwe.

Consequently, Zimplats agreed to release 23,093 hectares to government “to ensure participation by other investors in the platinum mining industry.”   Zimplats now owns 24,632 hectares with a new special lease valid for the lifetime of the mine. A significant development that warrants public scrutiny into how well the country’s mineral wealth is governed for the benefit of all Zimbabweans.

It is a positive development that this dispute was amicably resolved. But it must be noted that the dispute had been going on for six-long years, and such lengthy period riddled with uncertainty on government’s commitment to property rights and Zimbabwe as an unattractive investment destination. Such disregard for investment agreements also provides scant comfort to existing and prospective investors.

Notably, Zimbabwe is one of the least attractive investment destination according to Fraser Institute’s Policy Perception Index. Interestingly, Zimbabwe’s mineral potential is ranked among the top under the same organisation’s Mineral Potential Index. This partly explains why, despite Zimbabwe’s abundant mineral wealth, the country is struggling to attract much needed investments to realise the sustainable development dividend from its huge mineral wealth endowment.

One could also spin the agreement between Zimplats and government as positive in that the released land creates space for the entrance of new players in the platinum industry. In all mineral sectors, the entrance of new players is largely problematic as most of the land has been taken.

It is noteworthy that the new Minister of Mines, Honourable Chitando publicly stated during the Chamber of Mines AGM held last month that from next year, government will enforce the law on renewal of mining titles. Paying ground rental and mining inspection fees will no longer suffice, but evidence to back capital expenditure will be required. He stressed that this is not a new requirement at all. Perhaps Zimplats was cornered by this development and it had no option but to release the ground. In this regard Chitando’s leadership is coming to bear, a man with strong private mining sector background.

Worryingly, Zimplats got a new mining lease valid for the life span of the mine. Its special mining lease was due to expire in August 2019. Terms and conditions of the new special mining lease have not been disclosed. What we know is that in the previous mining lease, Zimplats had a 2.5% royalty stabilisation agreement with government which undermined the country tax code in which platinum royalties were pegged at 10%.

In 2015, Zimbabwe Revenue Authority (ZIMRA)’s annual revenue performance report revealed that mineral royalty income was in the red at $19,421,653.62. A factor attributed to a royalty refund of $101.55 million. Although the report did not state Zimplats, the refund came after Zimplats had won a court dispute with the tax agency on legality of the 2.5 percent royalty stabilisation agreement with Ministry of Mines.

 Section 315 (2) (c) of the Constitution requires transparency and accountability in the negotiation and performance monitoring of mining contracts. It remains to be answered whether Parliament was involved in this deal? A government that was established against the backdrop of restoring order should be at the forefront of respecting the Constitution.

Now that government is in possession of released ground, what happens next? The privately-owned Zimbabwe Independent on Friday reported that Lucas Pouroulis, whose company Karo Resources, last month signed a $4.2 billion platinum deal with government, has been given the land in the resource rich Great Dyke. 

The African Mining Vision, to which government is a signatory, cautions that known mineral reserves should be disposed through bidding to allow room for government to pick an investor who offers greater development outcomes like infrastructure, skills development, technology transfer and the development of local supply chains in addition to taxes.

The secrecy around the deals being announced currently leaves too much room for corruption. Lessons can be learnt from the acquisition of claims from Anglo American owned Unki Mine by government in 2008 as empowerment credits, which ended up in the hands of speculators. Government got $100 million from CAMEC, which later resold the Bougai and Kironde claims for nearly $1 billion dollars.  

Much as Parliament is preoccupied with the issue of allegedly missing $15 billion diamond revenue from Marange, a lot is going on in the mining sector with mega deals being announced frequently. Parliament should keep its eye on the ball.

Criminalising A Livelihood: A Bittersweet Testimony

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Photo by Mukasiri Sibanda

My name is Big Man (not real name), i was born on 21 June 1985. I was born in a very poor family in Mberengwa district under chief Mataka area. I did my primary education at Chamakudo school and secondary at Funye school. My O level results were very poor.

This could have been the result of poor attendance due to lack of school fees. Mostly,  i was not able to pay school fees on time. I joined artisanal mining in 2004 at C mine area, Mberengwa, where my brother was doing illegal gold panning. I joined him on this activity because by then l was self-sustaining and l had nothing to do except doing this gold panning.

Fortunately, God remembered me and l got some good quantities of gold. We used to do gold panning in the river and gold buyers would come and buy gold from us. By observing that, l envied how the buyers would smartly acquire gold without digging day and night.

I was then inspired to also try gold buying as a livelihood. l started from as little as 5 grams and I would sell it to those buyers  at a small profit. The business started growing slowly and in few months’ time i could buy an average of 50-60 grams.

However, in 2006 there was operation ‘chikorokoza chapera’ (an end to artisanal mining), i was arrested for illegally buying gold. All my money was taken by the police. The matter went to court and it took several months to conclude until April 2007. In that month. that is when Mr T (not real name), a Lawyer intervened. The people that l was arrested with were the buyers whom i was selling gold to, so they were able to pay the lawyer’s fee for him to process our case.

I got released and i was given back my money but by that time, it was heavily affected by inflation to an extent that it could only afford to buy 0,8grams of gold hence, l was broke.

I moved to my rural home and started fishing. I then went back to the mining areas selling fish to the areas where gold panning was taking place. l then started buying gold again. l decided to peg a mine to cover my gold buying in case of arrests.

I took this route because l did not know how and where to get a license for gold buying. l mined at my mine for one year and the mine yielded nothing so l forfeited it but I kept on buying and selling gold.

In the process, l interacted with some registered buyers from Zvishavane who helped me with their photocopied licenses which l would use to buy the gold for almost a year. I would buy gold and give it to the license holders to go and sell it to Fidelity Printers and Refinery (FPF).

In 2016, l was joined to Mr Bond (not real name)’ license and up to now l am using his license to buy gold. Currently, i have three claims of gold and one of chrome, but l am still facing challenges of getting a mine certificate and meeting Environment Management Agency requirements.

Caledonia ESTMA Reports An Eye Opener

By Gwanda Residents Association

Having attended a one-day workshop on community data driven advocacy facilitated by Zimbabwe Environmental Law Association (ZELA) on the 7th of June 218, we noted that our country laws are very limited in terms of enforcing public transparency and accountability of funds generated from our local mineral resources in Gwanda district.

We have noted that we are getting more information on activities at Blanket gold mine through reports generated by its major shareholder Caledonia Limited under Canadian laws-Extractive Sector Transparency Measures Act (ESTMA). We noted that as an example, Blanket Mine paid over $466 322 in 2016 and $138, 762 as rural electrification levies and local taxes respectively.

In this regard, we are left with a task to follow up with Rural Electrification and the local authority to verify how much more is generated from our mineral resources and how much of it was spent within our district.

Under section13 (4) of the Constitution, government is obliged to make sure that a significant amount of our resources is spent within our district.

As community based organisations, it becomes imperative for us to initiate advocacy measures to ensure that our people have access to the information in order to demand accountability on how minerals are exploited for the benefit of all citizens.

We need to urgently approach the authorities to get as much data as possible and disseminate the information to our people to quick make informed decisions on their mineral resources should be managed.

Many thanks to ZELA for the facilitation and looking forward to having further partnerships as we engage in the advocacy to gather the information and guide the community.

Whilst we applaud the Caledonia’s ESTMA reports for bringing transparency to information starved but resource rich Zimbabweans, it is discouraging to note that the 2017 annual report has less information compared to the 2016 report. For instance, fees paid to rural electrification agency are missing.

In terms of development opportunities, $466,000 paid in 2016 can provide access to basic electricity through solar panels to more than 2,330 households at a cost of $200 per household.

Gwanda RDC received 168,888 from Blanket mine in 2016 and income per head amounts to $1.47 given that Gwanda rural has a population of 115,000. Blanket mine generated $69 762 000 in 2017,which means that the local authority got 0.24% as a share of total revenue generated by Blanket Mine. Clearly, revenue sharing mechanism between the national fiscus and subnational fiscus concerning mineral tax revenue hurts local development opportunities.

National Discussion on ASM Developments

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National Discussion on ASM Developments

ASM National Dialogur.JPG

Mega mining deals being announced frequently can be attention grabbing, but Artisanal and Small Scale (ASGM) is strongly in the picture. Developments in the gold sector, where ASM gold production has surpassed large scale gold producers offers a timely reminder to policy makers that ASM sector is an important part of the mining sector. Remarkably, the ASM is pivotal to the empowerment of resource rich communities. Largely, the sector contributes to the resilience of rural economies in the face of erratic agricultural yields caused by increased climate change risks, droughts and floods.

Against this background, the Zimbabwe Environmental Law Association (ZELA) together with the Zimbabwe Coalition on Debt and Development (ZIMCODD) organized a national caucus meeting focusing on key developments in the mining sector, including ASM sector. Held at Crowne Plaza hotel, Harare on Friday, 11 May 2018, the meeting was attended by 56 participants, comprising of Community Based Organisations (CBOs), Civil Society Organisations (CSOs), artisanal and small-scale miners, media and govern institutions.

This article zeroes in on the discussion on developments in the ASM sector which was led by the Zimbabwe Miners Federation (ZMF) CEO, Mr Wellington Takavarasha.  According to Mr Takavarasha, the Zimbabwe Miners Federation (ZMF) represents 30 000 registered Artisanal and Small-Scale Miners (ASMers).  However over 1,5 million artisanal and small-scale miners are operating illegally. Below are key discussion points;

  1. ASM gold production has been growing since 2009.  In 2017 ASM outpaced large scale producers through contributing 53,3% to the total national gold output of nearly 25 tonnes.  This trend has continued in 2018, in the first quarter of the year, ASM sector produced 58,6% of the total gold output.
  2. Criminalization of ASM has been on the decrease.  In the new political dispensation ZMF has managed to have dialogue with the Office of the President and Cabinet (OPC) to stop the sporadic arrests of ASMers.  A positive development, as evidenced by a surge in gold production by ASM. There is need for a shift of mind-set in Zimbabwe, so that ASM is taken as a poverty reduction strategy and a source of livelihood for the people.  ASM should not be arrested for seeking to survive.
  3. Notable, ZANU PF in its 2018 Manifesto promises to recognize artisanal mining.  According the new Finance Act, ASM sector is reserved for indigenous players.  Ominously, the Mines and Mineral Amendment Bill does not recognize artisanal mining. Other countries such as Tanzania have developed policies that formalizes ASM.  
  4. According to the latest Monetary Policy Statement (MPS), $74 million was disbursed to 255 small scale miners in 2017.  This year, $150 million has been earmarked to support gold production in the ASM sector. Key questions that need to be interrogated is whether the loan facility is benefitting the ASMers who are in need.  Secondly, interrogation is needed to understand whether women miners have benefitted from the loan facility. 
  5. A cursory glance shows that the loan facility could have benefitted over 1000 syndicates given that on average, a mining venture requires about $20 000 to $30,000 as jumpstart capital.There is need to promote transparency and accountability in the disbursement of this loan to ensure that it is not abused and reaches the intended beneficiaries.
  6. Gender discrimination has been an inhibiting factor for some women miners. For example, in Inyanga, a traditional leader refused the Minister Muchinguri permission to set up a milling center for women. 
  7. There are many social challenges associated with ASM operations which include: violence through use of machetes, prostitution, early child marriages, degradation of the environment, drug and alcohol abuse.
  8. Youth are struggling to get funding for their operations, because of their unwillingness to organize themselves into syndicates.  Syndicates have a better chance of getting capital. 
  9. Several ASMers have been duped by suppliers who were paid under FPR’s gold mobilization fund because the suppliers are failing to deliver the paid equipment. Therefore, it is important for ASMers to conduct a due diligence to ensure that they work with genuine suppliers.  The FPR does not have the onus to conduct a due diligence on suppliers of equipment and machinery to ASM.
  10. Women miners raised concern that they were lagging in getting access to the loan facility set up by the FPR.  In response, Mr Takavarasha highlighted that there was serious competition for the loan and all applicants needed to be patient, as all applications were considered on merit. 
  11. Part of the gold from ASM is sold on the black market because banks and FPR take a long time to pay miners their money.  The black market pays 100 % in forex for the gold sold but this has many risks.  Firstly, machines used for weighing the gold can be wrongly calibrated to under weigh the gold. Secondly ASMers run the risk of being paid fake USD.
  12. There is need to enact the ‘use it or lose it policy’ in order for big mines to release ground for the benefit of new entrants in mining and for ASM to get access to rich gold deposits.  Currently most of the rich concessions are owned by large mining companies.
  13. To address violence among the ASMers, such as the use of machetes, ZMF has sought the assistance of the police and army in educating and raising awareness on the dangers associated with such practices.  There are still sporadic cases of the use of machetes in places such as Geiger in Kwekwe.
  14. Under the Zimbabwe is Open for Business Mantra, it is important for ASM to be taught how to negotiate and enter into viable contracts.  Otherwise they run the risk of losing their claims from unscrupulous investors. 
  15. There is need to balance the 10% export incentive offered to ASM gold producers with the interest of government to generate revenue and sustainability concerns.  The 10% export incentive should be accessed on condition that miners how proof that they are rehabilitating the environment. 
  16. Some of the policies hindering growth of ASM include burdensome provisions of the Environmental Management Act (EMA) Act.   The thrust is to have EIA provisions simplified to something of a check-list than to include technical terms in a language not easily understood by ASMers.

Talking Points: Marange Diamond Mining Operations Under ZCDC

Conglomerate plant

New conglomerate diamond processing plant under construction: Picture courtesy of Nyaradzo Mutonhori

Introduction

Right from the beginning, the sunny side of Marange’s rich alluvial diamonds was obscured for many Zimbabweans. More so, to communities impacted by diamond mining activities, who have been subjected to counting the costs of mining and hardly counting any benefits.

Weighed down by a plethora of legacy issues- disregard of Free Prior Informed Consent (FPIC), water pollution, and no tangible community benefits from diamond extraction, can Zimbabwe Consolidated Diamond Company (ZCDC) deliver on its vision “to be a world-class diamond producer for the long-term benefit of Zimbabwe.”

With depletion of Marange alluvial diamonds, is there any glimmer of hope for conglomerate diamond mining? Can ZCDC, a government owned entity fair differently from other state-owned enterprise on corporate governance? What measures are being put in place to maximise national benefits from diamond mining? What is at stake for the communities affected by diamond mining activities? Is there a change on transparency and accountability in the management of Marange diamonds? Is military linked Anjin on its way back?

To help to connect the dots, this report is a summary of key developments related to diamond mining in Marange observed by Zimbabwe Environmental Law Association (ZELA) during the EU delegation of Ambassadors visit to Marange on 20 April 2018.

A timeline of key events which discoloured Marange diamonds

To start with, DeBeers’ involvement in seemingly unending diamond exploration activities in Marange is marred by allegations of massive diamond looting. DeBeers though is refuting the allegations. In 2006, there was a chaotic diamond rush which attracted thousands of artisanal miners; led by the army, the infamous “Operation Hakudzokwi” (You will not return), a violent crack on artisanal mining took place in 2008.

After the displacement of artisanal miners, government arranged several joint ventures entities to extract diamonds between 2009 and 2010. The contracting process was opaque. From close to 1 million carats in 2009, diamond production peaked to slightly over 12 million carats in 2012, Zimbabwe becoming the fourth world largest producer of rough diamonds after Russia, DRC and Botswana. Yet, peak diamond production did not commensurately result in increased tax contribution.

In 2015, the former President, Mugabe intimated that Zimbabwe lost $15 billion revenue from Marange. Zimbabwe Consolidated Diamond Company (ZCDC) commenced its operations in 2016 after the closure of all seven companies that were operating in Marange.

About ZCDC

Rob De Pretto, ZCDC’s new chief operating officer who has 32 years of mining experience led the presentation on strategic developments at the entity. Formed in March 2015, ZCDC started its operations a years later in February 2016. Register under the Companies Act, as a private entity, the company is 100% state owned. Reserve Bank of Zimbabwe (RBZ) is funding ZCDC operations through an $80 million support facility. Currently, ZCDC is mining diamonds in Chiadzwa and Chimanimani through its a special grant covering 755,000 hectares.

ZCDC’s vision is to be a world class diamond producer for the benefit of Zimbabwe. Because alluvial diamond mining activities are no longer economically viable, ZCDC has transited from alluvial diamond mining to conglomerate diamond mining. A development that pushes upwards production costs per tonne compared to ZCDC’s predecessors which were extracting alluvial diamonds. ZCDC alleges that the past diamond mining companies never carried out any exploration activities. A lot of drilling is therefore needed to evaluate the diamond resources.

Alluvial diamonds depleted, is there hope for conglomerate diamond mining in Marange

Conglomerate

Previous diamond mining companies did not carry out any meaningful exploration activities. Considering that alluvial diamonds are diminishing, ZCDC is undertaking exploration work on conglomerate diamonds to evaluate diamond resources with view of increase the resource value. ZCDC has expanded exploration work beyond Marange and Chimanimani to include Mwenezi, Chihota, Kezi and Binga. In its 5-year strategic plan, ZCDC aims to produce 10 million carats generating $1 billion foreign currency, contributing $250 million in taxes to government, employing 8,280 workers and paying $20 million to Marange-Zimunya Community Share Ownership Trust (CSOT).

Diamond mining activities

In 2016 and 2017, ZCDC annually produced 961,537 and 1,776,244 carats respectively. However, ZCDC aims to produce of 10 million carats annually by 2022. This year, ZCDC’s target is 3 million carats. Averagely, 10 to 15% of diamonds mined in Chiadzwa are gem quality stones.

The average diamond recovery is rate is 50 carats per 100 tonnes, translating to 0.5 carats per tonne. At one of its sites named RBZ due to its high yield, it is possible at times to recover 300 carats per 100 tonnes, about 3 carats per tonne.

The search is still on for the source of Marange alluvial diamonds in Marange which were a result of erosion by glaciers and rivers thousand years ago. Kimberlite pipes have not been discovered in Marange, but conglomerate diamond mining is quite promising.

All this is a stark warning, without discounting efforts to search for the missing $15 billion in Marange, Parliament and the public must not drop the ball on transparency and accountability issues concerning ongoing operations in Marange.

Getting funding for greenfield exploration. Kimberlite pipes have not been found in Marange. ZCDC is out in the country searching for the source of diamonds that we eroded and weathered by glaciers and rivers. Where these diamonds got eroded we still do not know. Exploration being done in Katete, Ngulue and Mwanezi. We aware that Venetia, one of the biggest diamond mines in SA, Venertia owned by DeBeers is operating 20 km of the border between South Africa and Zimbabwe,

Rough diamond sales: Cleaning, Sorting and valuation

To gain maximum value from diamonds mined in Marange, ZCDC ensures that there is adequate cleaning to remove the oxide skin coating, a process that pushes some diamonds into gems diamond bracket. Most probable, the accounts for one of the reason why diamond mining activities failed to deliver optimal economic, this does not discount the impact of criminal activities like deliberate undervaluation, under declaration and smuggling of gem quality diamonds, high valued stones.

In line with the Africa Mining Vision spirit, Botswana, a mature diamond producer and marketer is assisting Zimbabwe on diamond valuation. Realising that the price of rough diamonds was depressed in 2017, ZCDC took a strategic decision not to dispose its diamonds in that period.

This practice is similar to stock market trends, a shareholder gains when he or she disposes shares when share price is firming than at a time when share price is depressed.

So far, this year, 2 diamond auctions have been held in Harare fetching an average price of $80. Aside from disposing diamonds through auction, ZCDC is also considering the tendering system.

The tendering system can be effective if it is used to adjust rough diamond prices after valuation to prepare an effective auction system, in this case the minimum value sought would be established.

As per legal requirement, 10% of the diamond produced is sold locally to stimulate domestic cutting and polishing industry.

Illegal mining activities

Illegal mining activities are still a challenge because some community members were not relocated and still within diamond mining concessions. As a result, illegal diamond mining activities are a major challenge. To solve this challenge, ZCDC is planning to use drones to monitor illegal mining activities to give real time intelligence to security offers. The drones have night vision equipment. Roughly each drone costs $150,000. 3 competent pilots have been recruited to operate the drones.

ZCDC intends to acquire free hands equipment for diamond sorting. The current diamond sorting procedure is inefficient and creates opportunities for manipulation.

Contribution to Community Development

ZCDC’s employment policy gives preference to locals from Manicaland, hence locals constitute over 50% of ZCDC’s total employees. The entity allocates 10% of its profits to Marange Zimunya Community Share Ownership Trust. Several community development projects have been undertaken by the entity which include borehole installations, vocational training centre, Gandauta secondary school upgrade, free tillage, scholarship programs for students and gemmology centre in Mutare among others.

Environmental Rehabilitation and Mine Closure

Rehabilitation

Rehabilitation activities being undertaken by ZCDC: picture courtesy of Nyaradzo Mutonhori

Encouragingly, ZCDC has started to rehabilitate some area that were mined by previous diamond mining companies. So far, the company has rehabilitated close to 25 hectares. The company claims that is now fully compliant with the requirements of the Environment Management Act. Levels of water pollution, dust pollution and vibrations from blasting activities are being checked on quarterly basis together with the Environmental Management Agency.

Chinese presents at former Anjin diamond mining concession

The Chinese are on the ground at former Anjin’s diamond concession. A fresh fence has been erected around Anjin diamond concession and the air strip has been cleared. ZCDC appears to have no control of Anjin’s concessions. Could it be that the army who lead operation restore legacy are clearing the ground for Anjin’s come back given their 40% stake in the concerned entity. Anjin is one of the companies who are at the heart of squandering Marange diamond wealth. The Auditor General lamented that Anjin failed to produce its audited financial statements and the former Finance Minister, Tendai Biti singled out Anjin for not contributing taxes to government.

Way forward

The quest for better transparency and accountability gave birth to ZCDC. To achieve this, ZCDC must do more to break away from opaqueness associated with Marange diamonds. This entails among others publication of ZCDC’s annual reports on its website; public release of disaggregated data on rough diamonds produced, that is gem, semi-precious and industrial diamonds, disclosure of various taxes paid to various government institutions and disclosure of costs per CSR project.

ZCDC made interesting presentation concerning its contribution to the community development. There is need for Community Based Organisations to undertake social audits to verify if indeed 50% of ZCDC is from the local community. The social audit should also ascertain the value of corporate social investments undertaken by ZCDC to check value for money. Impacted mining communities should pressure ZCDC to transfer 10% of its shareholding to Marange Zimunya Community Share Ownership Trust as well as the disbursement of 10% profit to the community trust.

Since ZCDC alleges that alluvial diamond mining is no longer economically viable, there is need to demarcate areas where artisanal and small-scale miners can make use of diamond resources that are not ideal for large scale mining.

Government must make sure that companies like Anjin associated with squandering of Marange diamond wealth must not resurface to show commitment on fighting rampant corruption and illicit financial flows in the mining sector.

It is noteworthy that officials from Ministry of Mines were not present during the field visit unlike last year in January, the then permanent secretary of Mines, Professor Gudyanga showed signs of baby seating ZCDC during Parliament visit to Marange. Honourable Minister Chitando and his team must cushion ZCDC from political interference because diamonds are a tempting resource for greedy politicians.

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