leaking money

Zimbabwe: Losing millions from illicit gold mining trade

By Michelle Chifamba

Posted on December 7, 2020 18:35

Illegal artisanal gold miners work at an open mine after occupying parts of Smithfield farm, owned by the former President Robert Mugabe’s wife Grace Mugabe, in Mazowe
Illegal artisanal gold miners work at an open mine after occupying parts of Smithfield farm, owned by the former President Robert Mugabe’s wife Grace Mugabe, in Mazowe, Zimbabwe, April 5, 2018. REUTERS/Philimon Bulawayo

In Zimbabwe, the majority of the working population can be found in the informal sector. And in mineral-rich areas of the country, people are continuously risking their lives digging underground in search of gold, hoping to make enough money to take them out of poverty.

In Mazowe, 40 km outside the capital Harare, artisanal miners have broadened their search for gold ore as they continue digging the soil underground in some cases to over 50 metres deep.

For the past three years, 34 year-old Jude Kore has had the same routine: digging soil every day in search of the precious mineral.

Together with his four co-workers, Jude tells The Africa Report that to obtain a gram of gold they have to gather five bags of ore and use their traditional processing equipment to separate the gold from the ore.

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“The gold is inside the stone. After processing we have gold buyers who come here to buy. Last week, we got 40 grams of gold and our local buyer paid US$40 per gram.”

Jude shares the income with his co-miners. For some miners, in-order to maximize profits the entire family works at the mine; including the children.

Performance in the gold mining sector

Zimbabwe’s mining sector has a significant role in the development of the country as it brings foreign currency, contributes to government revenue and provides for infrastructure development.

Since 2009, the mining sector has become the fastest growing with both small-scale mining companies, artisanal miners and multinational companies taking part in the gold rush.

However, as a result of illicit financial flows, Zimbabwe has been losing money through gold smuggling into neighbouring South Africa and nearby Dubai.

© The Dubai souk is famous for selling pure gold jewellery at the lowest prices, but partlly because no tax or royalties are paid to the African countries where it is mined.

The recent case of Zimbabwe Miners Federation president Henrietta Rushwaya demonstrates the government’s dealings in promoting illicit financial flows and smuggling of gold outside the country, says Christopher Komberai, a small-scale miner in Shamva. Rushwaya was arrested at the Robert Gabriel Mugabe International Airport on charges of attempting to smuggle 6kg of gold to Dubai.

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Komberai says the situation in the mining industry has been worsening since Mnangagwa came to power because the government’s policies support corruption and the few who benefit are politically connected. 

“The case of Henrietta Rushwaya is a clear revelation of how the Mnangagwa regime has been supporting corruption. She was arrested with 6kg of gold, but the main question is how much has she smuggled without getting caught and how many others have succeeded in smuggling without getting caught?” Komberai tells The Africa Report.

A 2020 report from the Centre for Research and Development in Zimbabwe (CRDZ), reveals that the country has a porous and corrupt aviation security system that is facilitating smuggling at private airstrips, national and international airports.

The report refers to the the Henrietta Rushwaya gold smuggling case as “confirmation that Robert Mugabe Airport has a long history of systematic smuggling of precious minerals involving state security agents, security officers and VVIPs.”

Inside Zimbabwe’s illicit gold mining trade

The Ministry of Finance says it has been losing about $1.8bn of mineral revenues; especially from gold smuggling.

Kazembe Kazembe, the Minister of Home Affairs, said Zimbabwe has been losing some $100m worth of gold every month through international smuggling rings and the country’s porous borders.

The Zimbabwe Debt and Development has reported that unclear policies have caused gold to be smuggled outside the country, with the country losing large amounts of foreign currency.

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Huge volumes of illicit financial outflows remain in the mining industry leading to unrealised social and economic rights for the country’s population, John Maketo, Zimcodd Programme Manager tells The Africa Report.

Maketo adds: “The government has been failing to provide for adequate social and economic rights for its population. There has been a lack of access to health care, water and sanitation, education and social security safety nets.”

System of gold leakages

According to government statistics,  the bulk of the gold is extracted by artisanal and small-scale miners who are responsible for 63% of the recorded production. In most cases, the artisanal miners operate illegally and do not sell the mineral to the state-owned buyer.

A report published by the Zimbabwe Environmental Lawyers Association (ZELA), entitled ‘Illicit Gold Trade and Smuggling-Vulnerabilities exposed by the Rushwaya case‘, outlines how the government is using illegal artisanal miners to promote revenue leakages.

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“The system of gold leakages in Zimbabwe is linked to criminality within the artisanal and small -scale mining sector. Massive gold leakage is facilitated by a well-connected system leveraging on the chaos in the sector and the influence of political actors,” reads the report.

CRDZ reports how the exploitation of gold is being controlled by the ruling party Zanu PF elites and securocrats whose actions have become a source of violence, destroying the environment and contaminating bodies of water with toxic substances.

Zimbabwe’s flawed gold buying scheme

“The government has been opening up for ‘black-market’, illicit gold buying and smuggling to neighbouring South Africa. Zimbabwe is mineral rich, but the government’s policies have contributed [to] the country [losing] foreign currency, because [the] bulk of the gold is being exported outside the country,” Komberai tells The Africa Report.

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Fidelity Printers and Refiners, the government’s main buyer of gold, pays miners $54 per gram while private buyers from neighbouring South Africa pay between $58 and $60.

“The government through Fidelity Printers and Refiners inconveniences gold miners and for that reason small-scale miners have failed to expand. It takes more than two weeks for Fidelity to process our payments which come part of the local currency (45%) and (55%) in USD, adds Komberai.

A Mining Data Online report reveals how Metallon Gold Zimbabwe, one of the country’s biggest mining companies, has been forced to put its mines on care and maintenance because of the “unsustainable costs of running them without proper proceeds from the government”.

The report adds: “Where payments are received, they would amount to a quota of the total owned. Between 2016-2019, Metallon lost $82m.”

Patronage and obsolete regulatory system

Small-scale miners in Zimbabwe say the absence of clear policies with the government are triggers illicit financial flows.

The monopoly of the government as the sole buyer of gold has contributed towards losses and non-performance in the sector.

The government does not have a gold policy framework on exploration, production, beneficiation and marketing and management, notes the ZELA report.

The lack of clarity with regards to the government’s policy direction on accountability of gold, including measures to curb criminality and illicit trade, has been the key driver of IFFs in the gold sector, adds the report.

Zimbabwe Miners Federation, a representative of small-scale miners, says the monopoly of the government as the sole buyer of gold has contributed towards losses and non-performance in the sector.

“Government should not monopolise the buying of gold in the country. The market should be open to allow other stakeholders, [and] bankers to compete. It has been recording losses from the beginning of the year because its payment system is not  favourable to miners and that  [has] resulted in miners opting for the black-market,” says Desmond Mangisi, the ZMF spokesperson.

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