ZHUWAO: Bureaucrats cost Zim billions annually

14 Dec, 2014 - 00:12 0 Views

The Sunday Mail

Is Zimbabwe losing US$2,1 billion annually because of bureaucratic bungling and inertia that constantly ignores the indigenisation and economic empowerment imperatives of government?

Zimbabwe could generate US$2,1 billion every year from just artisanal and small-scale miners (ASMs) in the gold sector without massive FDI.

All that is required is to recognise the potential of our ASMs and to then decriminalise them to facilitate their formalisation through development of a truly Zimbabwean mining code.

Zimbabwe’s mining code is comprised of approximately 25 laws. The legislation and regulations are administered through ten separate ministries.

The cornerstone of legislation guiding mining is the Mines and Minerals Act (Chapter 21:05), which was enacted in 1965 after having been written in 1961.

The legislation neither recognises nor accommodates ASMs.

Until this year, mining was administered via five mining districts in a country with ten political admistration provinces.

What unbelievable administrative and bureaucratic discord!

Are our bureaucrats so incompetent that they cannot have a proper mining code? Do they lack sufficient mental and intellectual capacity to realign our laws and regulations with national aspirations and objectives?

Is US$2,1 billion not sufficient to incentivise such realignment?

I believe that the problem, and consequently the solution, is institutional. I am convinced that the establishment of a dedicated strategic think tank within the ruling party will address such discordant issues.

The contribution of ASMs to the gold sector illustrates and motivates for how implementation of Zim-Asset could be accelerated through establishment of a dedicated strategic think tank at Zanu-PF headquarters.

In the foreword to the Zanu-PF Central Committee Report to the 6th National People’s Congress, President Mugabe called for the urgent establishment of a policy formulation, development and evaluation mechanism which provides focused intellectual input in assisting him, Congress, Conference, the Central Committee and Politburo to assert the supremacy of the party of Government.

This call is emphasised in the resolutions of the recent Congress.

A Zanu-PF strategic think tank would need to review the significance and contribution of the mining sector to Zimbabwe’s economy.

Such a review would focus on the potential of the gold sector as an example. The think tank would need to interrogate the objectives of Zimbabwe’s mining code and its attendant legislative and regulatory framework in tandem with other national policies, foremost of which are indigenisation, empowerment and Zim-Asset.

Artisanal and small-scale

gold mining

To provide relevance to my argument, I illustrate how ASMs can increase gold production to over US$2,1 billion contribution to GDP.

As the basis of the calculations, I have used the fact that the number of ASMs numbered more than one million around 2007 when there was an open gold market. I have also assumed that an artisanal miner produces five grams of gold a month and therefore has an annual production of 60g, which at US$35 per gram comes to US$2 100 annually.

Zimbabwe is known to have rich gold deposits throughout the country. This is why the country was invaded and occupied by the Portuguese and the British in the 17th and 19th centuries, respectively.

In recent years, gold production peaked in 1999 to 27,5 tonnes and was at its lowest in 2008 at 3,5 tonnes, falling below the 10-tonne threshold required to trade on the London Bullion Exchange.

ASMs are subjected to a legislative and regulatory framework that is similar to that imposed on large-scale operators.

For example, the requirements and costs for an environmental impact assessment are similar for a gold mining site that has reserves of US$100 million and one that has reserves of US$50 000.

Regulations include the requirement for a certified and qualified mine manager, which imposes overhead obligations on a small revenue base.

As a result, many ASMs opt to operate illegally.

This has the effect of fuelling leakages and smuggling, and translates to lost Government revenue.

Those that are averse to illegal operations opt out of artisanal and small-scale gold mining altogether.

Complying with at least 25 different pieces of primary and subsidiary legislation, as well as dealing with ten ministries and departments also places a huge administrative burden on ASMs.

Such burdens end up forcing artisanal and small scale miners into informal and unregulated operations. ASMs also become victims of illegal gold barons who provide funding whose conditions are equivalent to slavery.

I will be generous and assume that all these regulations and laws serve necessary and important requirements.

But is there no way in these requirements can be addressed without hampering ASMs’ operations? Could the various Government agencies not work together to harmonise their requirements?

I do not believe our bureaucrats can do this for several reasons.

Firstly, public officials have developed territorial tendencies which are driven by a silo mentality and militate against collaboration.

Secondly, because bureaucrats do not derive their mandates from an electorate, they have no incentive to restructure and realign process in a manner that is responsive to the public.

Thirdly, results-based management saw all bureaucrats signing individual performance contracts and such an exercise would detract from what they consider to be their primary responsibilities.

I would therefore propose that an exercise to redefine the mining code in such a manner as to unlock the value that is inherent in our human and natural resources, as exemplified by our ASMs and gold deposits, should be conducted by a dedicated strategic think tank.

The think tank would provide intellectual input to Zanu-PF organs, systems and structures so that the ruling party can guide Government operations.

Significance of mining

I would like to go beyond the gold sector to buttress my submission by unpacking the significance and contribution of mining to Zimbabwe’s economy.

Mining contributes directly to GDP, and through employment indirectly to national consumption and output. Besides being a source of liquidity, the mining sector has downstream multiplier effects.

Whilst mining’s contribution to GDP is officially pegged at around four percent, some estimates put it at 15 percent in reality.

In the mid to late-1990s, mining contribution was almost half of GDP with formal employment in the large-scale mines peaking at around 65 000, compared to around 45 000 now.

Between 2005 and 2010, there were close to one million people involved in artisanal and small scale mining.

Whilst the level of direct corporate tax is low, mining contributes around 15 percent of PAYE, 37 percent of VAT and close to 20 percent of customs duty.

Mining has been a catalyst for social infrastructure development as can be seen from the development of towns around major operations. These developments have resulted in construction of hospitals and schools.

This means mining is a critical component to not only achieving the results of the Social Services and Poverty Eradication Cluster of Zim-Asset, but also contributes towards realising the deliverables of the Utilities and Infrastructure Cluster as well as the Food Security and Nutrition Cluster.

Decriminalising and formalising operations of ASMs in the gold sector would more than double the 1999 record of 27,5 tonnes.

Formalisation of ASMs would also benefit sectors such as tantalite and chrome mining, which are amenable to operations by artisanal and small-scale miners.

This needs to be understood within the wider context of the fact that Zimbabwe has over 6 000 known mineral deposits and that only sixty percent of the country has been mapped and full potential is still to be realised.

Forty of the 60 minerals found in Zimbabwe are exploitable with ninety percent of the minerals exportable.

Think tank to accelerate

Zim-Asset

Zanu-PF’s dedicated strategic think tank must refine our mining code so that it is aligned to our national empowerment aspirations.

A mining code is a comprehensive document that contains all the major aspects of a country’s mining legislation and regulations in detailed form.

In the case of Zimbabwe, the mining code must include the country’s mining policy within the context of all the other policies of the country, most notable of which is the indigenisation and economic empowerment policy.

The mining code will incorporate aspects of both fiscal and monetary policies, as well environmental and social policies. Government thinking must also be captured within the mining code together with the views of notable stakeholders in civil society and business.

Zimbabwe’s mining code must be informed by historical events which include the nation’s pre-colonial mining prowess. The code must take into consideration the history of the mining sector since the days of the British South Africa Company.

That history includes the policy shift of the BSAC in 1906 from mining to agriculture, the “handing over” of minerals rights from the BSAC to the country in 1923, and the enactment of the Mines and Minerals Act in 1965.

During this long period, there have been several piece-meal adjustments that have resulted in a kaleidoscope of a code.

The nature of the current mining code lends itself to rent-seeking behaviour which manifests itself in parallel illegal processes underpinned by gold barons.

The most critical ingredient of a mining code involves incorporating the empowerment and transformational aspirations of the nation.

These have been captured in the 2013 Zanu-PF manifesto as translated into Zim-Asset.

Zim-Asset’s mission is to “create an enabling environment” with a vision for “an empowered society and a growing economy”. The mining code must ensure Zim-Asset’s mission and vision are realised.

The development of a mining code needs to go beyond addressing the transient interests and concerns of just one sector.

The mining code needs to address the real world requirements of our environment and not be informed by imported concepts such as the World Economic Forum ease of doing business indicators.

These indicators are for foreigners who seek to exploit our resources without care about us.

As indicated, the mining code must be informed by our history. Such historical and cultural considerations are a luxury that most bureaucrats do not have time for given the demands on their time. The development of the strategic direction must, therefore, come from the ruling party via a dedicated strategic think tank.

In this way, the party will be able to give Government direction that is well considered, thoroughly interrogated and in keeping with the nation’s empowerment, development and transformation aspirations.

Zim-Asset. Mina lawe silo msebenzi. Iwe neni tine basa.

 

Honourable Patrick Zhuwao is Chair of Zhuwao Institute, an economics, development and research think tank focused on integrating socio-political dimensions into business and economic decision-making, particularly strategic planning. Zhuwao is the holder of a BSc (Honours) in Computer Systems Engineering and an MBA in Information Technology Management (City University, London). He also holds BSc (Honours) and MSc degrees in Economics (University of Zimbabwe), as well as a Master of Management (with distinction) degree in Public and Development Management (University of the Witwatersrand, Johannesburg). Reach him at [email protected] and [email protected]

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