Mining in Zim: Time to use it or lose it
Economic stimulation
Since the withdrawal of colonial rule, Zimbabwe has implemented several projects to simultaneously improve the economic performance of the mining sector, and see its mines and mineral reserves returned to Zimbabweans.
Former president Robert Mugabe introduced a law requiring that at least 51% of each of the country’s platinum mines to be owned by local people, and since the decriminalisation of artisanal mining in 2013, the country’s total gold production jumped from under 15 000kg in 2012 to nearly 25 000kg by 2016.
e government has also implemented other ‘use it or lose it’ programmes, aiming to remove inefficiencies in the mining sector, alongside these attempts to improve access to mineral deposits.
In 2017, more than 1 000 gold mining claims were forfeited in the country’s Matabeleland North province after miners failed to pay an inspection fee of US$100 within six months of starting operations.
Beech noted that, unlike foreign investments which aimed to benefit the investors, initiatives such as these are “to ensure that minerals are extracted, to benefit the state, and all its citizens”.
e existence of these licensing fees may have contributed to the growth of the smallscale mining sector, a more accessible, decentralised approach to mining in Zimbabwe that was making strides towards establishing itself as a financially significant sector.
A 2016 report from PACT found that by 2016, artisanal gold mining was the third-largest contributor to national GDP from the mining sector, responsible for 21% of value, behind just PGM mining (32%) and large-scale gold mining (26%).
Yet a tightening of mining regulations could ultimately limit the productivity of the artisanal mining sector, effectively capping the potential of Zimbabwean companies to mine for resources.
“If the Zimbabwean government implements the ‘use it or lose it’ principle, it is unlikely that the small-scale and artisanal miners would be able to step in, and take over those operations,” Beech said. “ ese operations will require significant investment, which is often not available to the small-scale and artisanal miners.
“Until significant incentives have been implemented by the Zimbabwean government for the small-scale and artisanal miners to regularise their mining activities by making the licencing process an easy process, which is cost effective, and can be implemented without onerous obligations, the small-scale and artisanal mining sector in Zimbabwe is likely to continue in its current form, without regularisation.”
Winners and losers
“Ironically, if the principle ‘use it or lose it’ is strictly applied, the Zimbabwean state-owned mining company may be the biggest loser,” Beech said, “because the operations that fall under the state mining company, have not started operations or carried on operations as they are required to do in terms of Zimbabwe’s mining laws.”
External economic pressures and political changes have also further muddied the country’s mining framework. In 2017, South African magazine Business Day reported that the Zimbabwean economy had halved since 2000, and inflation rose by 176% across the national economy in June 2019 alone, according to the country’s national statistical agency.
Furthermore, the fall of Mugabe’s regime in 2017 led to another round of reforms for the country’s mining sector. In March 2019, the 51% ownership requirement was scrapped, and later in the year, the “use it or lose it” scheme was extended to all of the country’s mines, creating a hybrid system of laws and pressures that aims to encourage the foreign investment and production that characterised the 20th Century, while maintaining the local ownership and responsibility implemented in the 21st.
Beech noted that this hybrid policy “does open up opportunities for other investors, who may have a more risk-tolerant approach to investment”, and this combination of legal frameworks could ultimately benefit some of the larger foreign miners, such as Anglo American.
e company estimates that it has access to 52,5 million tonnes of reserves of platinum group metals in Zimbabwe, but is currently only producing platinum from a single project, the Unki mine. With production estimated to reach around 88 000 ounces in 2019, there is significant scope for improvement as the miner could be forced to begin developing the resource licences it holds.
Yet regardless of which policies are implemented, Zimbabwean companies could stand to lose the most, as a confused regulatory framework will continue to disadvantage local miners, and those with smaller financial reserves.
Beech concluded that: “It is more important, in my view, to address the policy and regulatory certainty, particularly surrounding indigenisation laws, and to develop infrastructure.
“ e more certainty there is regarding policy and regulatory frameworks, the more investment will flow to Zimbabwe, and it is usually far easier to grant new prospecting rights and mining rights, than tampering with existing rights.” — Mining Technology.