eBusiness Weekly
Business Writer
GOLD Miners Association of Zimbabwe says the requirement for mineral royalties to be paid partly in kind may promote the resurgence of smuggling of the yellow metal particularly by small-scale miners.
In the past, cases of gold smuggling were rampant in the small-scale mining industry, which accounts for 60 percent of the bullion produced in Zimbabwe before authorities introduced policies to encourage small-scale miners to deliver to the formal system.
Last October, the Government announced a new mining royalties’ system requiring companies mining gold, diamonds, lithium, platinum group metals (PGMs) and any other precious stone or precious or valuable metal specified by the Reserve Bank of Zimbabwe to pay part of their royalties in refined metal rather than cash.
Last month, RBZ announced that firms for specified minerals are now required to pay 50 percent of royalties in kind with effect from October 1, 2022.
In an interview, Gold Miners Association of Zimbabwe president, Irvin Chinyenze, said they were neither consulted by the authorities when the latest policy was being mooted nor apprised on how the framework would be implemented.
“The pronouncement to pay mining royalties partly in kind has been made but on the ground, we haven’t been informed of how this will be carried out from the practical side.
“In as far as some of these policies, we are not consulted and this should not be trial and error, a miner is in business to make profit and the Government needs revenue from the natural resources.
“Small-scale miners contribute significantly to gold production in the country and if we have these kind of policies, we are shooting ourselves in the foot by perpetuating smuggling of the mineral and the US$12 billion mining economy will not be achieved easily,” he said.
In 2019, the Government launched the US$12 billion mining industry by the end of this year anchored on new investments in the sector, reopening of closed mines, and intensifying mineral exploration.
Under the US$12 billion milestone, gold, which is the country’s major foreign currency earner, is expected to contribute US$4 billion.
“With effect from October 1, 2022, miners of gold, diamonds, platinum and lithium and any other precious stone or precious or valuable metal specified by the bank by notice in a statutory instrument, shall be enjoined to pay 50 percent of royalties due to the State in kind, that is, in the form of the mineral concerned,” said the Apex Bank in a notice last month.
The monetary authority said this follows amendments to Finance Act (Chapter 23:04 and the RBZ Act (Chapter 22:15), respectively providing for the collection of 50 percent of royalties in kind — in the form of the mineral concerned, and the Central Bank to maintain, over and above, gold, reserve assets in the form of diamonds, platinum and lithium (and any other precious stone or precious or valuable metal specified by the bank by notice in a statutory instrument) in a form and at a purity or of a quality or of a specified kind.
RBZ said the rationale for the legislative changes is to enable the monetary authority to collect, hold and manage reserve assets for the benefit of the country and thus all in-kind royalties shall be delivered to the Apex Bank.
Prior to RBZ addressing pricing issues by Zimbabwe’s exclusive buyer of the yellow metal, Fidelity Gold and Refiners, Chinyenze said the small-scale miners were hamstrung by uncompetitive prices that were offered by the buyer and ultimately this also increased cases of smuggling.
Zimbabwe’s gold was smuggled to countries like South Africa as well as Dubai in the United Arab Emirates, where prices were relatively lucrative and thus depriving the country of millions of earnings from the yellow metal.
“There is a need to create an optimal environment by the authorities to incentivise the miners to boost production in the sector. RBZ should come up with policies that attract producers to deliver to the formal market,” he said, adding that the small-scale miners despite producing the bulk of Zimbabwe’s gold, they are technically incapacitated because of lack of mining equipment and machinery.
Last year, the country produced 35,3 tonnes of gold from which small-scale mining industry delivered over 25 tonnes while the remainder was by large mining houses.
In a separate interview, the Zimbabwe Miners Federation chief executive officer, Wellington Takavarasha, said the pragmatic side of the new policy framework was not yet in place.
“Nothing much has changed from the previous policy framework, but the Government wants part of the royalties in kind so that authorities are in custody of the actual mineral,” he said.
The RBZ has said the delivery of the in-kind royalties, holding, maintenance and subsequent marketing of the same, shall be subject to and in compliance with applicable and practices and regulatory requirements.
Data from the Zimbabwe Revenue Authority (Zimra) show that in 2021, mineral royalties accounted for 2,8 percent of the country’s tax revenue.
Royalties are a tax on volumes of minerals produced and are due to the owner of mineral rights.
In Zimbabwe, this is the State and has been there since the 1930s when the mineral rights owned by the British South Africa Company were taken over by the State for modest compensation.
