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HomeNewsPoverty In The Midst Of Plenty, Losing Revenue Through Illicit Financial Flows

Poverty In The Midst Of Plenty, Losing Revenue Through Illicit Financial Flows

Mineral endowment tragedy’

In the mineral rich community of Mazowe, 40 kilometres north of Harare, artisanal miners have broadened their search for the precious mineral, gold. Clad in worn out work-suits and gumboots and with faces whitewashed by the underground soil, their hardened hands dig deep into the earth.

By Michelle Chifamba 

While these men work the earth to bring out the precious mineral to the surface, they live a life of abject penury. Meanwhile, because the government has failed to legalize artisanal mining they cannot regularize their operations.

For artisanal miners to benefit from their high risk operations they must secure a sponsor. Such sponsors are in most cases politically connected individuals or politicians who have access to the gold market.

“The performance of the mining sector has a significant role in the development of the country as it brings in foreign currency that contributes to infrastructural development,” says Owen Dhliwayo, a civil rights activist. “But, as a result of corruption, maladministration and a patronage system Zimbabwe is at a loss and the majority of the population is struggling. Like many African countries, Zimbabwe is in a development paradox – a projected growth without development as a result of poor governance. The highly taxed citizen is, therefore, severely crippled by poverty, joblessness and impoverishment.”

A mineral rich country endowed with vast resources such as gold, diamonds, platinum, lithium, black-granite and copper, is reeling under debt distress. A 2020 report by Zimcodd records that the government debt has risen from 48 percent of GDP in 2013 to 82 percent in 2017.

Ordinary citizens are struggling and the standards of living have deteriorated for many as corruption and a patronage system thrive. Illicit financial flows proliferate due to poor governance, weak institutions and lack of legal frameworks that support transparency and accountability, reads a Zimbabwe Democracy Institute [ZDI] 2021 Report on Democracy in Zimbabwe.

New Deal! At the dawn of President Mnangagwa’s administration in 2017, the government sought to polish up its image and lure in foreign investment. It came up with a raft of economic development policies, such as the “Zimbabwe is Open for Business” reengagement strategy and the National Development Strategy 1 (2020- 2025) (NDS1) that sought to make Zimbabwe a competitive global economic market.

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With the Vision 2030 agenda National Development Strategy became an economic development blueprint for the industrialization drive to transform the country’s economy to an upper middle-income economy.

The Zimbabwe government projected a growth in the extractive sector, aiming towards a $12 billion dollar economy from the mining industry.

But, Zimbabwe Artisanal Miners Association [ZAMA]; a coalition of artisanal miners says mineral rich communities are at a loss due to various challenges they face. The destruction of their land by mining companies who excavate minerals and leave large craters to the environment.

The Zimbabwe Environment Lawyers Association in its 2021 report says, despite being endowed with diverse mineral resources, the extractive sector is characterized by opacity that is evident in the granting of licences, negotiation of contacts and accounting of mineral revenue.

“As a result the mining sector has failed to fulfil its potential and expectations in contributing towards economic development and improved service delivery. Rather than being a blessing by bringing sustainable economic, social and political development, Zimbabwe’s mining activities have resulted in the ‘natural resource curse,” reads the Zela report.

Widespread corruption, maladministration and revenue leakages resulting in illicit financial flows have affected the development of mineral rich communities the majority of which lack access to clinics and schools. Section 13 (4) of the Zimbabwe Constitution compels the state to put in place mechanisms to ensure that communities benefit from resources in their localities, but Zama president Constance Muchoni says despite artisanal miners contributing more than 60 percent of gold output in the country, they are impoverished and live in penury.

“Artisanal miners [makorokoza] lack access to land rights and mining claims, collateral for financial loans they failed to regularize their operations. Powerful politicians and businesspersons who have access to gold claims and markets prey upon them. Although they are considered as illegal they contribute to gold production in the country. The Mining Minerals Act, 1961 needs to be repealed to promote empowerment for the citizens of this country,” says Muchoni.

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The Minerals Mining Act, 1961 is considered to be not in line with international best practices and not aligned to the Constitution on transparency, accountability and stakeholder orientation.  The Ministry of Mines says the failure to regularize artisanal mining operations and the existence of loopholes within the Act, has resulted in revenue leakages.

The Ministry of Finance in 2021 announced that the government was losing about US$1.8 billion of mineral revenues especially gold to smuggling and externalization. The Ministry Home Affairs revealed that Zimbabwe was losing at least US$100 million worth of gold every month through international smuggling rings through the country’s porous borders.

The Zimbabwe Debt and Development [Zimcodd] has reported that unclear policies have caused gold, diamonds and granite to be smuggled outside the country, causing the country to lose large amounts of foreign currency.

The mining sector in Zimbabwe is an epicenter towards economic growth and development topping an estimated 70 percent of the country’s foreign currency earning, but the absence of enabling acts and legislation on the export of raw materials, Zimbabwe has been losing billions of dollars in potential revenue.

“Zimbabwe is losing a significant amount of revenue collected from the mining sector due to its lack of implementation and alignment of legislative regulations to barn exports of raw materials,” Desmond Mangisi, Zimbabwe Miners Federation spokesperson says. “Despite the government promoting value-addition and beneficiation through the National Development Strategy [NDS-1], the country is losing mineral revenue by exporting unprocessed raw granite from Mutoko that could earn more if it was processed before being exported.”

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