By Mukasiri Sibanda
In 2019, the Zimbabwe government announced a plan to grow the mining sector’s annual earnings to US$12 billion by 2023, which would be a 344% spike from US$2.7 billion earned in 2017.
Gold, platinum and diamonds are earmarked to fuel this growth, contributing respectively US$4 billion, US$3 billion and US$1 billion to the US$12 billion target. If well harnessed, the US$12 billion target for mining earnings can be a propeller for socio-economic development post-COVID-19.
Evidently, COVID-19 overstretched the already poor public service delivery, increasing poverty levels and inequalities. For instance, the rich could afford e-learning, while the poor where quarantined from access to education.
With this background, the 9th edition of the Zimbabwe Alternative Mining Indaba (ZAMI) was fittingly themed; “Towards an inclusive and equitable US$12 billion mining industry anchored on sustainable mineral revenue management.” The ZAMI was held in Bulawayo from 30 September to 2 October 2020.
Over the years, ZAMI has grown into a formidable multi-stakeholder engagement platform that places communities right at the heart of the agenda of how mining can be tilted to fight poverty and inequality. Rightly so, the Constitution, under section 13 subsection 4, compels the State to put mechanisms in place to ensure that communities benefit from resources in their localities.
I spoke at the event as the board chairperson of one of the convening organisations, the Zimbabwe Coalition on Debt and Development (ZIMCODD).
Mining must improve living standards
The target of US$12 billion is about foreign currency generation, a macro-economic indicator whose impact is minimal on uplifting the standards of living of majority people living in poverty in areas where the minerals are extracted.
Therefore, in line with the Africa Mining Vision (AMV), government must clearly harness mining for mobilisation of domestic resources to finance the delivery of essential services – health, education, water and sanitation. As such, a clear target for tax revenue generation is fundamental to ensure the anticipated mining sector growth relates to the development aspirations of communities and citizens.
If government is not transparent on national debt, some of which has been securitised against gold and platinum future earnings, the US$12 billion target might be a pie in the sky. Citizens are in the dark on how much has already been gobbled up in advance through debt. Probably, the real earnings with be three quarters (US$9 billion) or half (US$6 billion), with the reminder ring-fenced for debt payment.
Lessons from agriculture must apply to the mining sector. In a good season, a bumper harvest is felt by communities. Whereas when the mineral prices spike, as currently is the case with gold, palladium, rhodium and nickel, there are no bumper tax revenues recorded from the mining sector.
“Give us this day our daily bread” that’s what the Lord’s Prayer says. Citizens cannot wait for 2023; they must benefit today from the bumper revenue recorded by platinum and gold miners in Zimbabwe.
Open mining: We need transparency
This is why government must improve transparency and accountability in the mining sector, for existing contracts and those that are in the pipeline as required by the Constitution, Section 315 (2) (c).
Citizens must be able to scrutinise the fiscal terms and conditions, to understand how well the mining sector is used to scaffold domestic resource mobilisation agenda.
Government must publicly disclose the tax revenue forgone through tax incentives, and undertake a cost benefit analysis to weed out harmful tax incentives. Such a commitment was made in the 2019 national budget statement. Implementation, though, remains a big challenge.
The challenge posed by tax incentives is real; the export incentives given to the mining sector at one point virtually obliterated revenue from mining royalties, the only predictable revenue stream from mining.
Counting the benefits, ignoring communities
The insidious virus of corruption and illicit financial flows that weaken government’s fiscal capabilities must be dealt with. Government must practice social distancing on investments that are associated with tax havens that encourage multi-national corporates to shift profits to lower or no tax jurisdictions.
Significant investments in the mining sector are increasingly channelled through tax havens, and this is quite problematic.
When it comes to mining, there is a danger of counting the benefits and forgetting about environmental, social and cultural costs. Pollution, land degradation, and involuntary displacements can leave communities worse off than before if they. Hence, this US$12 billion target can be a mirage if these challenges are no addressed.
Artisanal and small scale mining must be decriminalised and supported with access to productive mining claims and financial inclusion. A genuine fight against corruption and pervasive violence is needed. With more than one million direct beneficiaries, artisanal mining has grown to be an important source of job creation, income generation and a stimulant for community enterprise development.