Smuggled minerals surpass royalties

THE value of minerals being smuggled out of Zimbabwe far outstrips the royalties that government earns annually from resources, fresh data shows last week, as calls to crackdown on black market trade increased ahead of the 2022 national budget.

In a paper which spells out the Zimbabwe Environmental Law Association (Zela)'s expectation for the upcoming budget, the resources campaigner said the country was receiving only US$90 million in royalties from minerals annually.

This falls far below revenue losses of up to US$100 million being reported every month through smuggling, the paper noted.

For gold alone, reports have indicated that Zimbabwe has been losing about US$1,5 billion a year, a figure said to be one of the biggest in the region.

But the southern African country, which has been affected by years of economic mismanagement and plunder, is currently battling one of its worse economic meltdowns that has affected funding into crucial social service delivery, as well as growth stimulating infrastructure development projects.

Funding being siphoned through black-market trade would be crucial in helping government overcome these shortcomings, the report said, noting that the long-expected commissioning of advanced revenue tracking technologies should be prioritised in the budget.

"Government must take concrete steps to curb gold smuggling, which is currently draining the fiscus," the paper said.

"The mining royalties that the country rakes in from all minerals per year (approximately US$90 million based on the 2021 mid-term budget performance) are far below the revenue that is lost annually due to gold smuggling alone.

"The 2022 national budget should put more resources towards government departments that monitor smuggling of minerals such as diamonds and gold.

"These include the Minerals and Border Control Unit."

Zela said the 2022 national budget should avail adequate resources towards finalisation of the computerised mining cadastre system.

To improve resource mobilisation in the artisanal and small-scale mining sector, Zela said government should consider integrating the cadastre system into the Zimbabwe Revenue Authority's taxpayers' database.

It also said the 2022 budget should strengthen transparency and accountability in the awarding of tax incentives in the mining sector, adding that government should engage the public on tax incentives.

In 2019, government committed to "develop a tax incentive monitoring and evaluation framework to facilitate the management of timed tax expenditures as well as to inform cost-benefit analysis of tax expenditures by the Treasury, on an annual basis, with effect from 1 January 2019.

"Government's efforts to improve public disclosure of the amount that is being forgone through tax expenditure are commendable.

"However, there is a need for the government to engage the public on tax incentives since they have a bearing on domestic resources mobilisation and access to basic services by the citizens," it said.

"It is also important for the national budget to disclose revenue that is forgone through tax expenditures for public and parliamentary scrutiny.

"More importantly, the government must publicly disclose the cost benefit analysis that is being done to ascertain whether the tax expenditures are achieving their intended objectives."

Zela urged government to urgently formalise the artisanal miners sector to create an environment that allows its players to contribute more to the fiscus as well as facilitating their benefits from government programmes.

More than 1,5 million people in Zimbabwe directly depend on the sector, with three million people indirectly benefiting.

Apart from creating employment, the sector also contributes towards tax revenue mobilisation.

"More needs to be done if the artisanal sector is to significantly contribute to domestic resource mobilisation, poverty alleviation and sustainable development," Zela said.

"As part of the formalisation agenda and measures to improve tax compliance, the government must undertake consultations, education and training programmes targeting this sector."

Resources should be channelled towards these programmes, it said.

"More importantly, the overwhelming informality of the artisanal mining sector in Zimbabwe requires comprehensive policy and legislative reforms in the sector.

"Government must quickly develop an artisanal mining sector policy. The legality of the sector must be addressed through the Mines Bill," the resources campaigner said.

While the cadastre system is a move in the right direction, Zela said there was need for Zimbabwe to adopt a long-term mining governance framework to the transparency bottlenecks in the mining sector, including expediently taking the necessary steps to join Extractive Industries Transparency Initiative.