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Mnangagwa linked gold dealers mint money through govt incentives

by Staff reporter
18 Jun 2022 at 16:18hrs | Views
GOVERNMENT'S Gold Incentives Scheme (GIS) has come under scrutiny amid indications it is largely benefitting politically connected persons, mainly President Emmerson Mnangagwa's close ally Pedzisayi "Scott" Sakupwanya - a Zanu-PF councillor - and his Better Brands Jewellery (BBJ) company which pocked US$460 million in revenues last year at the expense of artisanal and small-scale miners.

While Sakupwanya is minting money through gold, artisanal and small-scale miners are struggling to survive. They say they are not reaping the rewards of the government's much-hyped gold incentives.

Gold is central to Zimbabwe's economic fortunes and politics. Those who know the sector's ins and outs – its labyrinth of structures and dynamics – say whoever controls that industry runs the country.

It is not just a source of livelihood for thousands, but also a feeding trough for the politically connected and a centre of crony political patronage for Zanu-PF and its shadowy economic networks.

The incentive scheme, which was introduced early last year to boost gold deliveries to Zimbabwe's sole authorised gold buyer, Fidelity Printers and Refiners (FPR), has left artisanal and small-scale operators at the mercy of big gold buyers who are making a killing at their expense.

This comes against reports that Zimbabwe continues to lose US$100 million a month through gold smuggling.

Development experts say if the country was well-run and managed, the abundant gold alone could form the basis of an economic rise, while its valued-added chains of production and cross-chain activities could become a catalyst for progress.

City states like Singapore and other Asian Tigers became economic giants without the natural resources that African countries like Zimbabwe are endowed with. They only had vision, leadership and development plans.

Last year, Zanu-PF councillor Sakupwanya's Better Brands Jewellery pocketed US$460 million after delivering more than seven tonnes of gold to Fidelity, a move that saw him being named the Best Gold Buyer of the Year at the recently held mining industry awards at State House in Harare.

Sakupwanya, who is also chairperson of the National Gold Buyers' Association, an affiliate of the controversial Henrietta Rushwaya-led Zimbabwe Miners' Federation, has close links with Mnangagwa and his children, as well as other politically connected elites.

Rushwaya, who was arrested in October 2020 trying to smuggle 6kg of gold to Dubai, is related to Mnangagwa and is a major dealer in the gold business.

A delivery of 20kg of gold within a period of 30 days is eligible for a 5% incentive, a tonne 7% and one to three tonnes 9%.

According to Reserve Bank of Zimbabwe governor John Mangudya, Fidelity received a total of 29 629.61 tonnes of gold, 18 470 tonnes of which came from small-scale miners.

"A total of 29 629.61kg of gold was delivered to Fidelity Gold Refinery in 2021. Large gold producers delivered 11 159kg, whilst small-scale producers contributed 18 470kg," Mangudya said.

"Small and large gold producers have delivered a total of 29 629,61kg of gold to Fidelity Gold Refinery (FGR) in 2021, a 55,5% increase from the 19 052,65kg delivered in 2020."

The Reserve Bank of Zimbabwe has hailed the GIS introduced by the government for increasing the precious mineral's output and deliveries by 55.5% after recent years of successive decline in production. Small-scale miners also maintained the lead in production ahead of large producers.

However, a survey by The NewsHawks revealed artisanal and small-scale miners, who constitute a bigger percentage of Zimbabwe's current gold deliveries, are receiving between one to 1.5% from the current gold incentives, with some getting nothing at all.

"We just hear that gold buyers are given an extra 5% when they deliver our gold to Fidelity. No one that I know is given that extra money after our gold is sold. We are usually given beer and permission to mine peacefully without hinderances from other mining gangs that control the claims as incentives," Bruce Chimbwanda, an artisanal miner based in Mazowe, said.

In Zimbabwe, the majority of the working population can be found in the informal sector. And in mineral-rich areas of the country, people are continuously risking their lives digging underground in search of gold, hoping to make enough money to take them out of poverty.

However, the reality is different. While the politically connected like Sakupwanya make millions, artisanal and small-scale miners are wallowing in poverty amid violence in the volatile sector.

Said another artisanal miner, Tonderai Mutasa: "As artisanal and small-scale miners, it's our wish to become registered and use state-of-the-art equipment that does not put our lives at risk. But the money we are getting from the gold buyers does not enable us to do so. My colleagues and I get an extra something from the gold buyers ‘who are our bosses' in the literal sense and we rejoice. However, the extras we get are nothing compared to the huge amounts of money that we hear they are getting from Fidelity."

Amid an economic meltdown, a surge of attacks linked to Zimbabwe's growing artisanal mining sector has killed hundreds of poor miners.

Gold Miners' Association of Zimbabwe chief executive Irvin Chinyenze said the GIS is mostly benefitting gold-buying agents, considering that most small-scale miners are not able to single-handedly produce 20kgs of gold per month as per the incentive's requirement.

"The 5% incentive is not in our view for small-scale miners if you consider that it's given for a minimum delivery of 20kgs per month. That threshold is high. So, in essence the major beneficiaries of that are not so much the miners but the buying agents and of course a few who might have that kind of capacity," Chinyenze said.

"The reason why that incentive is there is to try and buttress delivery and through an upward review of the price indirectly in the form of a royalty. If we have a pricing regime that is consistent with what's obtaining on the world market, we will not need any more incentives beyond that".

But Sakupwanya, who has emerged as one of the biggest beneficiaries of the incentive, defended the policy.

"The government has availed incentives that have made us attractive to gold miners who now prefer to sell the gold to us, instead of selling it to smugglers," he said.

Sakupwanya declined to comment on charges that small-scale miners were not benefitting from the scheme as much as they should.

Current policy approaches, including the criminalisation of artisanal gold mining by the Zimbabwean authorities, have failed to address effectively the persistent challenges such as land rights conflict, violence, environmental degradation and smuggling.

Mining experts say if the costs of imperfect regulations are to be mitigated, new approaches are required, including improved regulations and interventions to formalise the sector. It is important, they say, that the conflict-ridden relationship between artisanal and small-scale miners and large-scale commercial miners be transformed into an inclusive stakeholder arrangement framed by mutual interests and co-operation.

Gold is central to Mnangagwa's economic revival plans. In October 2019, Mnangagwa and Mines minister Winston Chitando announced plans to expand the government's gold revenue to US$4 billion per year by 2023, an ambitious fourfold increase in four years.

The government has been saying it has a target of a US$12 billion mining sector economy by 2023. Mining contributes about 2.6% of Zimbabwe's rebased US$25.8 billion economy.

The gold sector does not consist exclusively, or even mostly, of big business.

Artisanal miners – poverty-stricken men and women who toil on their own or in small groups using little or no machinery – and small-scale mining, which involves slightly larger operations with some mechanisation, produce the majority of Zimbabwe's gold.

In 2019, artisanal and small-scale miners combined were responsible for 63% of reported gold production, although it is unclear whether artisanal or small-scale mining is the bigger contributor of the two.

Amid the collapsing economy, an estimated 1.5 million people have turned to artisanal mining as a safety net. This trend has grown in the post-Covid-19 era which has brought compounded hardship amid renewed economic implosion, currency and exchange volatility and inflation.

Source - thenewshawks