How Nations Profit From Zimbabwe’s Blood Gold

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Gulf News

34 tonnes of gold is smuggled out of the nation yearly. Gulf News sniffs out the trail

HARARE: Still filthy from their work in the mines — clothing sodden with sweat and slime — the men regarded us suspiciously as we walked towards the shallow open pits in which they stood knee deep and panned for gold under the blazing sun.

A mountain of pinch bars, shovels and spanners lay scattered nearby.

We spotted a machete too. It’s the weapon of choice for artisanal miners in Mazowe, tucked away along the banks of the picturesque Mazowe dam in the Iron Mask Hills, a 40-minute drive from downtown Harare, the capital and most populous city of Zimbabwe.

For the uninitiated, artisanal and small scale miners (ASMs) are subsistence miners who are not officially employed by a mining company but work independently.

There are over half a million artisanal miners in Zimbabwe supporting up to three million dependents, according to government estimates. Around 84 per cent of these miners are not registered.

Gold is Zimbabwe’s chief export product, accounting for $1.2 billion in annual forex receipts. Around 50 per cent of the country’s gold production of 33 tonnes come from artisanal miners who deliver the yellow metal to sole authorised buyer Fidelity Printers and Refiners (FPR), owned by the Reserve Bank of Zimbabwe.

On the face of it, the arrangement between FPR and ASM looks perfect. But when you scratch beneath the surface, the picture crinkles like cellophane.

Bloody turf wars

Bloody turf wars over mines are common as is gold smuggling. And because the miners operate without policy regulation or government support, there are health, safety and environment issues too.

At least 25 miners died early last year after heavy rains flooded two mines near Kadoma, 150 kilometers southwest of Harare. Countless others die every month because of phthisis – the dreaded incurable occupational disease of the miner caused by silica particles being drawn into their lungs and then solidifying.

And then there are the machete wars. Over a hundred people were murdered between August and October 2019 in the violence prone mining areas of Kadoma and neighbouring districts, according to a report by Zimbabwe Peace Project (ZPP), a local NGO that records and documents breaches of peace in the country.

The Zimbabwe Miners Federation (ZMF) said most of these killings took place in gold rich areas over territorial disputes.

Alarmed by the violence, the government recently announced that carrying a machete around gold mines would be banned and those possessing them would be sentenced to jail for five years under a new law.  Many reckon it’s too little and far too late.

Superficial measures

“These half-baked superficial measures won’t help. The industry is plagued by a slew of problems. What we need is a radical approach,” said a local politician from the Movement for Democratic Change (MDC), Zimbabwe’s largest opposition party.

In a bid to revive the failing economy, the government last year abolished the multiple currency regime which allowed the use of the US dollar and South African rand in daily trading. The move backfired. The introduction of a quasi-currency, known as the RTGS dollar, send inflation soaring high and hit the earnings of artisanal miners.

Unequal terms

On its part Fidelity Printers and Refiners tried to incentivise ASMs by offering them a gold support price starting at $1,368 per ounce. That’s roughly seven per cent more than the daily gold trading price at the London Bullion Market Association.

If the miners thought they had struck a good deal, they were mistaken. As it turns out, they are paid 55 per cent in US dollars and the remaining in worthless RTGS dollars.

Miners find this arrangement untenable. Sure enough, instead of selling gold to Fidelity, as required by law, many are channeling it to informal markets leading to smuggling.

A 2018 report from the United Nations Industrial Development Organization (UNIDO) claims that 50 per cent of artisanal and small-scale mined gold in Zimbabwe is lost to smuggling.

Smuggling network

Our investigations show most of the gold is smuggled to China, India and Middle East through middle men and syndicates operating out of Harare, Mashava, Bindura, Mazowe and Mutare.

“Why shall I sell it to Fidelity? It makes no sense. I may as well give it away for free,” said Runako, a young miner who now sells the metal to a middleman from China. “He gives us a good rate and he pays on time. Once I asked for an advance and he readily obliged. My fellow miners also sell it to him,” he said. Latest statistics show that gold deliveries to Fidelity Printers and Refiners, fell 16.8 per cent in 2019 from 33.2 tonnes to 27 tonnes in the prior year comparative in 2018.

Industry experts say the surreptitious milking of Zimbabwe’s natural resources could wreck the country’s economy, facing its worst crisis in a decade. Amid all this, a new study has claimed that political elites from the ruling Zimbabwe African National Union – Patriotic Front (Zanu PF) are crippling effort to formalise artisanal mining as they are profiting from illicit gold trade. The scathing report by Southern Africa Resource Watch (SARW) said certain politicians are actively financing illegal mining operations to dominate the sector, influence major marketing decisions and ultimately undermine government efforts to formalise the sector.

Zimbabwe President Emmerson Dambudzo Mnangagwa  has also claimed  they lost gold worth US$60 million through a syndicate of businessmen that clandestinely exported the precious metal out of the country.