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Zimbabwe: How Politically Connected Elites are Benefiting from the Country’s Gold

Zimbabwe: How Politically Connected Elites are Benefiting from the Country’s Gold

President Emmerson Mnangagwa is targeting revenue of up to $12bn – a vastly ambitious quadrupling – from the mining industry by 2023, but opaque activities by by allies of the ruling elite are a major stumbling block for the government.

Platinum is expected to produce $3bn, while gold exports, one of the country’s biggest foreign-currency earners, would produce $4bn. To achieve this, the mining sector has been growing at an unprecedented rate, with small-scale and artisanal miners taking to many mining areas.

Smuggling and illicit flows in the artisanal mining sector in Zimbabwe are responsible for an estimated 3tn of gold each month, valued at approximately $157m, according to a report, titled Zimbabwe’s Disappearing Gold: The Case of Mazowe and Penhalonga released recently by a civil society organisation, the Centre for Natural Resources Governance.

Gold smuggled to Mozambique through porous borders

Businesspeople, state security personnel, top government officials and youths are using their links to the ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) party to secure mining pits in Penhalonga, a gold-rich village, located about 20km from Zimbabwe’s third-largest city, Mutare.

Although a company called Probadek had only deposited $300,000 with Redwing Mine-owned by Metallon Corporation in Penhalonga for a $3m price tag to take over the mine, Pedzisai ‘Scott’ Sakupwanya – who is linked to Mnangagwa through his company Betterbrands Mining Company – illegally took over 132 mining claims in the area.

Following the Redwing mine’s placement under judicial control to seek an investor in 2018, about 1,000 artisanal miners invaded the area in 2019 after the company had signed an agreement with Prime Royal Mining to extract gold.

It was agreed that the two mining companies would get 30% of the revenue each while artisanal miners would get the remaining 40%.

Even though the small-scale and artisanal miners are supposed to, as required by law, sell their gold to Fidelity Printers and Refinery (FPR), a company owned by the central bank, most of the gold is smuggled to neighbouring Mozambique through the porous borders in Penhalonga and its surrounding areas.

“Political elites are complicit in illegal gold mining, tax evasion and smuggling activities for personal enrichment,” says James Mupfumi, director of Centre for Research and Development (CRD), which is based in Mutare.

There are more than 200 hammer mills and six cyanidation plants in Penhalonga. Artisanal miners who are supposed to process their ore at a gold milling plant at Redwing mine pay often bribes to security forces to smuggle it to illegal millers, according to CRD.

Political elites enriching individual pockets at public’s expenses

Zimbabwe is facing a myriad of economic problems, from high inflation, huge external and internal debts, power shortages, low poor salaries for civil servants due to economic mismanagement and corruption in the Mnangagwa-led government.

Critical sectors such as education and health have been crippled leaving many citizens struggling to access these basic services.

As of July this year, Zimbabwe’s inflation rate stood at 595% per year, way above the official rate of 256% per annum, according to professor Steve Hanke of Johns Hopkins University.

The total value of gold that is smuggled to countries such as South Africa and the United Arab Emirates per year in the artisanal mining sector, which produces about 60% of the country’s gold, would amount to 10% of Zimbabwe’s gross domestic product.

“The bleeding is largely detrimental due to potential tax revenue loses, externalisation of foreign currency from a locally starved market and limited local banking sector deposits,” economist Victor Bhoroma tells The Africa Report.

Stevenson Dhlamini, an economist and a senior lecturer at the National University of Science and Technology in Bulawayo, says illicit financial flows are a huge challenge in Africa and especially in Zimbabwe. “There are individuals who are deemed untouchable because of their political connections, and they exploit resources,” he says.

“This has fuelled inequality and a lower Human Development Index for our country. This is grossly undermining the ability to use domestic resources mobilisation as a tool for development in Zimbabwe which is saddled with outrageous foreign debt,” he adds.

Political elites prospering in other sectors of the economy

Mnangagwa’s allies do not only thrive in the mining sectors but in other areas such as manufacturing, construction, agriculture, transport and energy.

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Campaigners point out that businesspeople such as Tino Machakaire, Billy Rautenbach and Kudakwashe Tagwirei have gotten government contracts without going through tender processes as required by the law.

In the 2018 general elections, Tagwirei bought vehicles for the ruling party.

Tagwirei, who is prospering in the mining sector through companies that are run by other people on paper, has won a number of government deals without going to tender processes, from supplying buses to a state-owned bus company to a $3bn deal to supply farming inputs.

Machakaire, Zimbabwe’s deputy minister for youth, through his logistics company Tinmac Motors, was given a deal by the government to distribute farming inputs as part of the Command Agriculture Programme.

Rautenbach, who is also in coal mining in Hwange, is the sole supplier of ethanol that is used for fuel blending in the country, through his Green Fuel company.

Economist Bhoroma says the impact of this state capture is that public resources do not benefit citizens in the provision of public services such as clean water, power, good roads, affordable accommodation and amenities.

“The solution only comes in reforming our public prosecution and weaning such institutions from political influence,” he says.

The Africa Report

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