Zimbabwe Environmental Law Association (ZELA) says government’s ZWL$1 Billion allocation for the mining sector is inadequate to stimulate growth, as hyperinflation continues chipping away at the fund.
Analyzing the 2020 Budget Mid Term Review, ZELA said while the current allocation was already inadequate, government’s dithering in disbursement further reduces impact in stimulating growth in the sector.
Zimbabwe’s economy is reliant on the mining sector, signified by an ambitious US$12 billion plan, with the sector the biggest foreign currency earner constituting sixty percent of all national exports.
Under the ZW$ 18 billion package, to cushion impact of Corona virus, ZW$ 1 Billion is set aside for a credit facility incentivizing investment for Large Scale and Small Scale mining and speed up implementation of a computerized cadastre system.
However ZELA questions the delay in disbursement of these funds, meant to cushion the mining sector from impacts of COVID-19 and provide measures to revive production in the sector towards achievement of the US$12 Billion Mining strategy.
“It seems the government was not adequately prepared to roll out this programme in the mining sector as there is no progress to talk about since 1 May, 2020 when it was announced.
“Now that the amounts have depreciated further before their use, one would have expected the government to increase the funding commitments to generate a meaningful impact on reviving production in the mining sector.
“Key raw materials needed for mining production require foreign currency and any delays in the implementation of the policy in targeted areas means that the ZWL$ 1B Billion will not make any major difference as the local currency continues to lose value,” noted ZELA.
ZELA also said outside of generating foreign currency for the country, the mining sector contributes to domestic resource mobilisation through payment of taxes such as royalties.
Leakages in the sector have also compounded effects of the global pandemic, where formal supply chains were disturbed, while the informal market which provide greenbacks has retained its allure to miners said ZELA.
“Government must move with speed to arrest the current productivity slump in the sector (particularly Artisanal and Small Scale) and mitigate the negative impacts, anticipated by the Mid Term Review to shrink the mining sector by at least 4.1%.
“The budget makes an acknowledgment that reduced deliveries reflect increased leakages through smuggling and diversion of gold to the informal market arising from unfavorable foreign currency retention ratios.
“The 2020 first quarter output contribution by ASM fell by 15.22% and LSM fell by 6.96% compared to 2019 first quarter output. Gold deliveries are projected at 27 958 kg for the year 2020, which is lower than the 2019 levels despite the favorable international prices obtained compared to the previous year,” said ZELA.
In its recommendations to government, ZELA said focus should be placed on expediting legal reforms, informed by principles of transparency and accountability in line with the Constitution and by the African Mining Vision (AMV).
“The Government must speed up finalization of the Mines and Mineral Amendment Bill and the mining cadastral system.
“Government should expedite development of a mining fiscal regime that allows the country to generate maximum tax revenue from mining activities and citizens to benefit from both backward and forward mining linkages.
“Government must improve the connection between mining and social development. The government indicated that revenue from the 2% Intermediated Money Transfer Tax (IMTT) will be fenced and channeled towards COVID-19 related migratory expenditures.
“In the same vein, the government should ring-fence royalties towards funding specific development needs in local communities,” said ZELA.
