MUTARE- The government has been urged to require a mandatory listing of shareholders in the privatization of the national gold refinery as a mechanism to enhance responsible investment and transparency in the gold sector.]
In response to moves by the government to offer a 60% stake in the Fidelity Printers and Refineries (FPR), Zimbabwe Environmental Law Association (ZELA) said due diligence should be followed including public notice of the names of the companies and their ultimate beneficiaries.
The government announced plans to give major shares in the FPR’s gold refinery and marketing arm to large-scale gold producers, a major gold buying agents and small-scale producers through their associations.
In a statement, ZELA noted that in order to improve accountability in the murky gold sector, the government should also consider mandatory listing on the Zimbabwe Stock Exchange (ZSE) or the Victoria Falls Stock Exchange (VFS) for those which will take up equity in FPR.
“The unbundling of FPR must be accompanied by comprehensive due diligence processes on the potential shareholders so that this opportunity to foster good management of gold revenue in line with section 298 of the Constitution is not lost.
“…Government might also consider including a condition that the shareholders should have a clean tax clearance certificate or evidence of a good human rights promotion record as part of its application to acquire shares in FPR.
“This will open a window for citizens to hold the companies to account on mineral revenue transparency since companies will be expected to publicly disclose their Environmental, Social and Governance (ESG) information in line with international best practices,” said ZELA.
In his presentation of the Mid Term Budget Review on the 29th of July 2021, Minister of Finance and Economic Development, Professor Mthuli Ncube revealed that the Government of Zimbabwe is finalizing privatization of the country’s sole gold buyer and refinery to boost compliance.
Minister Mthuli indicated that 10 shareholders have offered to take up shareholding, using a three-year average delivery of gold Fidelity by the Reserve Bank of Zimbabwe (RBZ) to determine its offer to the unnamed shareholders.
ZELA said the due diligence process enhances investment attractiveness to responsible investments and reduce risks revenue loss from investors, with records of tax evasion and ties to illicit gold trade.
It said the move by the Government to unbundle FPR has the potential to transform the gold sector by improving local beneficiation, investments in the gold sector and producers’ compliance with gold trading rules.
The LBMA established the Responsible Gold Guidance for Good Delivery Refiners to combat systematic or widespread abuses of human rights, to avoid contributing to conflict, comply with high standards of anti-money laundering and combating terrorist financing practices.
“Furthermore, by allowing private companies to be part of the gold refinery process, the country stands a good chance to comply with the London Bullion Market Association (LBMA) on responsible sourcing.
“Compliance with OECD requirements on responsible sourcing and LBMA accreditation will ensure that our gold exports fetch the highest return on the international market.
“The unbundling of FPR could release resources needed for the government to comply with the LBMA’s requirements on responsible sourcing if adequate legislation is put in place for the private companies to comply with.
Based on FPR’s gold production and deliveries for the past few years, it is now very easy for the country to re-join the LBMA. The Government should be persuaded to get re-admitted into the LBMA as this will attract international investments and possibly remove the ‘Pariah State tag.’
ZELA also welcomed the new Companies and Other Business Entities Act [Chapter 24:31] which requires companies to keep an up-to-date list of their beneficial owners and periodically update this with the Registrar of Companies when equity changes occur.
ZELA said without such public disclosure through a beneficial registry corruption in the management of mineral revenue and money laundering thrives.
Currently, there are speculations that Freda Rebecca (now under Kuvimba Mining House) is likely to be one of the companies that will be considered to take up equity in FPR since it is one of the biggest gold producing companies in Zimbabwe, said ZELA.
“More importantly, the Government should expedite its steps to adopt and implement international standards such as Extractive Industry Transparency Initiative (EITI) to address the transparency and accountability deficits in the mining sector.
“According to information that has been shared in the media, the Government has a controlling stake (65%) in Kuvimba Mining House. However, this information cannot be verified by the public as there is no public disclosure of the beneficial registry.
“As part of efforts to adopt international best practices on curbing corruption and improve extractive sector transparency, countries such as Nigeria and Zambia, for example, have embraced a public beneficial ownership registry in their laws,” said ZELA.
