Overview of Zimbabwe's Mineral Resources Endowment

According to the Ministry of Mines, for ease of administration, Zimbabwe is divided into five Mining Districts: Harare, Bulawayo, Gweru, Masvingo and Kadoma; with two satellite offices in Mutare and Gwanda” (MMMD 2011: 7). There are also two parastatals: MMCZ and ZMDC; and two learning institutions: the Institute of Mining Research and Zimbabwe School of Mines (ibid: 10).

How many kinds of minerals in Zimbabwe?

“Zimbabwe has huge and highly diversified mineral resource base dominated by two prominent geological features, namely the famous Great Dyke and the ancient Greenstone Belts, also known as the Gold Belts” (Ministry of Mines and Mining Development, 2012). The Great Dyke stretches North-South for about 550km (approx 350 miles) and contains “some of the world’s largest high grade chromite resource base” (ibid). All mineral rights are vested in the State, hence any potential investor has to enter into a Joint Venture agreement with the State designated mining company, the Zimbabwe Minerals Development Company (or by mine by Special Mining Lease issued/granted by the President/Government).

Figure 1: Geological Map of Zimbabwe with Great Dyke

Source: Ministry of Mines and Mining Development (Geological Survey)

Mining contributes a significant proportion of Zimbabwe’s, up to 62.5% between 2009 and 2013 (http://www.africaneconomicoutlook.org/.../Zimbabwe_GB_2015.pdf). The sector contributed about 20% to the national GDP in 2010, the largest for a single sector……. (Ministry of Mines and Mining Development 2011: 6).

The International Monetary Fund considers Zimbabwe as a country among those with the highest per capita mineral indices in the world. The country has an extensive occurrence of both common and rare minerals, estimated at about 138 varieties. However, not much geological surveying has actually been conducted with the country largely relying on exploratory data which comes from mining companies on the ground and pre independence colonial geological maps. Of note is that of the 138 minerals varieties in Zimbabwe, most are semi precious but a good number, about 60 types, are very valuable with consistent commercial mining having been undertaken for over 40 mineral varieties. Zimbabwe is thus a good area for mineral resources, both the metal and non metal types. There is no national ranking for all minerals due to lack of geological exploratory data, however the country features prominently as having significant quantities of very precious metals and stones. The global ranking for individual minerals by various institutions recognizes that Zimbabwe has the world’s second largest for platinum group metals (PGM) after South Africa, the world’s second largest chromium/chrome deposits and about 30% of the global deposits of diamonds (estimated).

By and large Zimbabwe is a gold rich country with the metal mineral being mined in all major 

provinces of the country. Accurate figures are not available but on arrival of European traders in 1890, it was estimated that about 700 tonnes of gold had been mined using rudimentary mining methods. This mineral endowment led to the country being colonized largely for its mineral potential by the British South Africa Company led by Cecil John Rhodes, who later gave the country its colonial name of Rhodesia.

More recently, the country has become famous for its Chiyadzwa diamond find, touted the largest diamond find in a century by major diamantaires. Zimbabwe is estimated to hold up to 30% of the world’s diamond reserves, the largest singular occurrence of alluvial diamonds in the world. This has been mined by the government in partnership with several private sector players. There is also an un-quantified occurrence of coal bed methane (CBM) in Zimbabwe’s South-Western Matabeleland North Province in Lupane. The country is yet to commission an exploratory study to ascertain the exact quantities of mineral occurrence, hence most of the data used currently is outdated. The country has great mining potential in exploration/prospectivity and extractive mining. Further opportunities abound in minerals value addition and beneficiation as the country has a well educated population and the government has adopted a re-industrialization programme premised on local beneficiation. 

Zimbabwe is a mineral rich country with an established regulatory framework and adequate enabling infrastructure in roads, air, rail, energy and telecommunications. The IMF notes that Zimbabwe has the highest minerals per capita endowment.

Table 1:  Major Minerals mined in Zimbabwe

Mineral Type	Occurrence	Quantity/Quantum/Quality	Areas of Occurrence
Gold	90% is on Greenstone Belts, Proterozoic Piriwiri Rocks	Among world’s largest, 4000 recorded gold deposits	Midlands, Limpopo Mobile Belt, North-West parts of the country
Diamonds	Alluvial, Kimberlitic	Approx 25-30% of global production	Chiyadzwa, River Ranche, Murowa, Chimanimani
Coal		Approx 12 billion tonnes in over 29 localities	Hwange, mid Zambezi basin, Sengwa/Gokwe, Mkwasine/Chiredzi, Tuli/Beitbridge
Platinum Group of Metals	Great Dyke	2.8 billion tones (4g/t4e)	Main Sulphide Zone and Lower Sulphide Zone on the Great Dyke
Chrome	Great Dyke, Greenstone Belts (ultramafic rocks)	10 billion tones on Great Dyke, (80% of the world’s metarllugical quality chromite)	Shurugwi, Mashava, Belingwe, Limpopo Mobile Belt
Nickel	Great Dyke, Greenstone Beelts, Igneous complexes.	Komatiite and mafic intrusion hosted deposits, laterite nickel deposits. 30 deposits discovered so far	Great Dyke
Copper	Mangodi Basin (stretches for 150 km), Umkondo Basin (south-eastern parts of the country), Greenstone Belts	70 known deposits	Mangodi and Umkondo Basins
Iron Ore	Ironstone formations in Greenstone Belts	30 billion tones of reserves	Buchwa, Ripple Creek, Mwanesi/west of Chivhu, Nyuni/near Masvingo, Manyoka, Mongula/Limpopo Mobile Belt
Uranium	Zambezi Valley	7.4% U3O8 combined with 12.8% V2O5, after drilling 450,000t ore averaging 0.7%U3O8 and 1.4%V2O5. Could be larger because exploration was done in the 1980s when global prices were falling.	Kanyemba, Zambezi Valley
Pegmatite Minerals	Edges of Greenstones, and in metamorphic belts	Source of the following minerals: tantalite, tin & wolframite, beryl, mica, feldspar. Gemstones: emerald, aquamarine, chrysoberyl, alexandrite and euclase.	Ubiquitous in several geological environments
Dimension Stones	Mutoko Black Granite	Granites, gneisses, mgmatites, gabbro-norites, dolerite, marbles & quartzites	Black Granite is ubiquitous in the North-Eastern part of the country

Source: Ministry of Mines and Mining Development (2012)

NB: Zimbabwe has a similar geological environment as Canada

“The Zimbabwean government’s main objectives as regards the mining sector include raising capacity in mineral production, continuous exploration, beneficiation and value addition of minerals, as well as retainership of skilled professional manpower” (Ministry of Mines and Mining Development 2011). To this end, the government has recently committed itself to reviewing the mining sector framework and increase of value addition and beneficiation initiatives in gold, platinum, nickel, copper, coal, coke, diamonds, and other nonferrous ores and concentrates (ibid).

"Much is expected from those with much"

Beneficiation of minerals in-country remains an attractive prospect for developing countries. What is necessary is the critical mass of local entrepreneurs taking it upon themselves to formulate workable configurations of "what works, at what scale, how, when and why?" Perhaps it is more telling that there are more scholars who are against African countries conducting local minerals beneficiation and rather discouraging, coaxing and disparaging (bordering on academic/intellectual coercion) the prospects for more local beneficiation. For me personally, what is missing from these discourses (discouraging local minerals beneficiation in producer countries) is the voice of an African scholar whose views are not rooted in the Western intellectual methods. The time may have come for Africans to either locally beneficiate minerals or choose not to mine or export them. This makes sense for future generations who may have the requisite ideas and aptitudes to make it work. It is just not enough to take a Western scholars word for it just because "they say so!" Further, admittedly beneficiation is bringing change to some African countries, Botswana as a case in point. South Africa should lead the way in this matter, for to "those  to whom much is given, much is expected."

The following words are instructive: ‘Somewhere here upon the earth, men must come together, think something, do something.’ Alan Paton

https://www.mineweb.com/articles-by-type/independent-viewpoint/adding-to-the-national-value-is-beneficiation-the-answer/

Demystifying Zimbabwe's Mining Sector Indigenisation Policy - "A focus on the 51/49 Policy Part 2"

My primary motivation for developing this page is to increase the knowledge of ordinary people in the rich mineral endowment of their country and hence be well equipped to fully participate in the mining sector. Zimbabwe has only recently legislated some of the most liberal mining sector investment regimes in the world, with entry barriers being removed significantly for the ordinary man and woman. Through the country's famed indigenisation and economic empowerment policy thrust, the government has introduced various initiatives to improve locals participation into the mining sector. 

Initiatives such as the 51/49 ownership structure in the minerals mining sector goes a long way to opening up more participation by the general public in typically capital intensive industries such as mining. This principle dictates (by way of a law/legal statute) that any and all prospective investors into Zimbabwe's minerals mining sector must partner with locals, who are anticipated to hold the majority shareholding at a minimum threshold of 51% local ownership and 49% foreign ownership. What this simply means is that locals are expected to hold no less than 51% of the total share capital of any foreign sponsored mining venture. Therefore, foreign partners can be introduced with a MAXIMUM ownership of up to 49% of the company's total shares. These provisions are timely for the mining sector if the country is to avoid what the Economic Commission for Africa and the African Mining Vision refer to as "holes in the ground."

Further, initiatives such as the Joint Ventures Act now mean that any foreign company wishing to invest in the Zimbabwean mining sector can meaningfully partner with the government in a form of "Public-Private-Partnership" with the government's mega mining sector investment and minerals development company, the Zimbabwe Minerals Development Corporation (ZMDC).

On the other hand, the Sovereign Wealth Fund aims to ensure inter-generational equity for the citizens of the country and the future generations while also inculcating a savings culture. This provides a useful source of capital which can be invested (by loan) for infrastructural development in the country thereby also helping in improving the condition of the economic enablers for the economy. Innovative approaches can be used to hypothecate these captures savings for developmental goals and aims.

Review of Mines and Minerals Act - outstanding since 2007

  

Mineral of the Week - Blurb

I developed the mineral of the week concept while teaching undergraduate public policy students at the University of Zimbabwe's Department of Political and administrative Studies. This department lies within the university's Faculty of Social Studies and has produced some of Zimbabwe's great minds in the fields of political science and public administration. Most of these have gone on to become prominent politicians (even attaining public office as Ministers and Members of Parliament). However, most find employment in the civil service or the numerous non-governmental organisations and other civil society organisations. Still others have found a home in the private sector as both employers and employees. Meanwhile there are those who have chosen an academic career and dedicated their lives to research, teaching and academic work at various institutions of higher learning around the world. Zimbabwean academics can be found in countries such as the United States of America, the United Kingdom and even is Asian countries such as China in as many disciplines as there are available to teach on. However, there was still an inadequate scholarship on mineral sector developments despite the mining sector being a major contributor to the country's Gross Domestic Product (GDP), ahead of other sectors such as agriculture. Further, Zimbabwe's natural resources and mineral endowment boggles the mind as to why such a rich sector has remained underdeveloped over the years. So much has been written about agriculture while so little has been done for the mining sector.

Teaching minerals of the week was aimed at increasing awareness of the Zimbabwean minerals sector. Most students did not have an in-depth awareness (sometimes even totally ignorant) of this crucially important policy sector, mainly because of the historically secretive and enclave nature of mining sector activities. This could be (partially) attributed to the fact that most minerals sector and mining developments were spearheaded by private sector corporations which would not typically publicise the lucrative mining sector to other potential competitor investors. In simple terms, it would not make sense for a private sector company making huge profits in a relatively secret industry to invite competitors to the table. Industries such as the diamond, platinum and gold mining sectors attest to this fact. 

This  was further compounded by the shortage of staffs within the government with the requisite competency to conduct mining sector (awareness and advocacy) research which could be used to encourage more local participation in the sector. Most of the personnel in the (then/former) mining and energy ministry of the time were typically technical staffs with expertise and experience only on the technical and engineering aspects of mining (surveying, metallurgy, geology etc)  but little aptitude for socio-economic and developmental expertise (advocacy, local capacity building etc). Even the very logic of combining the mining policy sector to the energy sector was skewed against the full development of the potentially lucrative minerals mining sector. The other potential causes of this lack of awareness were the unbalanced political economy of the post-independence state of Zimbabwe, an (extended/long drawn) over-emphasis on celebrating the nascent political independence without progressing towards imperative and indispensable socio-economic transformation.

This blog is premised on the need to increase more of the latter (advocacy for socio-economic transformation) without necessarily ignoring the former (technocratic natural resources exploration, mining and development), as both must act in a complimentary fashion. This blog will therefore review one mineral found and mined in Zimbabwe (every week), in terms of its key attributes and potential for transforming the economy of the country and improving livelihoods of the locals.

Zim4Minerals - Page Motivation

The primary motivation for this blog is for the purpose of increasing mineral knowledge awareness to the general public in Zimbabwe. It also serves as a social commentary on minerals related news. Ideally, the site will be the 'go-to-place' for information, opinion and news on natural resources, minerals sector governance and mining issues. Any contributions, comments, critiques, additions and revisions (academic or otherwise) to this end are most welcome .

Demystifying Zimbabwe's Mining Sector Indigenisation Legislation: A focus on the 51/49 principle (part 1)

The Zimbabwean mining sector has much potential for transforming its economy and livelihoods of its citizens. However, those with vested interests have always found a way to demonise any and everything coming out of the country to further their own selfish interests. This piece seeks to present an alternative view on the extant mining sector policy domain.

The concept of indigenisation has been a topical one, more so in the case of Zimbabwe where a law now provides for  limitations of foreign ownership across the various sectors of the economy. While many people choose to argue that indigenisation is not a feasible economic policy for Zimbabwe, others are simply "biting the bullet" and diving in head long and investing large sums of money into the Zimbabwean mining sector with huge attendant benefits.

The unique case of Chinese companies is a case in point here. Several Chinese companies have invested varying sums of money in both the agricultural and mining industry in Zimbabwe. Some have also invested heavily in the energy sector, the case of the multi-million  Kariba South Hydro-Electric Power Station expansion quickly comes to mind here. However, the most interesting investment have been in the mining sector where large returns can be made within a period varying between 2-5 years.

Diamond mining in the Marange (Chiyadzwa) Area has brought so many benefits, so that even various institutional investors from China and the government have sought to invest profitably.  

These investments have not only been in the precious minerals sector alone, as other companies are also now making inroads into the metallurgical sector with numerous prospectors eyeing the lucrative precious metals industry. Zimbabwe is gold and platinum mining country with the country having the worlds second largest reserves of platinum, after South Africa. Gold on the other hand has been mined from Zimbabwe since time immemorial, even before European colonialists arrived. In fact, gold was among the largest export and trade minerals of choice during the times of the Munhumutapa Empire, responsible for trade with merchants from far off continents and countries in Asia, Europe and the Middle East.

The Chinese investors also have invested in the chrome mining sector. Zimbabwe is a country of many greats as it has the worlds largest reserves of prime quality steel making chrome, potentially over 80%.

On the other hand, Russian investors have also begun making inroads with the only barrier being language as a gap still exists. With China, a Confucius has been setup at the country's largest institution of higher learning University of Zimbabwe. However, be that as it may, an initial US$3 billion injection into a new mine is testament to the confidence the Russians have in the potential of the Zimbabwean platinum mining industry.

An investigation into the efficacy of diamond beneficiation as a fiscal resource mobilisation strategy: the case of Zimbabwe

Introduction

It is estimated that while Zimbabwe can produce up to twenty-five per cent of the world’s supply in diamonds (Chininga Report 2013) it has not made much by way of foreign currency earnings. According to Mark von Boschel (2010) , a Belgian diamond industry expert of the Antwerp World Diamond Trade Centre, Zimbabwe has the largest known diamond reserves in the world at present, estimated at US$800billion judging from the current diamond foot-print (von Bonschel , Sunday Times,  08/08/2010). A diamond footprint is a pattern deduced from the quality and quantity of diamond production allowing estimations of future production to be made. If Zimbabwe adopts diamond beneficiation, the country stands to earn over US$8 billion annually and create 200,000 jobs (CNRG 2013; Mbanje 2013). The statistics point to a 20% potential contribution to nominal GDP as of 2010, which is significant for one mineral alone. (http://www.chamberofmineszimbabwe.com).

Although there are currently numerous revenue streams from the Zimbabwean diamond mining sector, not much value has been derived to the benefit of government and the local economy. This is principally because the sector’s taxation system is inadequate leading to discrepancies in the value of reported remittances to Treasury (Chininga Report 2013: 10). These revenue streams include royalties, resource depletion fees, levies, licencing fees, pay-as-you-earn, corporate taxes, income taxes, and profit taxes, diamond export tariffs, Value Added Tax (VAT), profits and dividends.

Furthermore, despite the boom in mineral prices and corporate profits from 2002-2007, very little has been earned by countries with minerals (ECA 2011: 92).  Diamonds are exported in their cheap raw form and in some instances re-imported as expensive finished products (Grynberg, 2013). This has contributed significantly to the Zimbabwe’s own trade deficit growing from US$2.5 billion in 2012, to US$4.2 billion in November 2013 and to the current projections of US$3.5 billion for 2014 (2013 National Budget Statement, 2012: 241, The Herald , 10 January 2014). This is an untenable situation given that the Zimbabwean Government currently faces an intense liquidity crisis compounded by a big public debt overhang and a poor social services rollout. Further, manufacturing has also continued lagging behind at 13% of exports in 2014 (Zimbabwe National Budget 2014). The IMF in its Natural Resources Per Capita Index, concedes that Zimbabwe has the world’s best minerals per capita indices. Going forward, Zimbabwe is projected to produce an estimated stable supply in excess of a firm assured 12 million carats of rough diamonds per year until 2023 (Bain and Company 2013: 57). Conservatively this was 8 per cent of total global rough volumes and just 4 per cent of value in 2013 this being production from the Chiadzwa area alone (DeBeers 2014: 42). However, very little direct fiscal flows to government coffers have been realized thus far (KPCS 2012, Chininga Report 2013).

Statement of the problem

Despite minerals contributing 16% of Zimbabwe’s +/- US$10 billion Gross Domestic Product and 52% of the country’s US$2,4 billion export earnings, the minerals sector has continued to perform dismally in its contribution to the fiscus. Whereas Zimbabwe is estimated to produce about 25% of the global supply of rough diamonds by volume, diamonds alone contribute just about 1% to the GDP and between 20 - 30% of the total export earnings. Therefore, the country has not managed to derive much benefit from this resource endowment. Meanwhile, the government continues to face apparently insurmountable liquidity challenges and is struggling to meet most of its obligations. Zimbabwe has been exporting its diamond in the rough form. This has meant government has not realized the full value from the export of its diamond production.

However, no comprehensive study has yet been done to assess the potential contribution that the diamond beneficiation process can deliver to governmental fiscal revenues. Unless more studies of this nature are done, the country may continue to lose out on the full value of its minerals until they are depleted. This study presents an attempt to bridge this gap by analyzing the potential of local diamond beneficiation to Zimbabwe’s revenue contributions. It draws lessons from countries that have similar resources and have experienced similar beneficiation challenges. All in all, the study seeks to examine the legal and institutional frameworks for diamond beneficiation in Zimbabwe; explore beneficiation practice in other countries; demonstrate the effects of diamond beneficiation to the mining fiscal regime; and recommend an appropriate diamond beneficiation model to enhance the performance of the mining fiscal regime.

Conceptual, Theoretical and Analytical Frameworks

Diamond Beneficiation/Value Addition (BVA)

The South African Department of Mineral Resources (DMR) (http://www.dmr.gov.za/beneficiation-ecnomics.html), considers the term beneficiation to be interchangeable with value added processing. The DMR (ibid) defines beneficiation as entailing “the transformation of a mineral or a combination of minerals (produced by mining and extraction processes) to a higher value product, which can either be consumed locally or exported.” For DeBeers (2014: 81) beneficiation is the “creation of activities beyond mining the natural resources in producing countries.” This means diamond sorting, valuing, selling and manufacturing. For the Zimbabwe Congress of Trade Unions (ZCTU 2011: 84) beneficiation refers to the process of adding value so as to increase the quality and value of a saleable product. According to Bwititi (The Sunday Mail,  Extra Analysis, 8 June 2014) “beneficiation entails the value addition of minerals by processing them to attain higher returns.”

Therefore beneficiation refers to any subsequent processing undertaken on a mineral or primary product post extraction. It is the process of further manipulating the minerals innate properties in new innovative ways into useful finished products that can be commercially sold for a pecuniary consideration. Diamond beneficiation thus refers to the successive cleaning, polishing and cutting of the mineral until it is valuably fashioned in various ways including the manufacture of diamond industrial tools, diamond ornaments and diamond jewellery.

History/Origins of Beneficiation

Early records indicate that mining began in Africa about 20,000 to 40,000 years ago (Kuhn 1987, Jourdan 1995, AMV/ECA 2009). As early as the 6^th Century, the indigenous Bantu speaking people occupying the Southern African region, (present day Southern African Development Community, SADC), worked iron ore, gold and copper through smelting (Kuhn 1987, Jourdan 1995, ibid). In the central parts of Africa, it is evident from archeological data that mining and beneficiation of iron and gold ores was already taking place even before the arrival of Arab and Indian merchants (Kuhn 1987). Hence the notion of minerals beneficiation is as old as the earliest human civilizations in Africa. The figure below depicts the stages of diamond beneficiation from mine extraction all the way to retail, and the value transformations at each stage:

Problems with over regulation

It is generally assumed that a few publicly owned companies have consistently failed to declare either profit or dividend. However, the reasons for this failure to declare dividend are complex, many and varied.  It has also been noted that the multiplicity of compulsory statutory payments, charges and levies on operators by the regulatory institutions depletes their finances and are viewed as hindrance to profit maximization. (ZMDC Annual Reports for 2011, 2012).

The Problem of Diamond Revenue Leakages

It is common knowledge that that most large diamond mining companies in Zimbabwe are managed by expatriates earning fairly good expatriate salaries and managements fees. DeBeers (2014) assert that the greatest threat to government revenue generation is in exorbitant management fees charged by some of these expatriates. This leaves the government sharing with the joint venture (JV) partner company a highly depleted profit pool (ibid). Further, overpricing imports, equipment and services may eat away at revenues effectively externalizing profits. Organized international syndicates specializing in tax evasion/avoidance, under invoicing, transfer pricing or blatant smuggling prejudice the State of significant revenues. Concerted attention to the mining fiscal regime will help to alleviate these challenges and minimize losses in the process. These Illicit Financial Flows pose a very serious threat to government revenue. However, while these present significant hurdles, the greatest threat lies in the export of un-beneficiated minerals to foreign countries which in turn get the full benefit from the mineral by simply conducting beneficiation and value addition.

Challenges to be expected when introducing Beneficiation in Zimbabwe

Survey respondents, although cautious, anticipated challenges in beneficiation to include: skills shortages (62.5%), corruption (48%), technology (45.8%), multi-national company (MNC) domination (40%), poor management of revenues (37.5%), poor workmanship (31.8%) and anti-competitive behaviour (30.4%). These low indices for challenges indicate that respondents were optimistic that beneficiation will lead to more benefits than costs accruing to the country. Consistent with the above,  experience from personal encounters indicates that the big challenges faced by the diamond sector in Zimbabwe are: lack of appropriate technology, poor investment levels, uncertainty in policy on indigenization, low Foreign Direct Inflows (FDI), lack of skills for diamond cutting, polishing, marketing and jewellery and poor accountability and transparency indicators. The negative effect of the restrictions facing certain State owned companies like ZMDC and specification of certain key individuals were a significant hindrance to the sale of Zimbabwean diamonds before the country acquired Kimberley Process Certification (KPC) in late 2009.

Other challenges faced by the industry include the punitive and high cost of diamond cutting & polishing licenses (US$100,000.00 per year as set by Statutory Instrument 157 of 2014, US$500.00 export fee regardless of quantity exported), lack of proper skills and knowledge about the true value of the diamond, its processing and subsequent marketing, and the unjustifiable favouritism of foreigners who may not be subjected to the same requirements as locals. Although the US$100,000.00 permit for diamond cutting and polishing has since been replaced with a US$20,000/10 year permit (Source) it still quite high for local processors.

Creating Fiscal Space for the Zimbabwean Government

It is now generally accepted that the huge public sector salary bill poses a huge drain on the fiscus. This obesity extends to the civil service which is currently estimated to constitute a complement of just above half a million members. There is a need to urgently rationalize the civil service so as to create fiscal space for government. This rationalization exercise should also extend to inefficient or non-performing State enterprises. This is consistent with Heller’s fiscal space diamond conception where reprioritization of expenditures should be married with increased mobilization of domestic resources, minimizing consumptive borrowing and reduction in the over reliance on development assistance to fund government programmes.

Global Diamond Industry Value Sharing Ratios

Documentary evidence shows that while diamond producing companies globally shared only US$18 billion from the sale of rough diamonds in 2013, those countries which engaged in both diamond jewellery manufacturing and retail sales shared a windfall of over US$50 billion.

This same trend was observed for 2014 and is expected to persist in the industry. While possession of the diamond mineral and producing the actual rough diamonds counts for a lot, it does not come close in terms of earnings potential compared to manufacturing value added jewellery. According to the Baines and Company Reports (2011 & 2013), DeBeers (2014) and McKinsey & Company (2014) the two most valuable stages which produce the greatest value along the diamond value chain are the jewellery manufacturing and retail sales segments. However, they are also very capital intensive (Bain & Company 2013: 6; DeBeers 2014). The challenge for Zimbabwe is that the value of its jewellery industry is currently unknown, leaving room for under declaration of production, worsening uncertainty for policy level planning.

Diamond classification

There are many factors to consider when evaluating the value of a diamond. While some diamonds are extracted from the mine are clearly gem quality, others require basic cleaning (by boiling in acid under pressure) to remove the tough outer coating of brown dirt. Most of Zimbabwe’s Diamonds are considered industrial and thus sold at very low prices. The Country may have been prejudiced greatly in the past by selling its diamonds without cleaning and polishing and this can be done cheaply by local middle men. That way, the country can get most of the true value of its diamonds.

Anticipated benefits from beneficiation in Zimbabwe

Respondents reported anticipated benefits from diamond beneficiation that include: employment creation (88%); higher retained local value (84%); improved livelihoods (84%); infrastructural development (82.6%); increased government revenue (78.5%); and industrialization (72%). Respondents were not very optimistic about improvements in transparency (65.2%), accountability (52.1%) or economic diversification (66.7%).

Proposed ways of Increasing the Contribution of Diamonds to the Fiscus through Beneficiation

This section seeks to recommend an appropriate model for Zimbabwe to obtain optimal revenues from its diamonds. It highlights the challenges anticipated and the opportunities available for exploitation to improve diamond mining fiscal regime. The recommended model is a modification of the Belgian, Botswana and South African experiences. The majority of respondents indicated that government must neither reduce nor remove the current tax levels (64% and 62% respectively), and 52% actually advocated for an increase in taxes. Alternatively, the government can introduce new tax measures (60%). However, almost half believe the country should ban export of rough diamonds (48%). Interviews and documentary search however indicate this might be counterintuitive. To achieve the objective of recommendations to enhance the fiscal contributions of diamond, the SPSS Factor Analysis was used and it extracted the most important variables and issues to focus on in the beneficiation discourse. To recommend appropriate strategies for beneficiation, factor analysis determined that the principal determinants for beneficiation include only four components out of the total 16 accounting for a total variance of 84%. Only components with an Eigen Value of one (1) or greater were extracted. The Scree Plot below illustrates these results, showing the distribution of the extracted components indicating the cut-off level for all components with an Eigen Value of greater than one (1).

Figure 10: Five components had an Eigen Value of more than 1 and were thus extracted 

Source: Principal Component Factor Analysis of Field data with IBM-SPSS 20.0

The key is such that component one is the most important, while component four is the least important.

Explaining the Principal Factors for Beneficiation

The Extracted Principal Component Matrix illustrates the variables which constitute each component basing on a loading factor of 0.80. The matrix indicates the composition of each component extracted based on how each variable is correlated with other variables. Basing on a Loading Factor (cut-off point) of 0.80, the principal factors extracted in component one (1) were Technology (0.959), impact on livelihoods (0.908), skills (0.956), workmanship (0.925), anti-competitive behaviour of companies (0.895) and improved transparency (0.824). Component two (2) was composed of only two variables: government revenue (0.924) and industrialization (0.945). The greater the loading factor, the greater the impact of the variable in terms of the impact on value addition and beneficiation. Those variables in component one (1) are considered to have the greatest impact. Elements in component two (2) are of lesser impact than those in one (1), while subsequent components (3, 4 & 5) are of even lesser importance and were ignored. Technology was found to have the greatest impact followed by skills. These findings were consistent with evidence emerging from interviews carried out in the study.

Conclusions

Realities of the Zimbabwean diamond/mining industry

The Zimbabwean minerals management sector is excessively fragmented with numerous institutions and pieces of legislation all having an effect/impact on the diamond mining sector. There is a need to enact a comprehensive Diamond Act which combines all relevant legislation to do with the diamond mineral in one piece of legislation. This creates certainty for policy level planning and implementation. At the same time, government must also finalize the Minerals Development Policy and the Mines and Minerals Act.

Mining Sector Policy Communities and Paradigms

For Zimbabwe, mining is still an enclave industry that is largely capital intensive, foreign owned, and mostly extractive and dependent on trading in raw mineral resources. This is notwithstanding that Zimbabwe has made concerted efforts to rectify this anomaly through various pieces of legislation, imposing tariffs and adopting Joint Venture models through the concept of Public-Private-Partnership (PPPs). It is important to note  that all governments seek to maximize fiscal revenue hence they impose resource rents on minerals exploitation. They are usually less concerned about when this revenue is earned. Conversely, political pressures compel governments to collect this revenue sooner rather than later (ICMM and the Commonwealth Secretariat 2009: 8). This has been observed in Zimbabwe where the government is financially hamstrung and is always eagerly awaiting for revenue that comes from diamond sales. All this revenue is immediately may be used to finance recurrent expenditures at the expense of reinvesting it into beneficiation processes. The key observation here is that for developing countries that are overly reliant on mineral revenues, the objective of maximizing revenue over the long run is not practical due to the need to meet immediate expenditure demands and this then  denies  the government opportunity to have accrual of benefits from minerals.

Beneficiation as Industrialization

For Zimbabwe, minerals beneficiation and value addition is of paramount importance as it resonates directly with the re-industrialization discourse. To the extent that beneficiation is defined as the setting up of new factories, side stream and downstream activities it is well in line with the Zimbabwe’s strategy of re-industrialization in ZIMASSET. In this light,  it can thus be seen that the beneficiation discourse is not exclusive to the mining and extractive industries sector alone but extends to other sectors where commodities need further processing beyond the raw state.

Recommendations

The following specific recommendations are made for diamond beneficiation to succeed in Zimbabwe: government must develop incentives for FDI which assure win-win investments; invest in infrastructure that can then act as an enabler for industrialization; conduct skills development programmes; adopt and adapt appropriate technologies; strengthen indigenization and empowerment frameworks to provide real tangible deliverables for the common man on the street; and the need to embark on more research into minerals beneficiation that can be done locally to both explore its feasibility and build a credible knowledge base.

Private Sector Initiatives

The private sector cannot simply wait for the government to do everything; there must be initiative from entrepreneurs forging partnerships with both local and foreign financiers and investing time and money to make diamond beneficiation a success. Government is recognized as an enabler, creating the conditions necessary for proper functioning of economic activity. Government cannot and indeed must not be seen as the only aggressive player in the minerals beneficiation discourse, private sector organisations (banks, companies, academia, civil society organisations, schools, researchers, politicians and individuals) must all take their place.

Legislative Improvements

To resolve the problem of multiplicity of legislation and institutions involved in managing diamond revenues, government must formulate an integrated legislative framework by finalizing the Minerals Development Policy; enacting a new Mines and Minerals Act; revamping indigenization and economic empowerment legislation so as to create certainty in the policy and simplify and unify all the legal frameworks for diamond management under a single Diamond Act responsible for all diamond issues.

Institutional Improvements

Institutional interventions must include the setting up the Minerals Prospecting Company to conduct minerals surveying and mapping; set up model beneficiation centers countrywide to bring minerals beneficiation to the local communities across the country. For intergenerational equity the Sovereign Wealth Fund must also be made operational, to promptly build savings. The Special Economic Zones/Export Processing Zones (SEZ/EPZ) must include special factories for diamond processing.

Sector Specific Interventions

The Government of Zimbabwe also needs to strengthen tax frameworks in Zimbabwe’s diamond sector. This can be done by compelling companies to use local facilities in their mining and processing activities. This includes doing diamond cleaning, cutting, polishing and jewellery manufacturing locally, use of local auction floors to sell diamonds, open more diamond processing centers locally, train more local people in diamond processing, open banks specifically designated to do banking for the diamond trade between Zimbabwe and other foreign countries, increase the number of diamond beneficiation training schools, set up a diamond beneficiation/minerals beneficiation centre after the Non-Aligned Movement (NAM) model. The ZDC already has the status as a designated NAM Centre for Beneficiation in Zimbabwe.

Mainstreaming Gender Issues, Indigenization and Economic Empowerment

Economic empowerment is not complete until there is a mainstreaming component. Government must ensure consistency and certainty in policy pronouncements. To ensure that there are lasting benefits from engaging in diamond beneficiation there is need to provide incentives for local beneficiation and value addition. This can be done by issuing concessions to and encouraging partnerships between locals and foreign funders in the set up of diamond processing facilities within Zimbabwe. This will increase the number of locals involved and helps retain more of the diamond revenues in the local economy.  It is also an imperative for the government of Zimbabwe to also structure arrangements for the inclusion of not only a gender component (by sector specific empowerment initiatives) but by also encouraging and allowing inclusion and transition of the informal sector into the formal economy. This must be incorporated into the diamond mining and beneficiation sector as part of the empowerment module. The purpose of gender mainstreaming is not only to achieve equality between the sexes but also to get their full contributions.

Incidental Interventions: Oversight 

There is a need to improve and strengthen supervisory and oversight functions of the various bodies, for example, by capacitating Parliamentary Committees. Government must also curb corruption by prosecuting perpetrators of fraudulent practices. Public officials must be forthcoming with information or data, especially by making it accessible to researchers and engender trust between government and business; this is the bedrock for successful nations.

Governance, Transparency and Accountability in Extractive Industries

Zimbabwe is a signatory and fully fledged member of the Kimberley Process (KP) a United Nations (UN) mandated multilateral organization.

The Kimberley Process Certification Scheme (KPCS) under Section V of its Core Document, titled “Cooperation and Transparency” and in Annex III titled “Statistics” sets out prerequisites for cooperation among KP member organisations and for managing statistics relating to diamond production figures and revenues and availing it to “interested parties for analysis.” The Government of Zimbabwe needs to do more to ensure diamond revenue statistics are readily available to the general public, in the interest of transparency and for purposes of accountability. The World Bank sets out responsiveness of governmental authorities as part of the good governance frameworks; this must be adopted in Zimbabwe.

There is a strong need to eliminate corrupt practices, by fully investigating and resolving criminal cases. Initiatives that may be adopted by the diamond sector industry players to increase transparency in diamond revenue management include the Zimbabwe Environment Lawyers Association’s (ZELA) Publish-What-You-Pay campaign a part of a bigger Extractive Industries Transparency Initiative (EITI). This campaign encourages diamond producers to publicly disclose its production figures, earnings and related statistics; thereby enhancing transparency and accountability in natural resources management.

Plugging Diamond Leakages

There is a need to plug leakages of minerals from smuggling and illicit financial outflows.  This can be done by increasing the physical surveillance of mines, mining areas and international borders using advanced technological tools like X-Ray scanners, Closed Circuit Television (CCTV) systems and Geographic Positioning Satellites (GPS). This would enhance revenue tracking by curbing leakages. The digital CADASTRE System recently adopted by the Ministry of Mines for registration of mining claims is thus very valuable.  Revenue management means little if there is no control of ownership structures. Technology can also be used to reduce inefficiencies i.e. set mineral size capture thresholds for mine extraction of diamonds and full exploitation of mine dumps. Regularizing the mining operations of artisanal miners will minimize leakages in diamond mining. This removes the incentive to externalize their produce through informal channels.

  

Bibliography

NB: This article was co-authored with Dr. Tawanda Zinyama (Senior Lecturer at the University of Zimbabwe) and Dr. Alfred G. Nhema (Senior Lecturer at the University of Zimbabwe) and is available in full from: http://www.aijcrnet.com/journals/Vol_5_No_5_October_2015/27.pdf