Turning Dust Into Gold
OPINION & ANALYSIS
Hon Patrick Chinamasa
Zmbabwe Sunday Mail
Mining has been a pillar of our export earnings, it has held the flag high.
Without mining it would have been very difficult for us, we would be in a worse situation as far as foreign currency is concerned. We know our problems and we have strategies to address them.
Some of the problems are outside our control but for some issues, we have the capacity to resolve. This is why it is important for all of us to know that there are no miracles to the resolution of these challenges.
We have to confront each problem and take measures step by step to resolve those challenges and that’s precisely what we are doing. So when I look at the mining sector, gold has been performing well and I am very happy platinum has been outstanding.
There are two minerals which have remained a disappointment, diamonds and chrome, but I want you to know that we have capitalised ZCDC to the tune of $80 million and we are getting weekly reports of production and it has new management.
We have also agreed on a new arrangement, we have told them, ZCDC, that since we are now capitalising you, the diamond are ours.
So the new arrangement is that every output of diamond will come to the fiscus through the Reserve Bank and this will ensure that we get maximum benefit from the proceeds of the diamonds.
Let me also say that the export incentives that you (miners) are enjoying will continue. I understand the primary producers are getting 2,5 percent and artisanal miners are getting five percent, we are going to continue.
The multi-currency regime is going to continue, so I know there is a lot of debate. Those debates are very healthy, but the point of the matter is that the multi-currency regime will continue.
There is no immediate return to the Zimdollar until the macro-economic fundamentals have been addressed, until we address issues to do with fiscal deficit, current account deficit, the wage bill and so on. The multi-currency regime will continue.
I am aware that currently there is a temporary problem with respect to the availability of foreign currency to import raw materials, but I consider that as temporary and it’s a matter that is in the transition and over time we should be able to resolve it.
We are quite advanced with development of the mining tax regime. I said this before to you, we need a tax regime which is fair to everybody, fair to the treasury, fair to you as investors.
I want to take this opportunity to appeal, we have done everything except for the coal industry, Hwange Colliery please give us your figures, Makomo Resources please give us your figures, the corporation is not as good as we would want it to be.
We want to produce a mining tax regime which takes into account the viability of each mineral. We want a tax regime which takes into account the viability of each mineral.
On the issue of local content, what we are saying is that the mining sector, in as much as you are leading the exporting sector, you are also buying material which we call consumables. To what extent can we manufacture these consumables?
To this end, you should be able to empower small businesses to start manufacturing those products, some of them under franchise, under licencing that’s the direction we are taking.
You can come to the Ministry of Finance for any incentives which you think we should grant. We want to encourage exploration on new or existing minerals.
One of the major problems with respect to attracting investments is that we do not have a data base of what we have. We can only have that data base if exploration is done and the records are kept.
Tell us what kind of incentives you want so that we discuss that in order to encourage exploration. One of our major challenge in the country is the skills shortage and as you know, as Government we have introduced STEM with a view to create a cadre who can be able to create employment for others.
What we are asking as a favour is for the mining houses is to give scholarships to our children at our universities like NUST and UZ, among others.
I also want you to offer internships to those students who have graduated, these can be hired at lower cost than hiring people full time. This has to be part of training and skills development.
Again I am ready to have suggestions on how we can adopt this and I also want you to support VTC. We have taken a policy in Government that each administrative district should have a vocational training centre that speaks to the national needs and also to the needs of that particular district.
The training must be leveraged to resources found in that administrative centre. We are also doing everything in our power to increase electricity generation.
By December, we are going to have 150 MW from Kariba and another 150 MW in March next year and this will go a long way in improving power supply in the country.
By end of July we are hoping to commission Hwange 7 and 8 which on completion will produce 600 MW. On the issue of cash shortages, some of the challenges that we are facing are a result of our success, they are a result of a structural shift from formal to informal economy.
When tobacco was grown by 2 000 farmers, they had bank accounts except to take cash to pay their workers, everything was done through writing a check.
Now with the structural shift that happened arising from our land reform, where we had 2 000, we now have 97 000 small scale farmers who have never known what a check is and they have no bank accounts.
Their knowledge of money is that it must be in cash and not in a bank. It is not possible for any country to have cash for all the money in the bank, there is no bank which can give us money when we wake up and say we all need our cash.
Currently we have $7 billion in bank deposits in our accounts. If we went to the bank and say can we have the $7 billion, the cash will not be there, l am talking about physical cash.
We have about 10 to 15 percent cash in circulation, in fact in other countries it’s even lower. The problems we are facing are arising from the failure to change the mindset of our people, because you cannot sell tobacco for $20 000 and get it in a suitcase back home.
That’s an aspect of education over time and we are very impressed because the uptake of plastic money has been overwhelming, it has surprised all of us.
The problem we are facing is the availability of POS machines which are imported and I am sure over time they will be available throughout the country.
Another success story is in the gold sector and chrome. Previously, gold was confined to 10 or 15 primary producers, this time we are talking of more than 200 000 artisanal miners.
Each week, Fidelity pays out $10 to $15 million and you can’t expect that to be in cash. That’s why I regard these teething problems as an economy which is in transition from formal, informal and back to the formal.
At the height of the formal sector, there were two million people and that figure has decreased to 500 000 and this shows you the change that has happened.
But of cause people want change without the cost of the pain. Every change comes at a cost and its painful and we are paying, some of these queues are part of that pain.
There are primary causes of the cash shortages, there is physical deficit. For as long as we borrow to balance my books, it means I am creating artificial money, which is why there has been the promotion of plastic money.
The other challenge is the indiscipline in the market. I now have information on people who just send money out of the country, our money, we are now closing in on those culprits.
We are going to name and shame, so there is a lot of market indiscipline we are addressing. No one is going to complain when the net closes on these culprits.
Minister Chinamasa was addressing delegates at the Chamber of Mines in Victoria Falls last Friday.
Hon Patrick Chinamasa
Zmbabwe Sunday Mail
Mining has been a pillar of our export earnings, it has held the flag high.
Without mining it would have been very difficult for us, we would be in a worse situation as far as foreign currency is concerned. We know our problems and we have strategies to address them.
Some of the problems are outside our control but for some issues, we have the capacity to resolve. This is why it is important for all of us to know that there are no miracles to the resolution of these challenges.
We have to confront each problem and take measures step by step to resolve those challenges and that’s precisely what we are doing. So when I look at the mining sector, gold has been performing well and I am very happy platinum has been outstanding.
There are two minerals which have remained a disappointment, diamonds and chrome, but I want you to know that we have capitalised ZCDC to the tune of $80 million and we are getting weekly reports of production and it has new management.
We have also agreed on a new arrangement, we have told them, ZCDC, that since we are now capitalising you, the diamond are ours.
So the new arrangement is that every output of diamond will come to the fiscus through the Reserve Bank and this will ensure that we get maximum benefit from the proceeds of the diamonds.
Let me also say that the export incentives that you (miners) are enjoying will continue. I understand the primary producers are getting 2,5 percent and artisanal miners are getting five percent, we are going to continue.
The multi-currency regime is going to continue, so I know there is a lot of debate. Those debates are very healthy, but the point of the matter is that the multi-currency regime will continue.
There is no immediate return to the Zimdollar until the macro-economic fundamentals have been addressed, until we address issues to do with fiscal deficit, current account deficit, the wage bill and so on. The multi-currency regime will continue.
I am aware that currently there is a temporary problem with respect to the availability of foreign currency to import raw materials, but I consider that as temporary and it’s a matter that is in the transition and over time we should be able to resolve it.
We are quite advanced with development of the mining tax regime. I said this before to you, we need a tax regime which is fair to everybody, fair to the treasury, fair to you as investors.
I want to take this opportunity to appeal, we have done everything except for the coal industry, Hwange Colliery please give us your figures, Makomo Resources please give us your figures, the corporation is not as good as we would want it to be.
We want to produce a mining tax regime which takes into account the viability of each mineral. We want a tax regime which takes into account the viability of each mineral.
On the issue of local content, what we are saying is that the mining sector, in as much as you are leading the exporting sector, you are also buying material which we call consumables. To what extent can we manufacture these consumables?
To this end, you should be able to empower small businesses to start manufacturing those products, some of them under franchise, under licencing that’s the direction we are taking.
You can come to the Ministry of Finance for any incentives which you think we should grant. We want to encourage exploration on new or existing minerals.
One of the major problems with respect to attracting investments is that we do not have a data base of what we have. We can only have that data base if exploration is done and the records are kept.
Tell us what kind of incentives you want so that we discuss that in order to encourage exploration. One of our major challenge in the country is the skills shortage and as you know, as Government we have introduced STEM with a view to create a cadre who can be able to create employment for others.
What we are asking as a favour is for the mining houses is to give scholarships to our children at our universities like NUST and UZ, among others.
I also want you to offer internships to those students who have graduated, these can be hired at lower cost than hiring people full time. This has to be part of training and skills development.
Again I am ready to have suggestions on how we can adopt this and I also want you to support VTC. We have taken a policy in Government that each administrative district should have a vocational training centre that speaks to the national needs and also to the needs of that particular district.
The training must be leveraged to resources found in that administrative centre. We are also doing everything in our power to increase electricity generation.
By December, we are going to have 150 MW from Kariba and another 150 MW in March next year and this will go a long way in improving power supply in the country.
By end of July we are hoping to commission Hwange 7 and 8 which on completion will produce 600 MW. On the issue of cash shortages, some of the challenges that we are facing are a result of our success, they are a result of a structural shift from formal to informal economy.
When tobacco was grown by 2 000 farmers, they had bank accounts except to take cash to pay their workers, everything was done through writing a check.
Now with the structural shift that happened arising from our land reform, where we had 2 000, we now have 97 000 small scale farmers who have never known what a check is and they have no bank accounts.
Their knowledge of money is that it must be in cash and not in a bank. It is not possible for any country to have cash for all the money in the bank, there is no bank which can give us money when we wake up and say we all need our cash.
Currently we have $7 billion in bank deposits in our accounts. If we went to the bank and say can we have the $7 billion, the cash will not be there, l am talking about physical cash.
We have about 10 to 15 percent cash in circulation, in fact in other countries it’s even lower. The problems we are facing are arising from the failure to change the mindset of our people, because you cannot sell tobacco for $20 000 and get it in a suitcase back home.
That’s an aspect of education over time and we are very impressed because the uptake of plastic money has been overwhelming, it has surprised all of us.
The problem we are facing is the availability of POS machines which are imported and I am sure over time they will be available throughout the country.
Another success story is in the gold sector and chrome. Previously, gold was confined to 10 or 15 primary producers, this time we are talking of more than 200 000 artisanal miners.
Each week, Fidelity pays out $10 to $15 million and you can’t expect that to be in cash. That’s why I regard these teething problems as an economy which is in transition from formal, informal and back to the formal.
At the height of the formal sector, there were two million people and that figure has decreased to 500 000 and this shows you the change that has happened.
But of cause people want change without the cost of the pain. Every change comes at a cost and its painful and we are paying, some of these queues are part of that pain.
There are primary causes of the cash shortages, there is physical deficit. For as long as we borrow to balance my books, it means I am creating artificial money, which is why there has been the promotion of plastic money.
The other challenge is the indiscipline in the market. I now have information on people who just send money out of the country, our money, we are now closing in on those culprits.
We are going to name and shame, so there is a lot of market indiscipline we are addressing. No one is going to complain when the net closes on these culprits.
Minister Chinamasa was addressing delegates at the Chamber of Mines in Victoria Falls last Friday.
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