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(SUNDAY MAIL ZW) Market Watch Brains Muchemwa: Soft infrastructure at mines ministry crucial

Market Watch Brains Muchemwa: Soft infrastructure at mines ministry crucial
Saturday, 28 April 2012 18:47

Harare-Shamva road is largely a quiet thoroughfare when compared to other busy inter-town highways. Those who drive down the road will, with no doubt, enjoy the pothole-free highway.

Driving with a relaxed mind, one has good chances to marvel at some beautiful hills and pollution-free, man-made small dams that adorn the snaking road. About 80 kilometres from Harare towards Shamva, there is some activity to the right side of the road where Shamva gold mine has been operating for many years.

Just across Shamva gold mine, about 4 km away on a very bad, dusty road, lie the famous Tafuna Hills.

From the main road, Tafuna Hills look serene and just like other ordinary hills in the area.

The very steep slopes and ordinary looks would, under normal circumstances, not entice a person driving down the highway to cast a second glance.

Rather, the collapsed Shamva gold mine shaft that is visible from a distance may be a more intriguing attraction.

Tafuna Hills, however, offer much more than meets the eye from a distance. A snaky and gullied dust road from the highway takes one to the foot of these hills and, all of a sudden, there are signs of concentrated human settlements, including shacks.

A further drive up the hills would herald the start of small-scale gold-mining activities.

The many small-scale miners that form part of the envied Tafuna Hills mining community have one thing in common — good ore yields around 8 grammes per tonne and a lack of mining equipment.

The latter is a big problem.

The small-scale miners, working in groups popularly known as syndicates, use hammer and chisel to dig into the earth in pursuit of lucrative gold reefs, largely known as “bhandi” in Shona.

Very few have capacity to hire or buy compressors to drill and blast the very hard blue stones that characterise the area.

Equally, an even fewer number has slurry pumps to pump out water from the shafts as they encounter more underground water the deeper they go.

With this very manual and painful way of extracting gold ore from underground, many of these small-scale miners end up hauling out, at best, four tonnes of gold ore per week.

The average weekly earnings, therefore, amount to around $180 per week for most of the syndicate partners.

Considering the very low alternative returns from other rural activities such as farming, this reward for labour is very high and so addictive that it keeps attracting the small-scale miners to shed sweat in the unsafe underground work environments.

This tale resonates with most small-scale gold miners across the country.
Small-scale gold miners, whose definition expands to capture as well these non-mechanised producers, contribute about 50 percent of the total gold production in Zimbabwe. Zimbabwe gold exports rose to $627 million in 2011 and may surpass the $900 million mark in 2012.

The sector is therefore very crucial after diamond and platinum mining, and Government needs to do much more for the small-scale gold mining sector to transform its image and improve output.

A number of small-scale gold mining associations have been regularly calling on Government to come up with schemes that provide funding and equipment to the miners.

Government has a history of bailing out big corporates and farmers by giving concessionary credit facilities and equipment, and small-scale miners believe they deserve the same treatment because of their unquestionable contribution to GDP and exports.

These calls are genuine and seek to address the inconsistencies on the part of the Government’s market interventionist policies.

But a more objective assessment of the small-scale mining industry reveals that they do not need active Government assistance in terms of cash handouts and equipment.
Rather, the small-scale miners need to lobby Government, through the Ministry of Mines and Mining Development, to establish efficient soft infrastructure that allows the private sector financiers to find reason to finance the rather lucrative sector.

The mining registers at the Ministry of Mines are not easily verifiable and involve huge hassles in ascertaining ownership.

It takes a lot of time to establish who owns what claims, and, equally, the claims are not easily transferable.

The Ministry of Mines and Mining Development needs a very efficient mining register system that allows easy cross-referencing, traceability and transferability of ownership.

The absence of this soft infrastructure at the Ministry of Mines has been a major source of conflict in many mining transactions and leaves the system subject to manipulation.

The Zisco-Essar deal is one such deal that has been subjected to controversy and the root cause can be easily linked to absence of efficient soft infrastructure that allows easy verification.

The recent Kwekwe gold rush that grabbed headlines got more exciting not only because of the easy find but because a number of people had “genuine” certificates proving legitimate ownership of the said gold claims.

Disputes between the Zimbabwe Government and ACR over diamond claims in Chiadzwa can as well be easily linked to inadequate information systems at the Ministry of Mines.

And there are many other disputes revolving around ownership of claims that emanate from the inefficient soft infrastructure that exists at the Ministry of Mines and Mining Development.

Private sector financing mechanisms thrive mainly when the underlying collateral is marketable and not susceptible to disputes over ownership.

The inability of small-scale miners to attract private sector funding is, to a large extent, a result of their inability to prove undisputed ownership of their claims.
Zimbabwe has a thriving small-scale mining sector and there is no reason why the mainstream lenders should shun this for other sectors of the economy whose prospects may not be even as bright as those of the small-scale mining industry.

Government recently hiked the mining registration and renewal fees to deter speculative holding of claims by individuals and corporates who, according to the policymakers, are disrupting the intertemporal distribution of natural resources wealth.

The overall objective is right, but Government has to equally consider sanitising the soft infrastructure aspects relating to ownership verification and transferability of mining

claims so that the private sector finance mechanism can easily find small-scale miners a good market for lending.

The local banking sector — sitting on just around $3,3 billion deposits and riding on a precarious loan-to-deposit ratio of around 81 percent — has no meaningful capacity to finance big mining transactions off domestic balance sheets.
Big mining projects have always been, and will continue for some time, relying on offshore financing arrangements to fund their requirements.

The small-scale miners are very much localised in nature and have no capacity to attract off-shore funding, and, therefore, would need to rely on the local banking institution for funding.

Expectations by some of the small-scale miners’ associations that Government should provide sustainable funding and equipment purchase schemes for their members are justified, but far fetched. Yes, Government has done that before, but the scale, reach and success remain very limited relative to the demands of the small-scale mining industry.

Working towards attracting domestic financiers to finance small-scale miners should be the utmost priority for Government and small-scale miners’ associations in search of a sustainable funding solution.

And, invariably, the issue of soft infrastructure becomes the most important aspect that needs to be addressed by Government, without which the small-scale miners will remain largely without access to finance.

Labels: MINING

posted by MrK @ 7:43 PM