admin
For a country to develop sustainably, it has to take near impossible sacrifices; forget immediate and typically less-enduring benefits and focus on more permanent ones.Such benefits may take generations to show, but those who end up enjoying them seldom forget where and when it all started and who laid the groundwork. In saying this however, we must not forget that Europe, America, Australia, and Canada have developed to where they are arguably because of military conquest and plunder.
Many of us in the Third World did not have that chance and capacity, so have had to call on the virtues of sacrifice and hard work as well as thinking ahead of our time.
We recognise that in addition to plunder, the West developed due to the fact that they add value to whatever they looted and export them as finished products at a premium.
The National Budget unveiled by Finance and Economic Development Minister, Cde Patrick Chinamasa on Thursday makes a bold statement of the Government’s intention to stimulate investment in beneficiation of locally produced minerals, a sure way for the country to set out on the road to sustainable economic growth and development.
It is a tough decision to make given the prevailing economic challenges and the almost rational urge to want to get the little income we can even from primary exports. However, easier routes are not always the best.
“In the diamond industry, we cannot continue to rely on revenue from rough diamond sales to the traditional processing and trading centres,” said Cde Chinamasa.
“While there might be pressure for maintaining rough diamond exports to meet immediate fiscal needs, there are huge downstream opportunities for sustainable local cutting and polishing industries.”
To ensure that the country earns more value from its diamonds, he proposed a huge tax on raw exports, the same strategy he proposed to impose on another important mineral, platinum. With regard to platinum, the order by the Government for producers to have set up a refinery by the end of next year stands.
Also, the minister proposed a total ban on unrefined gold exports, following up on the Government ban on raw chrome exports effected some months ago.
Mining, like agriculture a few years ago, is a big contributor to the economy. But the challenge with these two industries is that they are essentially geared towards raw exports, which is not good. Chipinge, for example produces macadamia nuts, but we export them as raw nuts, not as oil.
Using tax as an instrument to discourage raw exports works, as it makes such trade expensive, therefore uncompetitive. To attain competitiveness, miners would be forced to invest in local beneficiation. So what we have on platinum is a two-pronged strategy, imposing a tax on raw exports and forcing producers to set up a refinery.
We don’t have the latter approach on diamonds yet, probably because the minister considered that the mining of the gems only started on a broader scale relatively recently. That is fine, but we feel it was not going to be too draconian if something to that effect had been done to the diamond sector as well.
Experts assert that the value of a diamond grows 10-fold from a rough to the stage it is available for buying as jewellery by the rich in Milan, Paris, London, Dubai or Delhi. We reported yesterday that diamonds from Chiadzwa that were sold at Antwerp, Belgium recently earned the economy $10,5 million. If we had beneficiated them locally, we would have earned $100 million.
Therefore the financial prejudice we have suffered in this transaction only is $90 million. This is a lot of money. It is good that the Government has restored Fidelity Printers as the sole legal buyer of gold in the country. Exports of unrefined gold have been banned too.
This policy returns us to the pre-inclusive government system when all gold produced locally was traded through the Reserve Bank. We should be able to harness the resource and derive more value from it as opposed to the immediate past dispensation which encouraged smuggling.
For this new system to work for us, Fidelity Printers has to be capacitated so that it is able to pay miners competitively for their production and also pay them on time. If this happens there would be no temptation for producers to get the gold out to South Africa or other foreign destination.
Having said that, it is also critical for the Government to make sure that border security is tightened to prevent smuggling of the mineral. Effective policing at the borders will have to go with equally robust policing at the mines themselves.
The wider benefits of this broad beneficiation strategy, underpinned by policing, would be enormous for the country. It is a bitter pill to swallow for now as we begin to build capacity in an environment marred by economic challenges and illegal western sanctions, but should give the country meaningful and lasting returns.
Online Reporter