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Enacy Mapakame
Business Reporter
Zimbabwe and the rest of the region need to formalise every mining venture as part of efforts to capture data and curb illicit financial flows (IFFs) emanating from the extractive industry.
It is estimated that over 70 percent of the IFFs from the region come from the mining sector with Zimbabwe estimated to lose US$34 million annually and about US$32 billion in the past two decades.
Touring the recently installed gold centre in Matabeleland North, Finance and Economic Development Minister Professor Mthuli Ncube, admitted part of Zimbabwe’s gold was being smuggled to South Africa and Dubai.
Mines and Mining Development Parliamentary Portfolio Committee chairman Edmond Mkaratigwa, acknowledged that the country and the rest of the region are resource rich but losing money to illicit flows.
Gold, especially from small-scale miners, is leaked out of the country, prejudicing the economy of billions of dollars.
“We must be able to formalise every mining venture in the country and collect data on each and every one of them in order to know what they produce and their quantities,” Mr Mkaratigwa said in an interview on the sidelines of a recent annual debt conference held in Bulawayo.
“Zimra and other law enforcement agents must be able to track their activities, analyse their trends so that they are able to look at statistics and see when leakages occur,” he said.
According to UNCTAD’s 2020 Economic Development in Africa Report, the region loses an estimated US$88,6 billion, equivalent to 3,7 percent of Africa’s GDP in IFFs with half of it emanating from the extractive sector.
The report shows IFFs are concentrated in high value, low weight commodities especially gold which constitutes 77 percent of the leakages from the extractive sector followed by diamonds and platinum at 12 percent and 6 percent respectively.
Mr Mkaratigwa indicated the small-scale artisanal gold mining sector was a target for illicit flows particularly those not yet formalised, while pricing models and incentives for gold play a critical role in the fight against IFFs.
“Pricing is a big issue, when the foreign currency retention ratio was not conducive it was tempting to small-scale miners to divert gold to the illegal parallel market where they would be offered 100 percent. But the issue was resolved and Fidelity increased to 100 percent for small-scale miners which in my view is a good thing.
“What is needed now is to keep tracking the trends and see any other incentives that can be offered, for instance while producers get 100 percent for gold delivered to Fidelity, there is a challenge in accessing cash.
“Sometimes producers take two to three weeks before they get their cash for gold already delivered which is a challenge that may see informal players to opt for the illegal parallel market,” he said.
Mr Mkaratigwa highlighted the need to trace multi-corporations operating multiple companies where transfer pricing may occur prejudicing the economy of taxes.
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