By Lucy Tandi
HARARE (Mining Index) – CHINA has in the past decade emerged as a key external investor in Zimbabwe’s mining sector. Under the Second Republic, Zimbabwe has embarked on a policy drive to attract Foreign Direct Investment (FDI) to power its economic recovery, stabilization, and growth with a view to becoming a Middle-Income economy by 2030.
Under Zimbabwe’s five-year economic blueprint – National Development Strategy (NDS1) – mining is viewed as a key anchor towards economic recovery. Apart from economic resurgence, Zimbabwe is also pinning hopes to settle external debt obligations using earnings from the mining sector.
With such great expectation from the extractive sector, the government has put forward key policy plans such as the USD$12billion ‘Mining Economy by 2023 Strategy’, ‘Ease of Doing Business Reforms’, and the establishment of key institutions like the Zimbabwe Investment Development Agency (ZIDA), among others to raise earnings from the sector.
Riding on their proximity to authorities, the Chinese have invested in various minerals such as gold, chrome, diamonds, and semi-precious stones, giving them outsize influence over Zimbabwe’s vast mineral wealth.
According to the Zimbabwe Miners Federation (ZMF), the Chinese control a significant percent of Zimbabwe’s mining industry, which is very significant, making it exceptionally important for closer scrutiny.
The Chinese, however, seem to abuse their privileges as they are not willing to get a social license to reduce tensions from and strengthen relations with local communities as evidenced by constant investor-community conflicts with the indigenes.
The general perception among communities throughout Zimbabwe is that Chinese mining companies are making a considerable profit, but they do not just want to plough back to the community nor to operate properly.
Most mining communities say they are not aware of how much money is made out of Chinese mining done in their area, leading to speculation that the Chinese are externalising mining proceeds.
There is widespread suspicion that all Chinese mining companies are connected to the government or politically well-placed individuals. At times these seem to be well-founded claims.
In instances where Chinese companies have clashed with communities, examples have been cited in which the Chinese brought in top politicians to muzzle the locals from voicing concerns.
One such example is the Dinde land dispossession which saw the Zimbabwe National Army being deployed to protect a Chinese company, Bei Fa Investments that had pitched a tent in the midst of the Dinde community in April this year.
In Marange, the community brought up various names of politicians (names withheld) who came threatening the local community to allow Anjin to mine diamonds.
The former Zimbabwean president Robert Mugabe placed great importance on Zimbabwe’s relations with China.
The cooperation, cultural contact and trade between Zimbabwe and China dates back to over 600 years ago when the Ming and Qing dynasties in China and the Munhumutapa Empire in Zimbabwe traded.
However, since then, there has been no recorded activity between the two countries until the 1960s when China provided military, material, and ideological support to Zimbabwe’s liberation war.
The relationship deepened after Zimbabwe’s political isolation from the European Union (EU) following the land reform program at the turn of the millennium when Robert Mugabe repossessed land from former white colonial settlers.
“We have turned East, where the sun rises and given our back to the West, where the sunsets.” Robert Mugabe, 18 April 2005.
The much-criticized land reform program attracted a volley of economic sanctions and trade embargos which led to economic depression, resulting in Robert Mugabe looking for an alternative international trading partner. The Look-East Policy (LEP) saw China as the only available option to promote Zimbabwe–China bilateral relationship as a sign of commitment by the two countries to support each other against Western governments in global dialogue engagement and platforms.
The Look-East Policy was therefore a response to economic sanctions imposed on Zimbabwe by Western nations and enhanced Zimbabwean ties with the People’s Republic of China.
China seems to be filling gaps left over by the British Transnational Corporations (TNCs) as they divested from Zimbabwe for various reasons, leaving the Chinese as the only investor willing to take up the risk.
While the support started as ideological, it has moved to embrace all relational aspects which include diplomacy, culture, trade, investment, military, political, and aid including COVID-19 Diplomacy.
Critiques describe China as having a neo-colonial agenda, citing the relationship as that of a horse and a rider, Zimbabwe being the horse and China the rider.
The creation of such strong ties between China and Zimbabwe has therefore seen an increase in the number of Chinese nationals flocking to Zimbabwe for various business prospects, mining included.
While official figures reveal China as Zimbabwe’s third-largest export trading partner after South Africa (32.8%), Singapore (28.9%), China (9.7%) India (2.7%), and the UK (2.6%), the record of mineral output and revenue generated by Chinese ASM remains ambiguous, either owing to the secretive nature of details around the investments or that the data is actually not there and unavailable within Zimbabwe’s statistical records.
Most Chinese nationals flocking to Zimbabwe have been scrambling for a share of mining concession with local Artisanal and Small-Scale Miners (ASM).
According to a Zimbabwe Environmental Lawyers Association (ZELA) report, there are over 10 000 Chinese nationals living and working in Zimbabwe.
While a handful of sizeable Chinese mining houses such as Tsingshan Group – stainless steel manufacturer and parent company for Afrochine – are setting up operations, the majority of Chinese operations remain in competition with local artisanal and small-scale miners.
The Chinese have also bought major shares in the big chrome companies a 50 percent stake in ZIMASCO.
Local Zimbabwean miners argue Zimbabwe needs bona fide investors with funding suitable for capital projects, not foreign nationals coming to Zimbabwe to scramble for mining claims, as in the case with Chinese ASM.
There has been controversy regarding Zimbabwean governments’ move to embrace small-scale foreign nationals into mining, with locals arguing investments in the mining sector must be for larger mining projects in order for their investment to be meaningful.
Local miners say the government must only consider foreign investors to capitalise on the Zimbabwean mining sector and compete with local corporate mining companies as opposed to jostling for small claims with emerging local miners.
Chinese investments are concentrated in the extractive sector, analysts say the participation of any foreign locals should be at the same level with big mining houses.
‘Our resources are being looted and we are competing for small mining claims with foreigners. That policy is wrong,” said Changamire Munashe Zana, a gold miner who is also a social economic, and cultural commentator.
The coming of Chinese nationals to settle in Zimbabwe has resulted in the capital flight of minerals where revenue generated has not been made public for local citizens to appreciate investments and revenue generated.
However, although some local Zimbabwean miners have partnered with the Chinese, in theory, they say the partnerships are mutually beneficial but in practice, the relationships are exploitative.
“The Chinese have come into our country in numbers. They are hoarding gold claims, holding these claims for speculative purposes. The next thing you hear the mines office saying all the areas have been pegged, and when you look at it, it’s the Chinese. To make matters worse, where they mine, they sell part of their gold to Fidelity, and take most of it to China” said a Shamva gold miner who spoke on the condition of anonymity.
Communities around Zimbabwe expressed concern over the opacity and limited access to information, which they say affects accountability issues related to Chinese Investments within Zimbabwe.
“Lack of accountability also characterizes these investments, hence the need for them to be tracked so that stakeholders are able to get information which they can use to effectively mobilise, engage Chinese investors and in the process demand accountability,” said ZELA.
Zimbabwe’s government has been heavily criticised for controversial macro-and micro-economic policies that have plummeted the country into a deep economic crisis.
The Zimbabwean mining sector has been operating in the absence of, and or with outdated systems and policies.
Minerals Exploration Bill, vital in assessing Zimbabwe’s mineral worth has been pending since 2015 when it was tabled for review before parliament. The Mines and Minerals Amendment Act of 1961 had amendments last effected in 1996 and the bill to review the Act remains outstanding.
The Gold Trade Act still relates to the Rhodesian time, Precious Stones Trade Act is expected to be submitted to parliament end of 2019 while the Chrome Development Policy has not been passed.
The Chinese have noted and taken advantage of Zimbabwe’s outdated and malfunctioning mining sector policies to their own advantage, hence an increase in human rights abuses by the Chinese in the mining communities.
One of the major reasons for an increase in capital flight in the mining sector is the government’s policy that forces gold miners to sell the bulk of their bullion to Fidelity Printers and Refiners (FPR) is unnerving to foreign investors.
According to a local gold miner in Kadoma, Pedzisai Chigiji, “this move is a formula for smuggling of minerals by both local and foreign entities.”
Although there has not been consistency regarding how much revenue Zimbabwe is losing to smuggling of minerals, the Ministry of Finance says Zimbabwe has been losing approximately US$1.8 billion of mineral revenue mainly from gold smuggling alone.
Kazembe Kazembe, the Minister of Home Affairs, said Zimbabwe has been losing about US$100 million worth of gold every month through international smuggling rings and the country’s porous borders.
Diamond Sector
Lack of transparency and access to information regarding Chinese investments in Zimbabwean diamonds has been the major issue.
The largest known Chinese investors in Zimbabwean diamonds have been Anjin Investments (Pvt) Ltd and Jinan Diamond Mining Company.
In 2016, Mugabe ejected all eight companies mining diamonds in Marange – Anjin, Diamond Mining Corporation (DMC), Jinan, Mbada Diamonds, DTZ Ozgeo, Rera, Gye-Nyame, Kusena, and Marange Resources following allegations of corruption and massive looting of diamonds valued at an estimated US$15bln.
In 2016, Jinan Diamond Mining Company was investigated by the Zimbabwe Republic Police (ZRP) for externalizing $585 million.
The funds are believed to have been moved to accounts in Botswana, Zambia, Sierra Leone, Mozambique, Dubai, and China through BancABC which was accused by the central bank of failing to red flag the illicit transfers.
This resulted in BancABC closing the bank accounts of Jinan in Zambia and Zimbabwe. The bank had been served “with a second warrant of search and seizure in the matter requiring certified copies of telegraphic transfer confirmations and payment instructions and withdrawal slips,”
“A BancABC official (managing director) later appeared before a Harare Magistrates Court on charges of externalizing $332 980 000,00 on behalf of Jinan to Botswana, Zambia, Sierra Leone, Zambia, Mozambique Dubai, and China. The transactions that are said to have happened between 2012 and 2015 implicated the Chinese,” said ZELA.
Anjin investors were also investors in Jinan which was listed among the top five in a list of entities involved in illicit outflows by President Emmerson Mnangagwa in 2018.
There is debate over the current investments by Anjin in Marange.
ABOVE – Part of the Chinese area being mined by Anjin in Chiadzwa
The Zimbabwe Consolidated Diamond Company (ZCDC) says Anjin is only exploring for diamonds without a partnership with ZCDC. Issues have been raised over areas of operation with the Environmental Management Agency (EMA) saying Anjin got an Environmental Impact Assessment (EIA) in respect of its old claims in portal Q at Chiadzwa although it is said to be carrying operations in portal B.
While mining licenses for seven companies that were formally approved to mine diamonds in Chiadzwa, Anjin returned to mine diamonds in Chiadzwa during the first quarter of 2019.
According to the Centre for Natural Resource Governance (CNRG), Anjin returned to Marange on 1 March 2019,
“Anjin returned to Marange in 2019 although they claim they have been prospecting, which doesn’t make sense given they returned partly to their old claim,’ said Farai Maguwu, Centre for Natural Resource and Governance (CNRG) director.
While Anjin is said to have invested US$38 million at their Chiadzwa operations to boost production, no official output from their operations has been made available for the public and the Marange community to appreciate.
The share of mineral revenue from foreign investors has not been publicly gazetted since the mining of diamonds started in 2006.
Local Marange residents are not enthused with the return of Anjin to the Chiadzwa Diamond Fields as they say the return of Anjin Investments hurts the community because the company has not been observing the environmental laws of the country and has not made any meaningful contribution towards the development of the community.
Locals mourn the lack of development saying since diamonds were discovered in Marange in 2006, there is no meaningful economic development in the area endowed with multi-billion dollar gems.
“We had agreed that whichever company comes back, we have to do environmental impact assessment first. However, with Anjin, that was not done. We went to meet them and demanded to see the Environmental Impact Assessment (EIA) but they told us that it is kept at ZCDC.
We requested from ZCDC to see Anjin Investments’ EIA but they are not forthcoming. So we now think there is some unholy collusion between ZCDC and Anjin,” said Chiadzwa Community Development Trust member, Gladys Mavhusa.
Bullion sector
Communities in Zimbabwe’s gold-rich areas have concluded that artisanal and small-scale Chinese miners have come to Zimbabwe for mere self-enrichment.
Chinese gold mining in Zimbabwe is neither incidental nor isolated.
“They do not seem to care about the community, environment, or respect of human rights. “Chero rikawanikwa mumhino vanongochera” translated “even if found in a nose they will mine”.
Zimbabwe holds an unknown or unquantified gold resource, although some estimates believe it has the world’s second-largest deposits per square km, of which only 13 million are proven, which could potentially earn the country US$4 billion per annum in exports.
Chinese investments in gold have been opaque, and in some instances, led to the suspension of Chinese miners at international platforms like the London Stock Exchange (LSE).
What is known about Chinese investments in Zimbabwean gold is marred in controversy. One such example is of Chinese gold mining giant, Mwana Africa, which eventually transformed into Asa Resource Plc.
Asa Resource Plc encountered severe problems when it came under investigation at the London Stock Exchange resulting in its suspension from the bourse.
Asa’s subsidiaries in Zimbabwe included Bindura Nickel Corporation (BNC) and Freda Rebecca Gold Mine. It was discovered there was externalization of funds at Freda Rebecca by Chinese shareholders. US$15 million was detected although it was believed it could be more, leading to the suspension of Asa from the LSE.
Further allegations are linked to the issue that raw ore was being shipped to China with an accusation of externalizing $4.3 million.
Asa was subsequently put under the administration of Mark Skelton and Trevor Birch of Duff and Phelps Ltd. Eventually the London-based administrators dissolved Asa Resource while other senior Asa personnel were fired.
According to the 2021 Monetary Policy Statement by the Reserve Bank of Zimbabwe, the first 7 months of 2021 witnessed gold export receipts raking in US$309.9 FY2021 up from US$235.0 FY202, representing a 31.9% increase.
Chrome sector
China is the world’s top chrome consumer and Zimbabwe supplies 60 percent of that demand. Chinese demand for chrome is predicted to stay firm as a result of increased infrastructure spending like urban rail projects and projects under the Belt and Road Initiative (BRI).
Chinese have significant shareholdings in Zimbabwean mining companies, including in ZIMASCO which is registered in Mauritius. ZIMASCO has been criticized for awarding 99 percent of its tributary contracts to Chinese miners with one mining contractor complaining that:
“I have been a ZIMASCO tributor and contractor for over 15 years and I have been witness to all the transformation. The situation is now unsustainable and undesirable.
“Are you aware that ZIMASCO’s focus from 2016 to 2017 has been on processing concentrates where 99 percent of the contracts are given to Chinese nationals who then offload the concentrates at very low prices to ZIMASCO when sold within Zimbabwe? …. No support is coming our way in terms of equipment from ZIMASCO.
“We are exposed to all sorts of safety issues, very high mining costs, serious chrome price cuts, and mining profitability been a thing of the past,” he said.
In Zvishavane, the local community is not satisfied with the Chinese monopoly in chrome believing that the lack of competition is a disadvantage, selling their chrome at US$25 to US$30 per tonne.
According to former ZMF president vice president Lindi Mpofu, in 2020, the Chinese were paying as little as US$12 per ton of chrome.
Local Zimbabwean chrome miners also expressed concern that while in the past, chrome mining companies were expected to have a Chrome Movement Permit, that they would use to transport chrome, nowadays with corruption, Chinese companies are smuggling Chrome out of Zimbabwe without paying duty and taxes on chrome.
In Zvishavane it emerged that the Chinese mining companies are mining without licenses because of a complex arrangement between the Chinese and the local miners who own some of these chrome claims. Local black owners of these claims acquired them from ZIMASCO and Zim ALLOYS.
Some small-scale Chinese miners are also undertaking alluvial mining in Guruve, along the Great Dyke, exporting the raw ore to China for processing.
Photos above taken in Guruve on Sunday 12 September 2021
Photos were taken on Sunday 12 September 2021.
“This is the destruction being caused by the Chinese in the (Great) Dyke area where they are removing one meter of soil containing minerals and illegally exporting to China.”
Copper Industry
The Chinese’ vested interest in copper has seen Zimbabwe exporting mostly raw copper to China, and beneficiation is yet to successfully extend in scope and capacity within the mining sector.
A visit to Mhangura shows how the Chinese are operating a separate concession near Mhangura Copper Mine. They are also buying copper ore and copper concentrates from local producers.
During an interview with Tashinga Maponga, Director at Afro Southern, there has been an increase in the number of Chinese nationals seeking information about Zimbabwean copper.
“We have daily inquiries from various Chinese companies wanting to buy our copper with the intent to export it to China. One of them is Sinosteel,” said Maponga.
Sinosteel is a Chinese company that acquired a 92 percent stake in the Zimbabwe Mining and Smelting Company (Zimasco) for chrome mining.
Copper has not been actively mined in the last 20 years since the fall of Mhangura Copper Mine in 2000.
“There are ready Chinese buyers in Zimbabwe and also on the international market for the
Zimbabwean copper ore and copper concentrates with only a single Chinese company in the Mhangura area doing copper smelting,” said Maponga.
He however lamented how Zimbabwean copper is shipped out of the country for processing in China.
“Most of this ore has been going to China for further processing into the smelter meaning we as Zimbabwe has been selling the copper in its raw form,” he said.
“It has been inquiries only and a lot of other Chinese nationals have flown to Zimbabwe to see our copper operations,” he said.
“The closure of Mhangura was mainly due to the high costs of production that could no longer be covered by the selling price. Our cost of electricity in Zimbabwe and the fact that we do not have guaranteed suppliers has been a major setback in companies setting up smelting plants.”
“I also think that the companies did not move with changes in technology and their old smelting plants had become too costly to run,” said Maponga.
Last year, state mining vehicle, Zimbabwe Mining Development Corporation (ZMDC) said US$500 million was required to revive three of its copper mines together with a new smelter and refinery. ZMDC has three groups of Copper Mines namely, Mhangura, Sanyati, and Alaska
Copper Mines.
Mhangura Copper Mines is part of the governments’ Greater Chinhoyi Copper Development Programme aiming to revive six copper operations by 2023.
In June this year, the government announced that Zhi Jui had entered into a five-year contract to treat 26 million metric tonnes of mining dump at Mhangura, with the Chinese company expected to start processing dumps at the idle Mhangura Copper Mines in January 2022.
Mining equipment is expected to start before the end of 2021 as part of a US$10 million joint venture between the Chinese company and the Zimbabwe Mining Development Corporation (ZMDC) to restart operations.
Some former Mhangura Copper Mines workers argue the US$10 million is not enough as Mhangura requires a much bigger investment if they are to be fully restored, adding that treatment of the dumps is only one small step in any efforts to revive Zimbabwean copper.
Under the new arrangement, Zhi Jui Mining will own 65% of the project while ZMDC pockets 35 percent.
However, the government says “the project presents a win-win scenario, in which ZMDC will get substantial returns on their idle dumpsite,” the government said in a Cabinet statement then.
The Mhangura community further argues involvement of Chinese in Zimbabwean copper will only lead to smuggling of raw copper out of the country, prejudicing the country of significant revenue.
A company treating dumps will not employ many people compared to one that resumes full production. We need real investors, but as things stand in Mhangura we are just grateful that at least something is happening,” according to Effort Nkoma a former worker and unionist at the mine. ENDS// www.miningndex.co.zw
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