RBZ’s move to sterilise mining royalties hurts government’s fiscal abilities to finance service delivery from the country’s huge mineral wealth endowment.
According to RBZ, the rationale for export incentives is to drive export earnings. In the mining sector, export earnings can be boosted by several factors which include either price or production increments or a combination of the two.
Also export earnings can be boosted by mineral value addition and beneficiation and access to capital among others. The monetary policy contends that world commodity prices for base metals and precious metals are firming, platinum being an exception.
Ferrochrome production has spiked mineral export earnings, and the lifting of the government ban on raw exports is the main driver, in addition to favourable market prices.
Gold, the lead export earner in the mining sector is anchored by artisanal and small-scale gold mining (ASGM) whose production eclipsed large scale miners in 2017. ASGM accounted for 53% of the country’s total gold production of 24 843.87 kgs.
A combination of factors can be credited for this success story. The “no questions asked policy on gold deliveries” and RBZ’s gold production support fund are some of the prominent factors.
$74 million was disbursed to 255 small scale gold miners in 2017 and RBZ has doubled the fund at $150 million in 2018.
If the above factors are to be considered, RBZ must surely come up with a sensible justification on how the incentives scheme in the mining sector has boosted mineral production.
The central bank’s failure to address the liquidity situation means the sector is always susceptible to the black market.
RBZ pays 70 percent in USD cash and the balance through bank transfers or bond notes, the latter getting a five percent premium. But the black market is prepared to pay 100 percent cash in foreign currency.
Government policies on incentives as currently constituted is contradictory: on one hand government is incentivising miners for exporting raw minerals and on the other it is taxing raw exports to encourage the beneficiation of raw minerals.
Minerals are a finite resource and the opportunity to garner taxes to fund social service delivery will not last forever.
By Mukasiri Sibanda for The Source