Treasury descends on Chinese miners

TINASHE MAKICHI

Treasury will audit some Chinese gold mining operations amid revelations they have been importing equipment duty-free but failing to sell the yellow metal to Fidelity Printers and Refineries (FPR), Business Times can report.

Government had introduced a rebate and tax relief system that saw mining companies import capital equipment duty-free  to ramp up production.

“The new proposed measures will entail intensive auditing of Chinese gold mining operations to come up with proper production figures and also comparing with the declarations being made to the government. There are also proposals that may see some companies implicated in this scam being blacklisted on the rebate system,” a source said.

The mining sector has been on a sound growth trajectory where it recorded US$4.4bn by mid-November this year against US$3.6bn during the same period last year.

Business Times is however informed that there have been several reports of mining companies especially Chinese in the gold mining sector that have been importing mining equipment duty free but some of the mined gold is not finding its way to FPR.

In Zimbabwe, all gold by law is sold to the country’s sole gold buyer and exporter, FPR.

A well-placed government source noted that the abuse of the rebate system therefore informed Finance and Economic Development minister Mthuli Ncube’s latest intervention.

The source further stated that the abuse of the rebate system has been mainly orchestrated by players in the gold sector especially of foreign origin, with one prominent Chinese miner (named withheld) being implicated in this scam.

“There is a prominent Chinese gold miner that has been implicated in the scam and this miner has been importing a huge assortment of mining equipment duty free but most of the mined gold is being spirited out of the country eventually.

“Various reports were submitted with regards to this abuse hence the latest interventions by the Treasury to instill discipline,” the source said.

Efforts to get a comment from Finance and Economic Development Permanent Secretary George Guvamatanga were fruitless as his mobile number went unanswered.

Zimbabwe Miners Federation chief executive officer  Wellington Takavarasha said there was need to come up with a thorough investigation to ascertain the allegations being raised.

“Mining equipment is duty free and smuggling is already happening not only by the Chinese but across the board. So it has to be fully investigated if the Chinese are smuggling gold in terms of remuneration that they are making,” he said.

“If you notice, two years ago some Chinese mining companies were closed by the government on allegations of under-declaration to the government where a company with 600 employees claimed to be producing 2kg of gold a month. Therefore there is a need for a thorough investigation,” Takavarasha said.

A number of Chinese miners have set up gold mining facilities in Shamva, Shurugwi, Bindura, Mazowe, Kwekwe and Kadoma as well as gold processing plants in Bubi area.

Whereas availing of tax rebates and Value Added Tax deferment has gone a long way to enhance productivity, issues of concern were observed during beneficiary company tours which include false declaration of minerals produced, export of unpolished granite, non-submission of monthly returns to the Mines and Mining Development ministry, environmental degradation among other issues including smuggling of the yellow metal.

“In order to enhance transparency and accountability in the administration of rebate facilities and address the deficiencies that have been identified,” Ncube said in his latest 2022 budget statement.

Cognisant of the wide usage of such capital equipment by productive sectors, and the need to ease the cost of doing business in the country , Ncube proposed to provide duty free importation of the capital equipment through the tariff regime and strengthening the provisions governing the facility in order to minimise loopholes in administration through the following measures.

Ncube said companies applying for the rebate of duty facility should be incorporated and no third-party companies shall be granted rebate of duty in a bid to instill transparency and accountability.

As part of the process to evaluate the impact of tax concessions availed to date, Treasury in collaboration with the Zimbabwe Economic Policy and Research Unit and support from the Deutsche Gesellschaft für Internationale Zusammenarbeit will soon commission a study titled “Evaluate the Impact of Tax Incentives on Socio-Economic Outcomes in Zimbabwe”.

Economic analyst Victor Bhoroma said regular audits on rebate benefactors and types of equipment imported should be done and released to the public.

“It is widely known that our rebate system has loopholes from a management point of view to systemic corruption within the revenue collection agency itself. There are no external audits on the efficiency and soundness of the system. Business people [foreign and local alike especially those connected politically] have been taking advantage,” he said.

“Ideally, regular audits on rebate benefactors and types of equipment imported should be done and released to the public. It will save the country millions in revenues and reduce smuggling.”

China has been Zimbabwe’s all weather friend. Zimbabwe looked East at the turn of the millennium for salvation after it fell afoul of the West for human rights and governance deficits. Harare denies the charges saying it is being punished for embarking on a fast-track land reform programme.

Zimbabwe has rolled out the red carpet for Chinese investors. Unions say a number of Chinese firms do not adhere to good labour practices.