Zim losing  US$200m annually through gold smuggling


Zimbabwe is losing more than US$200m annually through illicit financial flows (IFFs), which continue to ravage the economy, Transparency International Zimbabwe (TIZ) has said.

Farai Mutondoro, head of programmes at TlZ, who spoke yesterday at the ongoing African Forum and Network on Debt and Development (AFRODAD) meeting in Gaborone, Botswana, said more could have been siphoned due to the government’s failure to plug leakages, especially in the small-scale gold mining sector, where players are selling gold on the black market where prices are attractive.

“I can’t give exact figures but Zimbabwe is losing quite a lot,” Mutondoro said. “Every month, Zimbabwe is losing about US$15m worth of gold (which translates to about US$180m a year). Gold finds its way into the black market where players sell their gold at higher prices than what government is paying them.”

He added that corruption also drives IFFs in Zimbabwe. “Corruption is rife in Zimbabwe. The auditor-general notes violation of procurement processes in her reports, but nothing is being done,” Mutondoro said. “This means the political economy is the key driver of IFFs.

“From our research, we also found that there was collision of the political class, where members of the ruling party and the Chinese, which is the international actor, collude through bilateral trade ties, where millions are siphoned outside the country,” Mutondoro added.

Efforts to get a comment on the matter from the Reserve Bank of Zimbabwe were futile. Business Times sent questions to the central bank governor, John Mangudya. But he had not responded by the time of going to press last night.

In Zimbabwe, like in many other African countries, IFFs are significantly greater than expenditures on key social sectors such as health and education. Experts say corruption plays an enabling role for IFFs.

Zimbabwe is an economy that remains highly vulnerable to IFFs, which are illegal movements of money from one country to another and can take the form of illegally earned, transferred or utilised, in the last few years. These outflows drain foreign exchange reserves, reduce tax revenues, and cancel out investment. Fighting IFFs is crucial to alleviate poverty, analysts said.

IFFs are also funds with criminal origins such as proceeds of crime, funds associated with tax evasion, or funds with a criminal destination such as bribery, terrorist financing or conflict financing. They occur through mispricing by under-invoicing exports and remittances of funds without proper documents.

Zimbabwe, like other African countries, does not have strict laws on the movement of cash. Most transactions in Zimbabwe are done digitally.

Fanuel Bokosi, AFRODAD executive director, said: “Illicit financial flows deprives developing countries of crucial resources needed for development.

“The loss of tax revenues resulting from IFFs hampers government’s ability to provide services and infrastructure for their citizens. The loss of capital impedes the organic growth of the economy,” he said.

Michael Masiya, an economist with Malawi Revenue Authority, said: “We should try as much as possible to finetune our laws so that they are not taken advantage of. Review and strengthen laws that provide loophopes for tax avoidance.”

It is understood that some of the funds leave countries in the form of donations or school fees to other countries. The situation, analysts said, had been worsened by the multicurrency system, especially in Zimbabwe.

Layla Latif, researcher at Cardiff University said the emergence of the digital economy has led to the creation of an underground economy.

“IFFs remain a development challenge for southern African countries,” Latif said. “The emergency of the digital economy and technology facilitate opportunities for IFFs at the click of a mouse. One can earn money illegally and transfer illegal funds. It can also lead to the creation of illegal markets of cybercrime and cyber-related crimes. A number of opportunities arise for fraud and tax evasion,” she added.


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