The Gold Story

This week Aljazeera ran a program on gold smuggling and money laundering in Zimbabwe. Nothing new to those of us who live here, but it attracted a huge audience. I have no real gripes with the content except that they underestimated the size of the problem.

Zimbabwe is certainly in the top 10 gold producers in the world and it is by far (after remittances) our largest source of hard currency. The basic resource is very interesting and is found in what we call ‘the green stone belt’. I am no geologist but these occur over many parts of the country and although nothing like the famous gold reef in South Africa, these vary a great deal in the content and character of the gold deposits. Our most famous gold mine was located at KweKwe in the midlands and at one stage produced 20 grams of gold per tonne.

When our economy crashed between 2000 and 2008, people in most parts of the country had two choices – leave or turn to the informal sector. They left in their millions – up to 500 000 a year at one point. They turned to smuggling and cross border trading (often the same thing). Very quickly this became a major source of basic incomes. However, it was the discovery, by young people, that in many areas of the country, you could find outcrops of the famous greenstone and dig it up and get it crushed at a local mill and make perhaps 2 grams a tonne of ore, worth US$100 in the market that started our ‘gold rush’.

Today we estimate that 500 000 to 700 000 small scale ‘artisanal’ miners are active across the country. They are serviced by perhaps 2000 millers with stamp mills mainly, who take in the ore and allow the miners to take the loose gold that is produced through a simple machine at the back of the Mill. This most often is assayed on site and the miner paid in cash.

In the more formal sector there are perhaps 600 mines – varying from opencast operations and some deep mines with annual production of 5 to 100 kilograms of semi refined gold per month. The Mining industry tell me that if these resources were exploited properly on an organised basis up to 200 ‘mega mines’ could be established and national production reach perhaps 200 tonnes a year.

I estimate that about half of that is traded here at present – no argument with others that about 70 tonnes is traded ‘informally’ and 30 tonnes ‘formally’ through official channels. A tonne of gold traded internationally is worth about US$70 million. That would put our gold industry at a value of US$7 billion a year, if it was managed properly. Aljazeera was a third of that!

Apart from some very foolish individuals who spoke on camera, the main casualties of the program (with more to come) were the Dubai gold market – now the largest in the world, our own gold refinery and the Reserve Bank and perhaps our reputation as a country. We have just come off the grey list of countries who are regarded as havening inadequate controls on money laundering and the funding of terrorism. South Africa has just gone onto the list. Being classified as grey, implies serious malfunctions in how we manage our money.

But for me the worst aspect of all this are the poor guys who mine the stuff in small mines and open pits. They are not formally registered, have no licence to do what they are doing, have no rights if a large business group takes over their small plots to establish a much bigger formal mine, they get no compensation. On the contrary they might find themselves driven off their claims with dogs and the police, or even worse, the army.

When they take their ore to a local miller, they face further exploitation. The stamp mill recovers the loose gold from the crushed ore, either over a table or a cyclone. This may represent 60 per cent of the actual gold content, the rest flows away to a dump, where the miller, if he knows what he is doing, has a chemical recovery plant where he will recover the majority of the balance.

Then when the Miner wants to sell his gold, it is assayed by a laboratory working for the miller or a trader, the real gold content is understated and then the price offered often represents a discount against the world market price. The raw gold, in whatever form is then most likely to be smuggled to South Africa where one of the 6 refineries, established in their heyday, will refine the product and buy it for Rand or US dollars. Sometimes it is smuggled overseas.

This involves not only gold mined in Zimbabwe but also gold traded through Zimbabwe from other African states. The major player is the Congo where similar chaotic conditions prevail and the small scale miners also operate under conditions that are distinctly unhealthy by any standard. The players in the Aljazeera program of Indian extraction are the major interlocuters.

Add to this sorry tale the use of cyanide and mercury plus the environmental aspects of all this activity and you get the picture. Criminal gangs control large swathes of this country and force is used to control territory. It’s not pretty.

What do we do about all this? Putting an undercover team into the country and finding out all of the above is one thing, sorting it out and regularising the industry is quite another and I hope Aljazeera will take as much time on this aspect as they have devoted to the negative aspects.

But for me the answers are quite easy to identify and implement, and the whole program could be self-funding and in turn produce major benefits for the economy and the millions of people involved.

It starts with the miners – give them a licence (which they pay for) to occupy and mine a small claim that is physically identified and surveyed using modern GPS technology. Such claims will immediately attract a value which the miner can secure by selling the claim to someone else, who either wants to become a small scale miner himself or has ambitions to fully exploit the resources. It also gives the operator legal status and he can quote his number when delivering his ore to a miller or selling his raw gold.

Then get a major player who wants gold, to come into the country and to get them to set up buying centres in all gold producing districts. Pay for the gold at the world market price less a small discount for costs. These buying centres to fund an extension service for the miners in their area and to support the miners with protective clothing and all the other items and machinery required. They should also be suppliers of explosives.

I would also encourage the miners in the area of each buying centre to establish their own processing capacities which they operate on a co-operative basis. These to be equipped by machinery especially designed and manufactured to handle the ore produced and maximise recovery. They would operate in competition with the established millers.

There is considerable interest in the establishment of the large scale open cast mines exploiting low grade ore resources and a special program needs to be created for this to happen. The present arrangements where the sole buyer of gold is Fidelity and the Reserve Bank is clearly not working properly, in my view, if the Bank wishes to buy gold for reserve purposes it should do so at market prices in US Dollars and not hold any monopoly on refining or buying gold.

The payment of hard currency for all gold production would assist the counties balance of payments, raise living standards and increase tax revenues. Everyone wins.

Eddie Cross
Harare 25th March 2023

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