• Fidelity Printers is set to introduce a gold traceability system in September
  • Over $1 billion in mineral revenues is lost annually due to corruption, with around $100 million from gold alone
  • The system can undermine smuggling but corruption risks remain high

Harare- The country's dominant gold buyer Fidelity Printers and Refiners will introduce a system to trace the supply of gold from mines to the market on the 30th of September 2024 to curb gold smuggling.

Mines Ministry revealed that over a billion dollars in mineral revenues is lost due to corruption, with around 100 million of that being from gold while the Gold Mafia, an Al Jazeera pronounced documentary exposed millions are being lost in weeks not annually exposing high level corruption by high level political elites and prophets.

According to Peter Magaramombe, the General Manager of Fidelity Printers and Refiners, "The system will enable real-time monitoring of the gold supply chain. It will track the gold bullion weighing by producers and its subsequent delivery to Fidelity Printers and Refiners, which can then also be traced to the final market,"

Gold has emerged as an even more crucial mineral than before, with the introduction of the new Zimbabwe Gold currency that requires larger gold reserves as backing. In 2023, the country produced 30.1 tonnes of gold, down from a record 35.3 tonnes in 2022 while minerals headlined by gold accounts for over 60% of foreign currency in the country.

It is within this context that Fidelity is set to implement its new traceability system which aims to provide real-time monitoring of the gold supply chain, from mine to market, in an effort to curtail the persistent issue of gold smuggling that has plagued the industry.

However, if properly implemented, a system with increased traceability and oversight through closely tracking the gold supply chain from mine to market could make it more difficult for artisanal miners to divert gold into illicit channels or avoid the official export processes. This could incentivize artisanal miners to formalize their operations.

Implementing a robust gold tracking system could undermine the economic incentives that have drawn many artisanal miners into the informal, illicit trade by making it riskier and more difficult to smuggle gold out of the country. Artisanal miners contribute 60% of the gold produced in the country, so any policies that disrupt their livelihoods could have significant unintended negative consequences.

While this policy may seem positive on the surface, it will only work if implemented equally without any special exemptions for powerful elites. The evidence suggests that it is the well-connected and influential individuals, rather than the poor and powerless artisanal miners, who are the main perpetrators of gold smuggling. High-profile cases like that of Henrietta Rushwaya, who was caught attempting to smuggle gold out of the country but then had her gold returned and even received a promotion, demonstrate the double standards at play.

If the gold tracking system lacks robust third-party auditing and verification mechanisms, it becomes highly vulnerable to internal collusion and corruption. Government agencies tasked with oversight may be susceptible to political influence or conflicts of interest, rendering them ineffective enforcers. In such circumstances, the tracking system will be largely powerless against the very culprits it is meant to monitor.

However, corruption remains the elephant in the room towards any progress in Zimbabwe. With already a culture of corruption brewing amid poverty and drought spells, officials responsible for monitoring, verifying, and approving gold shipments could be susceptible to bribery, leading them to overlook discrepancies or irregularities. Unscrupulous exporters may attempt to pay off these officials in order to bypass certain compliance requirements.

This will mean that those with privileged access to the real-time monitoring data and information about the tracking system could potentially share this sensitive information with certain players, allowing smugglers to time their activities in a way that avoids detection. It is not primarily small-scale miners who smuggles but powerful businessman who buys from them at a lower price.

Without addressing these fundamental vulnerabilities, the gold tracking system risks becoming a hollow exercise - a facade that perpetuates the status quo of corruption and elite capture. Meaningful reform will require a concerted effort to establish robust, independent auditing mechanisms and limit political interference in enforcement efforts.

To effectively mitigate these corruption risks, the Zimbabwean system would likely benefit from several key anti-corruption measures. Establishing strong, independent auditing mechanisms would provide rigorous oversight and accountability.

Ongoing monitoring and timely adjustments to this anti-corruption framework would also be critical to ensure its continued effectiveness.

Without these types of comprehensive, well-enforced safeguards, any tracking system introduced runs the risk of becoming merely a façade, rather than a genuine deterrent to illicit gold flows and other corrupt practices.

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