The global spike in demand, subsequently leading to lithium price buoyancy, has injected an adrenalin shot into the blend of public expectations and anxieties from either seeing mining as a lever or fever for improved standard of live of majority Zimbabweans.
In fact, speaking at the Mining Indaba in Cape Town in February 2023, the Minister of Mines and Mining Development, Hon Winston Chitando stated that his government saw mining as the key to solving Zimbabwe’s socio-economic challenges. Such challenges include low growth, unemployment, poverty, and inequality.
Among its 60 different mineral varieties, Zimbabwe is now confidently counting on lithium as one of its strategic minerals, joining gold, platinum, and diamonds which are the main anchors of the US$12 billion mining economy by the end 2023. Rightly so because the global price of lithium ore has skyrocketed (up six-fold or 10-fold in recent years). This price buoyancy is driven by the exploding demand for lithium-ion batteries to power electric vehicles (EVs).
Lithium demand has more than doubled since 2016, and it's supposed to triple by 2025. According to Market Index, the global demand for lithium is forecast to rise by over 40% over the next two years from 745,000 tonnes in 2022 to 1,091,000 tonnes by 2024, according to the OCE. Meanwhile, global output was 551,000 tonnes in 2021 and is forecast to reach 1,087,000 tonnes in 2024.
Lithium mining in Zimbabwe has a long history through Bikita minerals of producing petalite primarily meant for the export market. Petalite is a crucial feedstock in the manufacturing of glass and ceramic products. With increasing pressure, globally, to shift from dirty fuels to clean energy, the focus on the production of electric vehicles has spurred the demand for lithium, spodumene to be exact, among other green energy minerals. Lithium along with graphite, manganese, nickel, and copper, are critical to the production of batteries required to power electric vehicles. Currently, Zimbabwe is the 5th largest producer of lithium petalite. The demand for lithium spodumene has resulted in mega investments into the lithium sector and multi-projects are in pipeline.
All these positive developments present greater bandwidth for Zimbabwe to make her citizens enjoy a good life underpinned by universal access to quality public health, education, water, roads, and communication infrastructure. Unless lessons from the past, especially the badly managed Marange diamonds are not heeded, the lithium prospects will be fever and not a lever for transformative socio-economic development. While the exclusive focus here is on diamonds, the challenges in the gold sector, particularly the smuggling and illicit trade of gold offers another timely reminder that mineral wealth doesn’t automatically deliver an inclusive development dividend.
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Lessons from Marange Diamonds
For Zimbabwe to pull herself out of the deep-rooted socio-economic hardships, its solution lies in good mineral resource governance. Inescapably, taking lessons from the Marange diamonds debacle, for instance, is the backbone to unleash the country’s mineral wealth potential. The case study of Marange is one typical example of how not to manage your mineral resources.
Artisanal and small miners were violently evicted from Marange diamonds to pave the way for large-scale mining activities.
Years later, the government appeared to regret this move as the 2016 national budget statement disclosed that there were tangible local economic benefits when artisanal and small-scale mining (ASM) was behind the Marange diamond mining operations compared to large-scale mining. The government could be making the same mistake with lithium. Already, artisanal, and small-scale miners were evicted from Mberengwa, and their lithium ores were confiscated.
While communities surrounding platinum mines saw significant investments in Community Share Ownership Trusts (CSOTs), each being resourced to the tune of US$10 million, the Marange Zimunya CSOT seems to have been duped of the pledged US$50 million by companies mining diamonds in Marange.
Perhaps the Mines and Minerals Amendment Bill (MMAB), that includes a provision for state equity participation for projects involving strategic minerals may offer some relief. However, the MMAB should specifically include CSOTs as part pf the indigenisation requirements and be specific on the share for communities surrounding mining areas.
Another credit for community empowerment in the MMAB are the provisions for Corporate Social Responsibility (CSR) and royalty sharing arrangements, but these are not clearly specified in terms of the benefit sharing arrangements. For instance, CSR budget can be a percentage of revenue or profit before tax for predictability of in investments CSR activities.
Likewise, the sharing of royalty can be stipulated as a percentage share, for example, the allocation of a 20% share of mining royalties to local authorities where the resources are mined. On royalty revenue sharing, there a certain condition attached, and these include the use of standard taxes, rates or levies charged by local authorities to mining companies to harmonise the local mining tax regime.
Related to Marange diamonds, the government repeatedly expressed disappointment for not getting an equitable share of revenue. Given mega acquisition of lithium mining projects, mainly by the Chinese.
The lack of transparency and accountability around capital gains tax accruing to the government is a huge concern.
Key questions that crops up are how much accrued to the government and can we locate the attendant public benefits?
It is more worrying that the Double Taxation Agreement (DTA) between Zimbabwe and China in 2016 seems to facilitate the erosion of our sovereign right to taxation. If not reviewed, this deal might have immediate negative implications on the government revenue from lithium.
The other lesson from Marange relates to the massive under valuation of diamonds, one the main reasons why the government revenue from Marange diamonds was deflated. Without appropriate cleaning, sorting, cutting, and polishing of Marange rough diamonds, the economic value – profits, foreign currency, taxes, jobs and related industries, were shifted predominantly to Dubai and India.
Although Zimbabwe has moved to ban lithium raw exports, there are fears that loopholes for illegal exportation of raw lithium still exists. The exportation of raw minerals, lithium in this case, can greatly prejudice flow of mining benefits to Zimbabweans.
There can never be a discussion on what could have been because of diamonds in Zimbabwe and the famous alleged “missing 15 Billion diamonds money” will not be mentioned. It remains a fresh scar and a brutal example of a missed opportunity for diamonds to glitter the nation but alas diamonds failed to sparkle for life in Marange and Zimbabwe alike.
Despite the high geological potential of the Marange diamond filed, there was never any competitive bidding to select investors who could potentially offer a better socio-economic development bandwidth. Similarly, Zimbabwe appears to be a magnet for foreign and local investment in lithium mining, but the competitive disposal of mineral rights is not followed to optimise national benefits from mining in line with the National Development Strategy. Remarkably, the MMAB offers opportunities for the introduction of competitive bidding for the acquisition of the strategic mineral rights in line with the Zimbabwe Investment Development Act (ZIDA).
A state-owned entity, the Zimbabwe Mining Development Corporation of Zimbabwe (ZMDC), had a poor record regarding the timely production of its audited financial statements, a violation of the Public Financial Management Act (PFMA) and the Constitution. Kuvimba Mining House, a state-controlled entity, hasn’t produced its audited financial statements. Kuvimba also owns the lithium mineral rights at Sandawana Mine in Mberengwa.
Pertaining to public value derived from the rich Marange diamond fields, to date, the only notable development linked to Zimbabwe’s diamonds is the US$100 million Zimbabwe National Defence University built in Harare. For the people of Marange, the real cost of diamonds on the people of Marange has come in form of serious patterns of human rights violations including land rights violations, forced dislocations and evictions with no due process and inadequate compensation, environmental degradation, exposure to communities and workers alike to pollution, pollution of the living environment such as air, soil, noise, and water in the Save and Odzi rivers.
How is lithium playing out?
Zimbabwe has verified lithium deposits in over 15 locations across all the country’s provinces. Bikita Lithium mine believed to be Africa’s biggest and best-known lithium producer and is home to the world’s best-known deposit of 10.8 million tonnes of lithium ore.
The mine was sold to China’s Sinomine in 2022 for just US$180 million. Another Chinese Huayou Cobalt bought Arcadia Lithium mine in December 2021 in a deal valued at US$422 million while another Chinese firm again Chengxin Lithium acquired Sabi Star Lithium in a deal worth US$77 million. Western investors have also acquired mines. UK mineral exploration companies Red Rock, Galileo and Premier African Minerals is also on record having invested millions into Zimbabwean lithium exploration and mines. Ireland’s Arkle Resources recently secured three exploration licenses in Insiza.
Australia’s Mirrorplex has started to produce Lithium from its Shamva mine. A dozen other foreign companies are quietly exploring lithium in various parts of the country with the likely aim of determining resource size and sell to bigger mining companies. It is anticipated that by 2030, Zimbabwe will have at least 15 large scale operating Lithium mines.
What is on concern is the undervaluation of our lithium assets when being sold. China currently makes about 70% of the world’s EV batteries and has invested in our mines and one would expect that proper due diligence was done into the real value of these 3 major mines before selling them to our friends from the East.
Future generations are going to be prejudiced as our local resources will be mined by multi-national corporations with them watching from afar yet so near we once were the owners of these resources. We could have at least followed the diamonds and platinum route where lithium as the new in thing would also maintain the community share ownership models so that communities benefit from the resources in their localities. The communities in lithium rich areas have already made their pleas expressing how they are being side-lined in critical decisions.
In a commendable move, in December 2022, President Emmerson Mnangagwa issued a statutory instrument banning the export of unprocessed lithium with the intent to stop artisanal miners from digging up the mineral and taking it across borders and ensure value addition and beneficiation. Whether this is reaping benefits is a story for another day.
However, the ban is not absolute as with just the Minister’s authorisation exportation is allowed. This is a huge gap which obviously those politically connected or top political personal can exploit for self-enrichment whilst the ordinary people and Artisanal Small-Scale Miners (ASM) wallop under the strict claws of the law. History has not been kind to us since Marange and we have witnessed government and politically connected people taking advantage of the laxity of controls in our mineral sector owed to the haphazard manner things are done.
The ban clearly side-lines the ASMers who could have benefitted and eked a living off the newly found resource. Furthermore, reports of human rights violations on the ASMers such as physical attacks by heavily armed police and being ordered to abandon their ores are on record. Further, the communities of Mberengwa registered their displeasure in the lithium projects in November 2022 where they raised concerns about being side-lined in all processes. After all, civic participation and benefitting from resources in your locality are basic human rights as per the Zimbabwean 2013 Constitution.
Needless to say are the concerns on illicit financial flows have been raised against the biggest lithium producer Bikita Minerals that it may have been under-invoicing its exports in addition to failure to declare its high grade lithium to Zimbabwe Revenue Authority (ZIMRA), thereby prejudicing Zimbabwe of revenue amounting to tens of millions of dollars annually.
Conclusion
From the quick glance at the script that is playing out in the lithium sector, one cannot help but draw many similarities with the Marange script. If lithium is to lighten up Zimbabwe’s economy, good management of mineral resources is the key. Marange has shown us what to and what not to do and it is for us to act like the Bourbon kings who were known for their stubbornness that led to their own downfall despite tasting the winds of change and were referred to as have learned nothing and forgotten nothing out of the French Revolution of 1789.
The Lithium boom is recent and will continue the future and Zimbabwe needs to learn new ways and unlearn the old ways. There is hope and potential for Zimbabwe to prove herself and this needs to be translated to policy and practice.
The basics that the Zimbabwean government must follow for positive change have been recited repeatedly. For starters, the Mines and Minerals Amendment Bill which Parliament was making hearings on is old, tired, and ragged and does not cover the recent global trends especially on transitional and critical minerals. We need a new mining law that speaks to the current trends. Furthermore, ASMs have contributed largely to the economy in the gold sector and in the diamonds sector before being kicked out thus lithium mining needs to accommodate them strategically.
Secondly, a lithium industry that is shrewd in secrecy and transparency whilst not promoting accountability is not good for Zimbabwe. Zimbabwe needs to embrace principles of transparency and accountability principles and promote contract transparency, beneficial ownership disclosure in lithium mining. To demonstrate sincerity, the government must reconsider joining the Extractives Industry Transparency Initiative (EITI) as per Professor Mthuli Ncube’s 2019 Budget Statement recommendation.
Furthermore, mineral backed development comes from mining revenue thus Zimbabwe needs to maximise on taxation of the mining sector. At all costs, Zimbabwe must desist from offering harmful tax incentives and needs to reconsider her tax treaties/agreements with countries like China and move towards implementing effective and progressive taxation.
Finally, world trends on due diligence are clear and Zimbabwe needs to ensure that her minerals are sourced in a responsible manner. The issues of getting a social licence before mining commences needs to be taken seriously. In order to avoid the conflict minerals tag, Zimbabwe must adopt the United Nations Guiding Principles on Business and Human Rights and work towards its own National Action Plan on their implementation.
Since our government is fond of looking East, perhaps they can draw inspiration from the Chinese proverb that says, “If we do not change our direction, we are likely to end up where we are headed”. It is our hope that Zimbabwe changes the course of the ship and ensure lithium lightens up its economy as expected by the Zimbabweans.
- Chidarara is a Projects Coordinator with ActionAid International Zimbabwe. Sibanda is a Tax and Natural Resource Governance Advisor and Coordinator of the Stop The Bleeding Campaign, a consortium of organisations fighting illicit financial flows from Africa. They write here in their personal capacities.