Zambia’s Gold partnerships raises more “gold dust”

With the recent discoveries of Gold in various parts of Zambia, there seems to be great interest in the speedy exploitation of the mineral. The general citizenry is hoping for a super economic relief on a debt-burdened country. Expectations of job creation, more forex, more taxes and an economic mining diversification from copper to the newfound Gold. 

Following the frenzied gold discoveries in Kasenseli, Mwinilunga district of northwestern province of Zambia, the government made some pronouncement on the prudent exploitation of this strategic mineral for the greater benefit of Zambians. These calls were welcome, however, the turn of events has raised a lot of dust. Especially the latest joint venture forged by the nation mining investment arm ZCCM-IH with Karma Mining Services and Rural Development of Sudan. Many voices have been raised calling government to cancel these suspected dubious new partnerships.

A Canadian based, Zambian lawyer Elias Munshya has added his voice to the Gold matter. Below are some of his penitent questions begging for answers from Zambian authorities;

“The ZCCM-IH website appears to have conflicting information regarding the Consolidated Gold Company of Zambia structure.

In some cases, it says Karma Rural Development and Mining Services has 65% of the CGCZ shares, and in some other instances, it says the same company holds 55% of the CGCZ shares.

In any case, regardless of how we look at it; CGCZ is controlled by Karma – which is a company registered around two years ago; and it has, as its directors several Sudanese.

CGCZ share structure is important for several reasons:

(1) It contradicts President Lungu’s directive that a Zambian company owned by Zambians will be mining gold in Mwinilunga.

(2) it does not explain why ZCCM-IH needed this joint-venture with Karma, which has no history anywhere of mining, gold, or management.

(3) It does not explain why the Sudanese must have majority shares in the CGCZ. Why not a minority share?

(4) it contradicts the reasons given as to why the government withdrew exploration licences from small scale miners in Mwinilunga. We were told that it was necessary to withdraw licences from all these jerabos, or by whatever name they are called in Mwinilunga, so that government can come up with much orderly way of mining. What is the orderly way? The Sudanese.

(5) Nearly everyone believes that Karma is just a front for President Lungu’s selfish penchant to steal. Karma as a company can only exist and have access to so much, only if it is under the backing of State House. There is no Sudanese who can come to Zambia and within two years has the mining licence; and has majority shares in the gold enterprises.

(6) The board of ZCCM-IH has some explanations to make. How did they set up the CGCZ structure? How did they come up with Karma? Did they advertise for interested companies to set up the joint venture? At which board meeting did they decide to choose Karma?

A humble thief, bakwetu, is still a thief.” end of quote.

The Centre for Trade Policy and Development also added its voice, asking Government of Zambia to explain the material motive of partnering with Karma Mining Gold. Below is their statement on the same matter.

The Centre for Trade Policy and Development (CTPD) wishes to note with great concern over the recent developments with regards to the exploitation of the Gold resource.

The government needs to slow down and engage in a consultative process to generate a formidable Gold game plan that will enhance the benefit of the citizenry from the resource. From the recent undertakings, it is clear that Zambia does not have one.

Gold discoveries across the country provide yet another opportunity for the Government to provide direction and guidance with regards to the exploitation of natural resources for the benefit of the Zambian people. The Government of the Republic of Zambia (GRZ) has declared Gold as a strategic mineral. This is to allow all citizens to duly benefit from its exploitation. However, the public seems to have a lot of concerns around the recent undertakings by ZCCM-IH. One such undertaking is the joint venture partnership with a Sudanese dominated company, Karma Mining Rural Services Development (KMRSD) Ltd.

This partnership has been actualized through a special purpose vehicle known as the Consolidated Gold Company Zambia (CGCZ) Ltd. CTPD wishes to note that there are several reasons as to why corporate entities enter into joint venture business partnerships. Some of these include:

Creation of greater creativity and spur of innovation;

Technological and skills transfer between the partners;

Equity financing; and

Reduction of business risk.

“It is not clear why ZCCM-IH has chosen to partner with KMRSD when many Zambian dominated mining companies are crying for the same opportunity. The Government clearly needs to underscore its material motive. This will go a long way in shaping a progressive conversation in the gold mining sector. This will also help limit speculation by various stakeholders.

The government can only partner with a foreign-dominated mining company if it has exhausted all possible avenues and opportunities to partner with a local citizen-driven company. The following questions need to be addressed by the Government:

Is the partnership between KMRSD and ZCCM-IH aimed at equity financing?; or

Is the partnership aimed at creating a transfer of technology and skills from Karma to ZCCM-IH?; or

Don’t local citizen influenced companies to have the capacity to partner with ZCCM-IH?

The Centre also wishes to stress that deriving maximal benefit from the gold resource should go beyond the Karma and ZCCM-IH partnership. The government needs to put systems in place that ensure that ordinary citizens duly benefit from the gold resource.

The only way of achieving this is by supporting Artisanal and Small-Scale Gold Mining (ASGM) and recognizing that miners in this sector are an important element in the gold value chain. This support must not merely end at providing equipment but should also involve educating the miners. Formalization cannot exist without education, because the untrained small-scale miners will continue to use the same inefficient and environmentally dangerous techniques to mine and process the gold resource.

The government can utilize the services of the University of Zambia (UNZA), School of Mines and Copperbelt University (CBU), School of Mines and Mineral Sciences to initiate the training of artisanal and small-scale miners on efficient and environmentally benign techniques.

CTPD in conjunction with the University of Zambia (UNZA), School of Mines has just concluded research on Gold mining. This research will be launched before the mid-next month and will provide an opportunity for the Government to adopt some of the progressive recommendations put forward based on empirical evidence.” end of quote.

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