Inside the zama zama war

Sibanye-Stillwater’s Neal Froneman has more reason than most to want crime and corruption in the mining sector tackled. The precious metals miner, of which he is the founding CEO, reported 363 incidents of illegal mining in 2022, resulting in 1,115 arrests — against 187 incidents and 473 arrests the year before.

“Look, illegal mining is out of control,” he tells the FM. “It requires special skills that clearly [the police] do not have. You are dealing with people where life is cheap and sometimes blunt force with blunt force needs to be used to establish control.”

It seems to be a conclusion the government has reached too. On November 17 the parliamentary joint standing committee on defence gave its blessing to the deployment of 3,300 South African National Defence Force (SANDF) soldiers to help finally defeat the illegal mining industry. Until April, the army will work with the police to stem running battles between the heavily armed criminal gangs, known as zama zamas, that trade in illegal gold, mostly east and west of Joburg.

It’s no small matter. Speaking in a parliamentary debate last year, mineral resources & energy minister Gwede Mantashe estimated illegal mining had cost the South African economy R49bn in 2019. A more up to date estimate is hard to come by, given the opacity of the industry, says Minerals Council spokesperson Allan Seccombe. But the council is in no doubt the problem has spun out of control.

Parachuting in the SANDF to deal with seemingly intractable civilian scourges is hardly novel in South Africa. Soldiers were part of an effort to reduce illegal trade in rhino horn. What is worth thinking about, however, is that more force doesn’t guarantee a better outcome. In June, for example, 51 rhino horns were stolen from the North West Parks Board’s vault in Mahikeng — a salutary lesson that corruption of this ilk supports a food chain with international reach. Similarly, stopping the violence near disused mines in Krugersdorp doesn’t tackle the well-funded syndicates funnelling stolen gold to the souks of Dubai.

The SANDF initiative is also not the state’s first effort to up the fight against illegal mining. Mantashe last year announced plans for a specialised police investigating unit for precious metals and diamonds — a replica of the division former president Jacob Zuma disbanded when he dismantled the Scorpions. But the Minerals Council doesn’t know what’s happened to that idea.

Which means the mining industry is only partially cheered by the military rollout. Its main worry is that the government has failed to recognise the scope of the problem. Syndicates operate through informal and institutional channels; in fact, wherever public sector weakness enables them. Take South Africa’s national borders, which are so porous as to provide an unbroken supply of new illegal miners.

And, as Froneman tells the FM, “when you think of illegal mining you think of well-armed people in gangs running around underground. But it’s also communities panning for gold on tailings dams, people with equipment starting a mine without a permit. I personally don’t know what this initiative is targeting.”

So while he expects the initiative to help to an extent, he worries that the government hasn’t got an idea of what success will look like when April comes — and after spending the R492m required for the effort, which is currently unfunded.

Pan African Resources CEO Cobus Loots also likes the idea of force meeting force. His outfit is building a R2.5bn project called Mintails in Carletonville, where illegal miners have flourished. Though Mintails is fenced in and protected, he is faced with the question of what happens once the SANDF packs away the guns.

Illegal mining is out of control. It requires special skills that clearly [the police] do not have

—  Neal Froneman

In his view, it’s important that the Hawks be better empowered. This is the elephant in the room; it’s what everyone wants and what no-one seems able to achieve. One person tasked with assisting in this role is Froneman, the joint head of the crime & corruption workstream created by President Cyril Ramaphosa in June.

But, worryingly for those hoping the government has got its bases covered in tackling illegal mining, Froneman says he was surprised by the SANDF plan. “I became aware of it like you, through the media. It’s not linked to the crime & corruption workstream but it would have been nice to come through us as well,” he says.

In any event, the workstream has asked the Minerals Council to form a point of co-ordination with the government so that the private sector can be “sure its knowledge and experience is incorporated into the government’s plans”.

As for the workstream more broadly, Froneman says the private sector is still in “the organising phase”. There are no successes worth pointing out to date (it’s still early days) with a lot of effort put into knowing when and how the private sector can step in, and when not to do so.

Froneman is keen to avoid compromising the work of the National Prosecuting Authority, as well as the Hawks and established institutions. As it is, there are already severe capacity constraints in the judicial system as a whole. “You’d be shocked: there are something like 10,000 cases ready to be heard; 2,000 cases waiting for judgments. The low-hanging fruit is moving that on,” he says. “The recommendations of the Zondo commission [of inquiry into state capture] have to follow through to proper prosecution. Then [there are] the crimes that are not even public that are being pursued.”

But Loots points to something slightly different: controlling and arresting illegal miners is no good if the courts aren’t able to impose minimum sentences for illegal mining in the first place. At present, prosecuted illegal miners walk away with a fine for trespassing or just a warning.

He’s also concerned by a lack of clarity on the government’s artisanal mining policy. “That just obfuscates the matter,” he says.

The draft artisanal & small-scale mining policy 2021, released for public comment last year, is described by minerals lawyer Hulme Scholes as “a fantasy”. It assumes miners will stop illegal mining overnight, undertake formal training, use personal protective equipment and pay taxes and royalties. “This is like allowing drug dealers to continue selling drugs if they obtain pharmaceutical qualifications and pay tax on their earnings,” says Scholes. “It just won’t happen.”

This is like allowing drug dealers to continue selling drugs if they obtain pharmaceutical qualifications and pay tax on their earnings

—  Hulme Scholes

It’s not all bad news; there are examples of success in the war against illegal mining. Harmony Gold has all but stamped it out in the Free State. CEO Peter Steenkamp cites a joint venture with the police and the fact that Harmony’s trust funds paid for mine closures.

Still, while Harmony was the owner of most of those gold mines, he says, in Joburg it’s a different story. “You don’t know where those trust funds have gone because the disused mines have no owner,” he says. “You’re talking about mines that operated before I was born. The trust funds must lie with the government.”

Illegal mining, especially in gold, is not unique to South Africa. Billions of dollars in illegally mined gold has been sold to traders in Dubai, often via the unmonitored recycling industry. It’s a major concern to David Tait, CEO of the World Gold Council, who is on a mission to clean up gold’s image and improve its tradability.

“We are working with the United Arab Emirates to change the way things are done. I can smell BS a mile away but I think they are serious,” Tait tells the FM.

The World Gold Council recently convened a meeting in Vienna between central banks in whose countries illegal mining was a factor. “During the course of the meeting we agreed on 12 principles about how we want to be part of a global body to influence this,” says Tait. The aim is to put all gold imports through refiners registered with the London Bullion Market Association, and to agree on ESG principles that ban mercury usage and child labour.

They also agreed to influence the governments above the central banks to provide incentives for artisanal miners to use central banks rather than going to criminal gangs. “My goal is to marginalise the criminal gangs and get gold into credited refiners and into our ecosystem, and in so doing redirect flows away from nefarious actors and nefarious parts of say, Dubai,” he says. An agreement is expected by year-end.

—  An international problem