HomeBase MetalsBasic digital solutions for the artisanal sector

Basic digital solutions for the artisanal sector

After reading about various tragedies regarding artisanal miners losing their lives in Zimbabwe and across the globe, one cannot help to wonder what more can be done to stop the recurring loss of life.

This is not just a Zimbabwean problem and 2019 has particularly registered a high number of fatalities from the artisanal sector in many mineral rich countries.

AUTHOR: Selina Zhuwarara – Mineral Policy, Investment and Strategy Consultant

Recently 43 artisanal miners lost their lives in a landslide after they breached security and entered the mining concession at Kamoto Copper Company operations in the southern part of the DRC.

This is devastating because when the criminal element of their behavior is cast aside, one finds ordinary men and women trying to make a living in difficult circumstances and with little resources to aid their cause.

The case for artisanal miners has already been adequately made and now solid interventions need to be taken to sanitize the sector in Africa.

Following from the same, Autem Mining Consultancy has been devoting its energy into developing different models that can be utilized by mineral rich countries to formalize the artisanal sector in a sustainable manner. The discussion below summarizes one such proposal.

In order to establish a picture of some elements of the model, the following discussion will utilize the Zimbabwean artisanal gold sector as a pilot scenario.

The model suggests the integration of digital solutions to the regulation and oversight of the sector and requires extensive collaboration between multiple stakeholders, in this case the following players are required, that is; government, telecoms companies, banks, digital solutions service providers, Fidelity Printers and Refiners (FPR), millers/ processing points and artisanal miners.

FPR is the sole gold buying entity in Zimbabwe thus represents the mineral buying agent within the model; this position can be also taken up by any mineral commodity trading company or the national minerals marketing authority in the relevant mineral rich country.

The model can be developed to assist any mineral sector and can be implemented in any country.

The models’ foundation is premised on taking decisive measures in embracing artisanal miners as legitimate producers.

This requires introducing bold and clear policy, legal and regulatory reforms that will allow ordinary individuals to be able to join the mining sector and become legal artisan participants.

It is clear that artisanal mining is now a permanent fixture in the mining industry. It is particularly attractive and vicious in stressed and poorly performing economies that continue to experience increasing wealth inequality and high unemployment rates.

It has become apparent that mineral rich governments cannot maintain the status quo where artisanal mining remains outside the economy mainstream because the sector is growing in considerable numbers every day and the clashes between artisanal miners, government, commercial mining entities and communities are increasing.

It is more effective to bring full range integration of the sector into the mining sector.

The artisanal sector is a unique sector. It presents itself in various forms such as groupings of people working together and sometimes as individuals’ pursuing solo enterprise.

The solution for dealing with artisanal miners is to legally recognize and embrace individuals and coordinated groups as legitimate producers and enable them to contribute as standalone producers or as partnered producers in the mining sector.

In order to achieve this, the conditions for formalization have to be re-conceptualized and watered down so as to allow this new set of participants.

Registration and licensing requirements can be based on a simple structure that requires an artisanal miner who has a registered mobile number, an identity document, a nominal fee and the attendance of a short basic introductory course which details mining basics and the regulatory requirements.

The course can be facilitated and wholly funded by government, tertiary institutions and development partners. These requirements are easily accessible and attainable.

The registration procedure can thereafter also collect all other relevant details pertaining to the miner. The requirement for a registered mobile number is vital because mobile technology can be utilized to link and provide digital regulatory and sector solutions to artisanal miners as will be illustrated in this proposal.

Once registered, the miner can be allocated a unique digital ID code that will be used to identify them wherever they are operating in the country and at any Ministry of Mines sub office across the provinces.

For instance, if the miner starts by mining in one province then decides to relocate to another province, then all they would need to do is report to the provincial mines office, tag in, and thereafter be assigned to a mining site or area of operation.

The model can also work with miners working as a group, the group will be required to register with the Ministry of Mines and be issued with a unique group digital ID code whose digits will be made up of the group ID code and the individual suffix number for each member.

Once registered, the artisanal miners can be allocated work sites in their preferred area of operation. This kind of registration system and regulatory solution will require governments’ to embrace and take up digital strategies to manage to sector.

The nomadic nature of the artisanal sector requires a very flexible and malleable system that can follow its participants and continue to have oversight and interaction with them.

The most appropriate strategy in this case would be to weave in digital solutions to the governing structure of the sector because they are easily adaptable and agile.

The next facet of the model requires the establishment and coupling of milling facilities with gold buying centers in areas that have been designated for artisanal mining.

The proximity of these two elements to artisanal mining sites is important because it avails infrastructure for immediate processing and disposal of gold. The approach will also assist in reducing vulnerability to illicit dealings.

When the miner goes to a designated miller with ore, the mill or processing plant will act as a vital oversight and informative point. It is suggested that every mill or processing point should be fully registered and fiscalized, that is, they should be fitted with and synchronized with fiscally linked systems that can verify the quantity of milled product and issue a fiscal receipt showing the same.

Fiscal registers at milling points have the potential to improve remittance of gold production and can become a vital cog in preventing mineral leakages and improving the accuracy and transparency of gold production statistics.

The next critical aspect in improving the artisanal sector performance is linking artisanal miners to key stakeholders and fostering supportive relationships that further facilitate their growth. Relationships with the regulatory authorities, financiers, equipment and service providers are required to improve the sector.

In order to cater for this need, artisanal miners require ready access to key stakeholders and ultimately the relationships created with each stakeholder needs to culminate into a coordinated and interactive network between all the parties.

The success of the artisanal sector relies on extensive and comprehensive collaboration between all key stakeholders in structuring and managing support initiatives. Isolated support initiatives will not bear fruit.

A simple digital solution can be devised in order to create such a network and further enable the miner to even access this network remotely. The mobile phone can be used to deliver a digital platform that creates a direct link between the miners and service providers such as banks, mobile money platforms, millers, marketing authorities and the mines ministry in a sustainable and cost effective manner.

An App can be developed specifically for the artisanal mining sector and will need to be able to host multi stakeholder entities that the artisanal miner needs to interact with.

Once a miner downloads the App they will have to input their issued digital ID code which will then enable all the stated entities to access relevant information and process various transactions for the miner based on his profile.

Whilst a host of functions can be offered on this App, the primary functions will be to create access to financial and mining services and products, to facilitate gold sales and to also act as data point for the Ministry of Mines and Mining Development.

The App can be backed by an alternative version of the platform which can be created on Unstructured Supplementary Service Data (USSD) protocols in order to cater for 2G mobile devices or for when the App is unavailable.

The digital platform or App can be scalable and fluid in terms of the partner entities and functions that it can be used for in each mineral sub-sector.

In order to illustrate the use of such a platform, the following transaction sequence is demonstrated. Artisanal miners need access to financial services and because the App will host banking services it will mean that any registered artisanal miner who has downloaded the app can use the App to instantly open a bank account or link an existing bank account with his profile on the App.

Assuming that a miner intends to access a loan to buy a pump, the registered miner can use the App to prompt a loan request to the bank. Bearing in mind that the App will also be linked to the mines ministry, the loan request will then prompt the Banks system to access production history and any other necessary details of the miner from the Ministry of Mines.

Once the loan request is assessed and approved the money is disbursed into the miners’ bank account and the miner can go and buy the pump.

Every time the artisanal miner processes ore at the mill, a receipt will be issued stating the quantity of gold recovered. The receipt can then be used by the buying center (FRP) for the finalization of the sale.

In order to enable repayment of the loan and to also avoid buying centers holding large amounts of cash, all payments can be done as transfers and deposited into the miner’s bank account where the repayment installment will immediately be deducted.

Once the repayment amount has been deducted, the miner can transfer his/her remaining balance to a mobile money wallet and cash out if they wish to do so. Using an App can provide a closed and secure system that gives an artisanal miner access to fair pricing by cutting out middlemen, giving direct access to formal channels of disposing product, access to financial services, access to capital and importantly an ability to immediately access cash from sales.

What is inherent in artisanal mining is that while miners desperately need access to dynamic financial services, they also have a real need for the immediate receipt of cash because they spend most of their time in rural or remote sub-economies that may not yet have wide use of electronic money systems and thus thrive on cash.

For this reason it is important to pair the digital solution to a relatively fluid and ready access to cash upon sale.

The success of any policies in respect of artisanal miners needs to address the fears that exist pertaining to consequences of formalizing their activities. Tax repels many individuals from even considering formal operations.

Exorbitant interest on loans and stringent requirements for collateral also dissuades individuals from accessing financial assistance. A unique tax structure has to be modeled for the artisanal sector; the rules that apply to bigger mining entities cannot be superimposed or tweaked for this sector.

The sector needs its own set of parameters and rules that introduce taxation in a manner that does not repel artisans from registering. It is without doubt that the solution has to be founded on trying to encourage and grow the sector and preventing leakages rather than cashing in on tax or interest revenues.

The artisanal sector is vital in dealing with prevailing poverty in many African countries and as such the tax and financial support solutions for the sector have to be able to leave more money in the hands of the miner and suppress the desire to maximize tax or interest returns in the initial stages of formalizing the sector.

Likewise, the financial support solutions for this sector should also be structured with less onerous requirements for individuals to access financial services such as opening bank accounts or accessing loans. This requires re-writing the barriers that currently exist in the banking and financial services sector.

The anticipated introduction of the collateral registry by the Reserve Bank of Zimbabwe which will support the use of movable property as collateral for loans is the first of such a step that will open up financial avenues to currently marginalized individuals.

But more will still need to be done to achieve financial inclusiveness for sectors such as artisanal mining. Issues such as banking fees, mobile money transaction fees, cost of fuel, cost and access to electricity, cost of data and access to connectivity all play a part in determining whether economic potential can be realized from fragile sectors such as small to mediums scale enterprises.

If regulation proves too cumbersome or if the cost of inputs becomes too costly for artisanal miners then and the calls for formalization will not bear fruit. Regulatory and commercial entities that are pivotal in ensuring the success of this sector have to be prepared to forgo traditional profit points for the greater good of nurturing this sector and be satisfied by receiving returns on investment through leveraging economies of scale.

It undoubtedly presents new risk factors for supporting entities but stakeholders have to be ready to think differently and out of the box because the artisanal sector bears significant commercial potential.

Whilst various solutions can be crafted for the industry, it is important to realize that fixing our ailing economies in Africa will bring sanity to the artisanal sector.

Part of the multitudes that take part in artisanal mining do so only because there are limited economic options available for them. It is important that African economies be built to support diverse employment alternatives, provide access to quality education in both urban and rural areas and also prioritize development of rural economies.

Once more options are made available and macro-economic situations improve, the sector will be pursued by individuals who choose the path as a career choice and not as a result of limited options.

The model by no means under-estimates the input needed from each stakeholder to bring such a proposal into reality but at its very least should drive countries that have not embarked on creating comprehensive solutions to artisanal mining to start searching for decisive measures.

The formalization of the artisanal sector is a process and will only be efficient when solutions are tailor made to the circumstances, capacity and goals of each mineral rich country.

Opening up mineral resources to individual enterprises is a vital component of fostering transformation and inclusiveness and much can be achieved by purposefully organizing the sector.