RECENT LEGISLATIVE DEVELOPMENTS ON THE EXPORTATION OF BASE MINERALS IN ZIMBABWE
1.1 On the 20th of December 2022 the Minister of Mines promulgated the Base Minerals Export Control (Lithium Bearing Ores and Unbeneficiated Lithium) Order, 2022, Statutory Instrument 213/2022, (hereinafter referred to as “the 2022 Order”).
1.2 The Order was issued in terms of section 3 of the Base Minerals Export Control Act [Chapter 21:01] which empowers the Minister of Mines to issue orders prohibiting
the export of all base minerals or of any specified base minerals from Zimbabwe either generally or to any territory mentioned in the order; or to issue orders directing that all base minerals or specified base minerals may only be exported from Zimbabwe either generally or to any territory mentioned in the order in accordance with a written permit.
1.3 In terms of the 2022 Order, exportation of lithium bearing ores, or unbeneficiated lithium from Zimbabwe to another country was prohibited except under written permit of the Minister.
1.4 Written permission of the Minister could be obtained in the following circumstances:
1.4.1 upon a written application being made for exportation of samples of lithium bearing ore or unbeneficiated lithium for assaying outside Zimbabwe; or
1.4.2 upon production of written proof satisfactory to the Minister that there are exceptional circumstances justifying the exportation of the lithium bearing ores or unbeneficiated lithium and where the lithium bearing ore or unbeneficiated lithium has been valued in terms of section 12 B(3) of the Value Added Tax Act [Chapter 23:12] for purposes of payment of the export tax on unbeneficiated lithium.
1.5 The phrase “special circumstances” was not defined in the Base Minerals Export Control (Lithium Bearing Ores and Unbeneficiated Lithium) Order, 2022. Ergo, the
Minister of Mines had a wide discretion regarding the question whether there are special circumstances warranting the issuance of an export permit to an applicant.
1.6 Three Chinese companies which were in the process of building processing plants in Zimbabwe were exempted from the ban. These could therefore continue to export unbeneficiated ores without the need of the permit issued by the Minister in terms of this Order.
1.7 It is important to highlight that the 2022 Order did not apply to lithium concentrates. What was barred is the exportation of lithium bearing ore or unbeneficiated lithium. “Lithium bearing ore” was defined as any mineral ore containing lithium. This is wide. Any ore that has lithium in it was barred from export.
1.8 “Unbeneficiated lithium” was defined as any lithium in whatever form that has not undergone processing to an extent that would exempt it from the payment of export tax under section 12B (“Collection of tax on exportation of unbeneficiated lithium; determination of value thereof”) of the Value Added Tax Act [Chapter 23:12].
1.9 Section 12B of the Value Added Tax Act provides definitions of “unbeneficiated lithium” and “unbeneficiated lithium petalite” for purposes of collecting tax on unbeneficiated lithium exports. “Unbeneficiated lithium” is defined as lithium exported for use in automotive or other batteries manufactured outside Zimbabwe, or for the manufacture of lithium carbonate, or for any beneficiation outside
Zimbabwe. The definition is most unhelpful but suggests that any lithium exported for further processing, in addition to the lithium exported for use in automotive and other batteries is regarded as unbeneficiated lithium for which tax is paid.
1.10 The extent of the processing is not defined but reference to section 12B (5) gives a hint. Section 12B (5) provides for an exemption to the payment of tax between 1st January 2020 and 1st January 2025 in respect of spodumene and chemical grade petalite concentrate by operators in a special economic zone area. After this period, petalite and spodumene concentrates will not qualify for exemption and will therefore for purposes of the ban on exportation fall within the export ban. Those outside the special economic zones are liable to pay the tax. The processing should therefore be beyond simply producing petalite and spodumene concentrates.
1.11 On the 6th January 2023, the Minister of Mines promulgated the Base Minerals Export Control (Unbeneficiated Base Minerals Ores) Order, 2023, Statutory Instrument Number 5 of 2023, (hereinafter referred to as “the 2023 Order”). The 2023 order was issued in terms of section 3 of the Base Minerals Export Control Act [Chapter 21:01].
1.12 The Base Minerals Export Control (Unbeneficiated Lithium Bearing Ores) Order, 2022, published in Statutory Instrument 213 of 2022, was repealed in terms of section 4 of the 2023 Order. The repeal however does not affect the validity of anything done by the Minister under the 2022 Order. The exemptions to the three
Chinese companies therefore stands. All permits, if any that the Minister may have issued would also not be affected.
1.13 In terms of the 2023 Order, the exportation of unbeneficiated base mineral ores from Zimbabwe to another country is prohibited except under written permit of the Minister of Mines.
1.14 The permit by the Minister to export unbeneficiated base mineral ores may be granted in either of the two instances below:
1.14.1 the export of any unbeneficiated base mineral ore in respect of which the applicant produces compelling reasons to the Minister showing that no such ore is capable of being beneficiated to any extent within Zimbabwe; or
1.14.2 the export of samples of any unbeneficiated base mineral ore for assaying outside Zimbabwe, upon production of proof satisfactory to the Minister that such assay cannot be satisfactorily done in Zimbabwe, and that the quantity to be exported for that purpose is necessary for that purpose.
1.15 The following definitions are key:
1.15.1 “Base minerals” means coal and all other minerals and mineral substances, and includes coke and all such slimes, concentrates, slags, tailings and residues as are valuable and contain base minerals as hereinbefore defined,
but does not include precious metals, precious stones, mineral oils and natural gases.
1.15.2 “Unbeneficiated base mineral ore” means any ore of whatever base mineral that has not undergone processing within Zimbabwe to any extent.
1.16 There are two key differences between the 2022 and the 2023 Orders. These relate to the Minister’s discretionary power and the minerals which fall within the ambit of the Orders. The differences are addressed separately below:
1.16.1 The 2022 Order only prohibited the exportation of raw lithium or unbeneficiated Lithium ore without written permission of the Minister. However, the 2023 Order now prohibits the exportation of unbeneficiated base minerals ore, including lithium, except with a written permit issued by the Minister of Mines. What that means is that the prohibition now extends to all base mineral ores and not just lithium.
1.16.2 The Minister of Mines had a wide discretion regarding the question of whether or not to grant an export permit in respect of lithium bearing ore or unbeneficiated lithium under the 2022 Order. An applicant needed to establish special circumstances to the satisfaction of the Minister in order to obtain an export permit and the term special circumstances was not defined. Currently, an applicant must establish compelling reasons showing that the base mineral ore cannot be beneficiated in Zimbabwe to any extent, in order to obtain an export permit in respect of base minerals
ores. This suggests that for as long as there are facilities in Zimbabwe to perform some form of beneficiation, an exporter would be expected to have that ore processed in Zimbabwe to the extent possible before it can be exported.
1.16.3 With regards to samples for the purposes of assaying, under the 2022 Order, an application for an export permit for the purposes of assaying ore samples outside Zimbabwe was almost ceremonial. No statutory requirement was imposed in respect of such an application save for proof of volume of the ore which the applicant intended to export for assaying. The 2023 order on the other hand imposes strict requirements regarding an application for an export permit for the purposes of assaying base minerals ore samples. Under the current 2023 order, an applicant must establish two things:
1.16.3.1 proof satisfactory to the Minister that such assay cannot be satisfactorily done in Zimbabwe; and
1.16.3.2 that the quantity to be exported is necessary for that purpose.
1.17 What is the import of the Base Minerals Export Control (Unbeneficiated Base Minerals Ores) Order, 2023, Statutory Instrument Number 5 of 2023 on the mining industry and Zimbabwe at large? In my considered view, it is clear that the Order does not outrightly bar the exportation of beneficiated base minerals ores. One simply needs to bring themselves within the ambit of the exceptions. With regards
to unbeneficiated base minerals ores, one can only export in terms of a written permit which is issued by the Minister if he is satisfied that the samples cannot be assayed satisfactorily in Zimbabwe and also that the base minerals ores cannot be beneficiated or processed in Zimbabwe to any extent. The intention obviously is to ensure that the beneficiation and value addition process is done locally to the extent possible in Zimbabwe. However, this is only possible where the relevant infrastructure is in place.
1.18 The effectiveness of the 2023 Order in achieving the purpose or mischief behind its promulgation is yet to be tested. The results however will depend on implementation.
Article written by Pauline Mwandura, an Associate at Wintertons Legal Practitioners.
This opinion does not constitute legal advice and should not be relied upon as such. The writer can be contacted at pauline@kuvaka.host
