Financial Management Practices of Small-scale Gold Mines in Virginia Central, Odzi, Mutare, Zimbabwe

Abstract

Small-scale gold mining is of significant economic importance to Zimbabwe, accounting for 60% of gold production, creating much-needed employment, enhancing rural development, generating crucial export earnings, and supporting an array of livelihoods along the value chain. The sector often lacks formalization and is dogged by cross-sectional challenges affecting the small-scale gold miners' ability to implement robust financial management practices. This case study investigated the financial management and record-keeping practices of small-scale gold miners in the Virginia Central area of Odzi, Mutare, Zimbabwe. The study was guided by stakeholder and institutional theories to help gain a better understanding of the miners' interactions, actions, norms, and behaviors in the field of financial management. The study employed a mixed-methods convergent parallel design approach with quantitative research from 28 Ministry of Mines and Mining Development -registered small-scale gold miners who were the survey respondents, supported by qualitative thematic analysis based on 18 key informant participants. Rudimentary financial management practices coupled with poor cash-based record keeping and the mixing of personal and business expenses were identified. The limited records maintained aligned more towards monitoring of incoming cash revenue, with limited tracking of expenses or operating costs. The study also revealed that payments for gold deliveries received by miners in cash from Fidelity Gold Refiners, the sole legal gold buyer, impeded financial accountability, encouraged underhanded dealings, including gold smuggling, and compromised a digital money trail that could facilitate bank reconciliations. This important financial management practice of bank reconciliations was identified as not being practiced by close to three-quarters of respondents. Levels of financial literacy of the miners were generally low, and the majority of the miners were identified to have failed to go beyond high school in formal education. Suspicion of formal financial institutions led to reliance on informal loans, with distrust evidently rooted in the country's deep-seated historical hyperinflation and currency problems. Distrust of government agencies such as ZIMRA and EMA was also prevalent as miners felt their title to the claims could be threatened by such agencies passing information to more connected miners, thus compromising their long-term planning. The study findings highlighted a lack of financial accountability and compromised access to finance. An understanding of the benefits of formalization and sound financial management practices was evident amongst the miners, yet conscious efforts to avoid prudent financial management practices were evident. The study brought to the fore the need for interventions to ensure financial management best practices in the small-scale gold miner’s sector. Recommendations also encouraged review of policies to support formalization of the sector, as well as a relook at regulations with a view of amending the status quo of the same rules and regulations governing both the informal small-scale and established, formal large-scale gold mining sectors. Financial literacy training is also required in the sector to enhance understanding of financial management practices, and the distrust of financial institutions and government agencies needs to be addressed.