Zimbabwe: Legislation Vital for Sustainable Mining Revenue Sharing

26 October 2020

Repeal of the controversial Indigenization and Economic Empowerment Act left communities from resource-rich areas with limited legal legroom to benefit from mineral resource revenue.

Against this background, a coalition of civil society organization is pushing for a new legislative framework to ensure communities benefit from natural resources' extraction.

Publish What You Pay (PWYP), an international coalition of over 1000 organizations, with a local chapter in Zimbabwe, is angling for an Act of Parliament.

Despite its controversial enactment in 2010, the Indigenization Act set up a legal framework for communities in resource-rich areas to benefit through the establishment of Community Share Ownership Trust Schemes (CSOTs).

While vilified for its role in allowing political cronies to take over companies, with its infamous 59 per cent threshold, by setting up CSOT structures it gave communities a legal footing to claim revenue from natural resources.

The 2019 Midterm budget review statement and supplementary budget by Minister of Finance and Economic Development Professor Mthuli Ncube, however, confirmed an end of the Indigenization Framework.

Despite this, PWYP coordinator Joyce Machiri says mining communities still have a constitutional right to benefit from the extraction of mineral resources in their communities.

Speaking during a virtual meeting launching a benefit-sharing campaign for communities, Machiri said there was the need for a proper law to ensure communities get a share from the extraction of natural resources.

"CSOTs no longer have legal backing, because government reversed the IEE Framework. A proposal was made in the 2019 mid-term budget review that a new empowerment framework will be formulated after the IEE framework was reversed.

"Up to date there is no new policy framework that the government has come up with. There is need for the Ministry of Finance and Economic Development to speed up formulation of the new policy framework," said Machiri.

Although CSOT structures body faced challenges in participation, transparency and accountability due to accusations of hijacking by politicians, they were legally constituted unlike the benevolence of corporate social responsibility.

Corporate Social Responsibility shortfalls

Ordinarily, construction of a health centre for any community represents development. But not for Mutoko community where granite miners have been constructing a clinic for 14 years, according to community members.

Narrating the ordeal of Mutoko granite mining, Kuda Makanda a community monitor says political elites are subjecting miners to underground tax, through favors and gifts, under pretext of community development.

Makanda said there is no sincerity in cascading benefits to communities as miners' interests are protected by compromised politicians when communities seek redress and accountability.

"The granite miners here are not sincere, they have been building a clinic for over 14 years now through CSR, so we believe this framework cannot ensure sustainable communities benefits.

"We have poor infrastructure, roads are in a sorry state, service delivery from council is depressed they are failing to repair and maintain the current dilapidated infrastructure as the revenue from granite mining is taken to central treasury," said Makanda.

As the lack of an enabling legislative framework remains an albatross to revenue sharing, communities are hopeful that through devolution they will get a chance to participate in the mining value chain.

Its implementation is still lagging, government seemingly concentrates on effecting favourable elements for hegemony, without legislating an Act of Parliament to operationalize this constitutional principle.

Makanda says or residents in resource-rich communities, devolution presents a window of opportunity to get involved and communities need to keep guard of its implementation.

"With devolution, there is a possibility that communities might start to actually have some sort of involvement in how their resources are governed. But still, the question goes back to the issue of an enabling framework.

"Devolution is there in theory but in practice, it has not been realised on the ground," he said.

Local authority officials concur with the community on the connivance of miners and political elites receive money to shield companies from liability.

Officials at Mutoko Rural District Council say they are receipting as little as a dollar (local currency) from a tonne of black granite as royalty, while the more granite mined the less royalty council receives.

Thomas Mashango Mutoko RDC, Finance Director, currently doubling as acting Chief Executive Officer, questions production figures declared by miners as their operations are out of council's reach.

He proposes direct benefits through reserving community concessions, setting up local polishing firms to create employment, as the current laws allow miners to essentially siphon granite for free.

"On paper, transparency is there but on the ground, it is a different story, we are appealing for community reserved concessions. We need laws that ensure the community benefits from granite mining in Mutoko.

"We are totally blind to the productions of the council, we don't know the production quantities from their mining activities. We are not sure even of the tonnage because they use estimates," he said.

Diamonds fail to glitter

Mutare Rural District Council, chief executive officer Shepherd Chinaka says their experience with diamonds of elite resource capture with no tangible local community benefits draws parallels with Mutoko.

He said council and communities shouldered inconveniences of mining expecting benefits which have come in bits and pieces.

"We were expecting to benefit as the council as well as communities when diamond mining started in our district but those benefits have not been tangible," he said.

In 2012 then President Robert Mugabe was sold a US$50 million dummy at the launch of Zimunya Community Share Ownership Trust by five diamond companies which pledged ten million each but failed to honor their pledges contributing a mere US$400 000.

The successor of the multi-company regime in Chiadzwa, the Zimbabwe Consolidated Diamond Company (ZCDC) chipped in with $5 million in 2018, converted at 1:1 rate- leading to a rapid loss in value as the local currency plummeted against the US dollar.

Chinaka says when ZCDC has contributed it has been erratic, recalling only one year since diamond mining started when royalty revenue was paid on time.

He said benefits have not cascaded to local communities nor council which only gets royalties at the end of the year, in devalued local currency.

"In the past two years, we have not been getting these levies in time. ZCDC has contributed in phases, the ZWL$5 million which it seeded in the Zimunya CSOT at a rate one to one was wiped when the financial laws changed.

"We wish government comes up with a legislation which forces miners to declare what they have mined and council are given a percentage which is predetermined and which can be fused into our annual plans," said Chinaka.

A PWYP study on Revenue transparency and sharing in the mining sector between the period 2013 and 2019, proffered key recommendations towards improving natural resource governance for sustainable development.

The study recommended government to ensure transparency and accountability in revenue management, sustainable planning for future generations and adoption of mining sector reforms like the Extractive Transparency Initiative (EITI).

PWYP also said communities and CSOs can also push for revenue transparency by following the money from central to provincial or lower government tiers in line with Section 301 (3) of the Constitution, to advocate for accountability.

"PWYP must push for a new framework to empower communities based on multi stakeholder discussions, with a clear message for royalty revenue sharing framework and preferential local procurement," reads part of PWYP recommendations.

Machiri said the benefit-sharing campaign embraces transparency and accountability as key facets of just, equitable and sustainable exploitation of natural resources.

She said a legislative benefit sharing and policy framework in Zimbabwe is key for communities to get a fair share of the revenue from the extraction of finite natural resources.

"The benefit-sharing campaign on transparency and accountability is critical at this point in time we are running this to mainly inspire mining revenue transparency and sharing in the extractive sector in Zimbabwe.

"We aim to lobby and advocate policymakers to review benefit-sharing laws and policy frameworks in Zimbabwe," said Machiri.

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