A COUNTRY REPORT ON NATURAL RESOURCES POLICY
PRESENTED AT THE
CONSULTATIVE MEETING ON THE GOVENANCE OF NATURAL
RESOURCES IN THE SADC REGION
BY
HON EDWARD CHINDORI-CHININGA
CHAIRMAN
COMMITTEE ON MINES & ENERGY
HON MAXWELL DUBE
CHAIRMAN COMMITTEE ON
NATURAL RESOURCES ENVIRONMENT & TOURISM
29 – 31 October 2010
SOUTH AFRICA.
1. Introduction
Achieving poverty reduction and economic development in Africa based on a sustainable utilization of the continent's rich natural resources remains an unresolved challenge. Instead, natural resource use in Africa, similar to other parts of the world, is characterized by overexploitation and unsustainable development patterns. In addition, it is usually the poor who benefit the least from the exploitation of natural resources, yet they are the ones most affected by the negative effects of sustainable resource use such as ecosystem degradation or increased vulnerability of extreme events.[1]
2. The Zimbabwean Situation
2.1 Environmental Policy as it relates to extractive Industries
Zimbabwe adopted a sectoral approach in the management of natural resources. It is governed by legal instruments that delimits the scope of exploitation and benefits that accrue to the government. The major instrument governing the management of natural resources is the Environmental Management Act.
2.2 Environmental Management Act (Chapter 20:27)
The Environmental Management Act (Cap 20:27) is a comprehensive legal framework that provides for sustainable management of natural resources and protection of the environment through the prevention of pollution and environmental degradation. At the core of environmental management is the development of environmental management plans beginning from national to the village levels.
Section 4(1c) of the Act calls for the promotion of participation of all interested and affected parties in environmental governance through providing opportunities for skills development and capacity enhancement for achieving equitable and effective participation. This provision is vital in strengthening community base natural resource management. Unlike the repealed Natural Resources Act Chapter 20:15 which had specific provisions for the formulation of local natural resource management plans, The Environment Management Act specifies the need for the formulation of Local Environmental Plans (LEAPS). These include community involvement in managing natural resources and are designed to be much broader as they seek to address other aspects of the environment such as waste management.
Part XII of EMA Act has provisions that are relevant to the land sector. The President is authorized to allocate land for conservation purposes or improvement of natural resources or protection of irrigation works. This provides for the rehabilitation of severely degraded land. EMA Act also gives the Minister of Environment and Natural Resources Management the right to direct the constructions for the rehabilitation of the environment notwithstanding the provisions of any other law. This is particularly useful for land affected by mining abandoned in the 1960s when the laws on environmental management had not fully developed. The Minister's authority in this regard also extends to private property. Protection of wetlands is mandatory, giving a legal basis for prosecutions relating to stream bank cultivation and sustainable utilization of wetlands which form important habitats for some indigenous plant and animal species.
The Environmental Management Act and Statutory instrument number 7 of 2007 makes it mandatory for all development projects (all extraction operations mining included) to be subjected to the Environmental Impact Assessment before implementation.
Section 116(2) further outlines the following specific roles for the Minister responsible for the Act:
-promoting appropriate land-use options;
-selecting and managing protected areas,
-prohibiting the importation of exotic plants and animal species, ecosystems and habitats.
Section 117(2) regulates the exploitation of germ-plasm to ensure the equitable sharing of benefits between the owner of the technology and the government of Zimbabwe.
3. Community Participation in Management of Natural Resources
With regard to community participation in the management of natural resources The Environment Management Act specifies the need for the formulation of Local Environmental Plans (LEAPS).
Section 4(1c) of the Act calls for the promotion of participation of all interested and affected parties in environmental governance through providing opportunities for skills development and conducting of the Environmental Impact Assessment reports for all developmental projects. These call for community participation during development and reviewing of the documents. Thus they decide aspects of community involvement in managing natural resources and are designed to be much broader as they seek to address other aspects of the environment such as waste management.
With the change towards participatory approach to NRM, personnel in institutions have not had sufficient skill orientation to devise strategies that lead to genuine participation of affected stakeholders. At the local level there is a perception that consultation through various workshops and conferences is participation in policy making. A fundamental problem may be the fear of the protracted time and huge financial resources it would take for stakeholders to input into policies and legislation at the design stage. Organization of communities at local level still requires development. The voice of locals organized in communities is still very low. There is limited cohesion of communities and enforcement at local levels except to limited cases.
4. Mineral Natural Resources
Zimbabwe has a well-diversified mineral resource base. The Zimbabwe Geological Survey of 1990 lists no fewer than 66 base and industrial mineral deposits found in the country. The major minerals found in Zimbabwe include gold, chrome, lithium, asbestos, nickel, copper, coal, emeralds and the platinum group metals. The mining sector is exposed to price shocks and these are not the same for all commodities at the same time. Given the diversified mineral endowment, it is critical that the country encourages the exploitation of a wide range of minerals to avoid dependence on a few commodities.
By 1990 over 40 minerals were being exploited in the country. Initially, the two most valuable products by far were gold and asbestos but this changed with the emergence of nickel and ferrochrome as major exports and, very recently, the exploitation of platinum group metals (PGMs), – platinum, palladium and rhodium. Much more recently, the discovery of large diamond deposits at Chiadzwa that are estimated to be about 25% of world deposits, will eventually see this mineral taking a prominent role in the country.
4.1 Ownership of Mining Industry in Zimbabwe
The mining industry in Zimbabwe has been traditionally dominated by foreign multinational corporations. This situation has changed overtime with greater involvement of Government through the Zimbabwe Mining Development Corporation (ZMDC). The ownership structure of businesses involved in mining range from those listed on the Zimbabwe stock exchange, government owned, limited liability companies, foreign owned, indigenous, cooperatives and syndicates among others.
Table 1. Ownership of top 22 Mining Companies in Zimbabwe
Ownership | Number of Companies | Percentage |
Government | 3 | 14% |
Indigenous Owned | 3 | 14% |
Listed ZSE | 4 | 18% |
Local Non Indigenous | 2 | 9% |
Foreign | 10 | 45% |
Total | 22 | 100 percent |
Source: Chamber of Mines membership list
4.2 The Legal Framework
The main legal instruments concerning mineral resources in Zimbabwe is the Mines and Minerals Act (Chapter 21:5). The Act provides for all rights to search for, mine, and these rights are vested in the government. Thus, minerals are a national endowment. Their exploitation is for the benefit of all nationals, with the government as custodian of these resources.
Exploration is conducted under Exclusive Prospecting Orders (EPOS), Special Grants (SGs) in reserved areas as provided for under Part XIX and for Coal, Mineral Oils and Natural Gas under part XX. EPOs are issued for a deposit charge of Z$0.12c per Ha, literally for free, refundable if all conditions are met. Special Grants attract a current licensing fee of US$20 000. The fee for EPOs is stipulated in the MMA while that for SGs is not. The Minister has the authority to stipulate by statutory instrument the licensing fee for SGs.
The MMA provides that any Zimbabwean above the age of 18years may acquire a prospecting license which allows the holder to search for minerals resources on land open to prospecting and to peg claims. The MMA also provides for different types of mining title depending on the mineral. There are precious metal blocks of claims, precious stones blocks of claims and base mineral blocks of claim.
The MMA provides for the investor who explores and finds mineral resources to peg the mining claims and proceed to exploit the resource. This system is applicable in many jurisdictions, provides security for those that spend resources in the search for minerals that they will proceed to mine and realize income from the resources they will have discovered. The system is also very liberal in that every citizen with an interest in mining can acquire rights to search for and mine minerals with very low entry barriers. In other jurisdictions the space to enter this sector is a preserve of Government and companies which demonstrate the means to carry out mining at a commercial level.
Other subsidiary Acts to compliment the MMA include;
- Gold Trade Act (Chapter 21:3)
- Precious Stones Trade Act (Chapter 21:06)
- Base Minerals Export Control Act (21:01)
- Minerals Marketing Corporation of Zimbabwe Act
- Zimbabwe Mining Development Corporation Act
- Zimbabwe Mining Development Corporation Act ( Chapter 21;08)
- Explosives Act (Chapter 10:08)
Among the subsidiary legislation is the Minerals Marketing Corporation of Zimbabwe Act which governs the sale and marketing of minerals produced in Zimbabwe. It was created to safeguard export receipts from mining against possibilities of transfer pricing. The MMCZ is probably the only institution of its kind in the world. In other jurisdictions the function of supervising and monitoring exports rest with the government department responsible for mineral resources. The MMCZ imposes an export tax of 0.875% of export value, as provided for in the Act for the administration of the corporation and as dividends to government.
However there are weaknesses within the current MMA which have to be considered in the proposed amendments to the Act such as:
- Clarity and understanding between miners and land owners;
- Inclusion of communities in decision making institutions such as the Mining Affairs Board;
- To accommodate compensation for families in rural areas affected by mining activities.
4.3 Existing State Institutions and Structures in Terms of Their Capacity to Monitoring Metal Mining, Logging and Oil Activities
There are two distinct levels of management of natural resources in Zimbabwe namely national and sub-national. Institutional arrangements can be formal and informal. This section explores formal institutional arrangements as well as providing an analysis of the capacities and effectiveness.
At the highest level of natural resource management are ministries of; Environment and Natural Resources Development and Management, Ministry of Mines and Mining Development, and Local Government, Rural and Urban Development. All these Ministries have the overall mandate of formulating enabling legislation, policies as well as setting up measures for their implementation (strategies and plans). Effectiveness of these institutions is determined by the pace at which they are pro-active in suggesting new legislative arrangements, proposing legislative amendments to existing legal instruments so as to take account of prevailing social, economic and political conditions at the national level. The pace of legislative and policy reforms to better address natural resource management has been affected by several factors including, limited technical capacity to assess the need for change, technical skills in the Attorney General's office to attend to draft legislation, limited resources to undertake research and consultative processes necessary for collective vision and objective setting.
4.4 Revenue Accruing from Mining
Government obtains revenue from the mining sector through royalties and income tax. Royalty is calculated as a percentage of the gross fair market value of minerals produced as follows;
- Precious Stones 10%
- Precious Metals 4%
- Base Metals 2%
- Industrial Minerals 1%
- Coal Bed Methane 2%
- Coal 1%
- Export tax for unbeneficiated chrome 20%
Income tax on mining operations is levied at 15% for Special Mining Lease holders and 25% for other mining title holders and all capital expenditure incurred exclusively for mining operations is deductible at a rate of 100%. Mining companies enjoy indefinite carry forward of their tax losses. In terms of Finance (No. 3) Act, 2009, royalties are collected by the Zimbabwe Revenue Authority (ZIMRA).
Investors are allowed to borrow locally for working capital purposes. Offshore borrowings require Reserve Bank approval and interest paid on borrowings of a debt to equity ratio of up to a maximum of 3 to 1 are tax deductible.
4.5 Beneficiation Policy
The Government of Zimbabwe encourages beneficiation of all minerals produced in Zimbabwe. To this effect, export of raw chrome ore attracts a tax of 20% of the export value. Government has also set a policy to reserve 10% of diamond production for local cutting and polishing.
4.6 Corporate Social Responsibility
Mining investors are encouraged to be responsible corporate citizens in line with international best practices. They provide social amenities to local communities such as schools and health centres for the communities within which they operate, offer transport to their workers and the community at large, and are responsible for waste management, as well as road construction. Mining companies, as part of corporate social responsibility, are encouraged to employ people from local communities. The proposed amendments to the Mines and Minerals Act will also make it mandatory for companies to be Responsible Corporate citizens.
4.7 Community Participation in Mining
Community participation in mining is encouraged through formation of community syndicates to venture into mining projects. There are groups of small scale miners such as Youth in Mining and Women in Mining who have come together to pursue mining ventures. .
4.8 Role of MPs in the Mining Industry
In the natural resources sector, Members of Parliament should be able to play their three key functions namely; to legislate, play an oversight role over the executive and represent the people.
Executive oversight:
Legislators should
- Demand for transparency and accountability in issuance of mining licences (more are under consideration), contract negotiation and revenue generation and distribution. Transparency and accountability will remove suspicion, ensure that operations of mining companies are accepted by the people.
- Check if what was agreed between government and mining companies in mining contracts is being implemented e.g. is government getting its dues as agreed and are mining companies doing what they promised they will do to communities. .e.g relocation
- Call for compliance with KP minimum standards
Representation role:
Legislators should
- Represent the interests and rights of mining communities
- Represent community interests on the issuance of mining rights (small scale mining), relocation, access to information and environmental degradation
- Encourage the people to be organized and formally constitute trusts or other entities.
5. Conclusion
Zimbabwe has made great strides towards the success and sustainability of natural resource management. However, there are still a number of loopholes in the legal instruments, which are making the law weak, hence the need for it to be addressed.
6. Recommendations
6.1 THE EXTRACTIVE INDUSTRIES TRANPARENCY INITIATIVE
The Extractive Industries Transparency Initiative (EITI), was established in 2002 as a voluntary organisation. Since then EITI has become a well-established and recognized broad-based global coalition of resource rich developing countries, donors, major companies, civil society groups and investors. The EITI is seen as a real attempt to deal with the proverbial “natural resource” curse that many resources-rich countries suffer from, conflicts over natural resources.
Countries implementing the EITI commit themselves to publishing all payments made by oil, gas and mining companies to government and revenue received by government from these companies. EITI implementers also commit themselves to closely involve civil society in the design and monitoring of the EITI process.
The EITI Principles can be summarized into four main groups:
1. Prudent use of Natural Resources as an engine for sustainable economic development and poverty reduction,
2. Promotion of public understanding of revenue and expenditure issues within the mining sector and recognition of the sovereign duty of governments to use wealth for the benefit of citizens and national development,
3. Ensuring Transparency and accountability by government and companies in the Extractive Industry and enhancing public and financial management, and
4. Participation of all stakeholders including government, the extractive industrial companies, multilateral organizations, financial organizations investors and non governmental organizations in implementing and compliance with the EITI general principles.
As a major mining country Zimbabwe is expected to benefit from EITI through:
· Improvement in systematically reporting, reviewing and assessing the revenue streams from the extractive industry,
· Establishment of a more efficient revenue assessment and collection systems in addition to the improvement in the detection of corruption in both the private and public sectors,
· Establishment of a systematic collaborative framework between government, private companies, civil society, development partners and international investors in the development of the extractive industries,
· Improvement in the country’s credit worthiness and investment climate by making public the country’s revenue that is accrued through the extractive industries, and
· Improvement in corporate risk management and public image of the mining companies. Mining companies are always accused of reaping huge profits from the extractive operations without plowing back to local development programs. By making public their revenues and expenditures, mining companies can reduce corporate risks and improve working relationships with governments and local communities.
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