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sharing in governance of extractive industries

Can Data Driven Advocacy Change Mineral Revenue Transparency Landscape in Zimbabwe

For Zimbabweans, mineral revenue transparency reforms have proved to be a mirage.  Possibly hope evaporated with the domestic version of the Extractive Industry Transparency Initiative (EITI), the Zimbabwe Mineral Revenue Transparency Initiative (ZMRTI) failing to take off since 2011.  Without transparency in the mining sector, it is difficult for the public to have a hard talk with government and mining companies on how their mineral wealth is being managed to deliver better schools, clinics and roads.  

The 2017 Resource Governance Index (RGI) by the Natural Resource Governance Institute (NRGI) buttresses this notion.  Countries that have not embraced international best practice on resource revenue disclosure like the Extractive Industry Transparency Initiative (EITI) are less likely to manage their resource wealth for the benefit of their citizens. This paints a gloomy picture for Zimbabwe which is ranked at number 81 out of 89 countries in the 2017 RGI.

Marange alluvial diamond wealth, a squandered opportunity evinces “the resource curse.” $15 billion was lost from the exploitation of Marange diamonds according to the President. Whilst the plundering of diamonds was taking place, the Treasury was sounding “like a broken record” on opacity in the management of Marange diamond revenue.

Through use of “alluvial data” as a colleague Jed Miller labels it, opportunities to influence mineral revenue transparency policy and practice reforms are gaining traction.  Alluvial data refers to data which available on the public domain, like alluvial gold, you do not need to dig deeper to access the data. Such data include mining companies published integrated annual reports, national budget statements and Auditor General’s reports.

 ZELA has a seat at the table as a stakeholder to the Mining Technical Working Group (TWG) on ease of doing business reforms. Through Publish What You Pay (PWYP) data extractors programme, ZELA is making its voice count in the mining TWG. ZELA is in the subcommittee that is working on a special artisanal mining permit meant to contribute to formalisation of artisanal mining.  Another issue on the agenda of the TWG that ZELA is seized with relates to the review of local mining taxes.

A subcommittee being led by ZELA involving the Ministry of Rural Development and Chamber of Mines has been formed to advise the TWG on review of local mining taxes. The Chamber of Mines is pushing for harmonisation of local taxes and the reduction of tariffs paid to local government by mining companies.

Working with the Ministry of Rural Development, Association of Rural District Council of Zimbabwe (ARDCZ) and Rural District Council, ZELA has proposed a framework that RDCs can use to make a compelling case on why mining companies must pay a fair share of local taxes. Mainly, ZELA has presented a weighty argument that the lack of transparency around mineral revenue transparency erodes the power of local governments to negotiate fair local tax deals with mining companies.

Basically, tax is a tool that is used to finance development. RDCs derive their “power to levy rates and taxes and generally to raise sufficient revenue for them to carry out their objectives and responsibilities” from the Constitutions, Section 276 (2) (b). Always, it is important for RDCs to link tax revenue and its impact on development.

If communities are not aware of policies concerned with how RDCs are generating mining tax revenue, the tariff agreements between RDCs and mining companies, the allocation and utilisation of mineral revenue to promote the progressive realisation of their Socio-Economic Rights (SERs), concomitantly, RDCs loose a key alley to hold to account central government and mining companies. It is also noteworthy that by promoting mineral revenue transparency, RDCs can solve information asymmetry within government ministries and departments. Furthermore, tax transparency will expose some mining companies that are quick to publicise their Corporate Social Investments (CSIs) at the same time defaulting on their obligation to pay a fair share of taxes to finance local development.

By taking some of the following steps, RDCs can enhance greater transparency through local budget public consultation processes to make mineral revenue information easier to understand to different users;

  • Actual amount paid by each mining company to the local authority and how it is calculated. That is the agreed tariff and number of units used to calculate taxes paid by mining companies. The number of unskilled labour and production volume are respectively as units for computing local taxes paid for extracting precious and base or industrial minerals.  Of course, through budget transparency initiatives provided in the RDC ACT, local authorities have been publicly disclosing this info. Transparency, however, transcends disclosure. The highest measure is when various stakeholder groupings including communities must understand the data.
  •   Mineral income per capita. As an example, local government can divide the total annual revenue paid by mining companies with the official number of the population size in their district. According to 2012 Zimstat population census data Mhondoro-Ngezi had a population of 104 342 people.  Suppose that Zimplats paid taxes amounting $1 million dollars to Mhondoro-Ngezi RDC in 2016, the income per head for Mhondoro-Ngezi translates to $9.58 in the same year and 80 cents per month. So if basic income grant is adopted by local authorities for all the local taxes paid by Zimplats, each head will receive 80 cents per month.
  • Mineral revenue as a percentage of total revenue generated by the RDC.
  • Mineral revenue linked with socio-economic development outputs like schools, clinics. This is important to demonstrate the important link between tax and development. By taking this path, RDCs can help to manage stakeholder fears of abuse of public revenue. Indeed, the Auditor General’s Reports for local authorities have consistently highlighted wanton abuse of public resources by several local governments.
  •   Comparing corporate social investments (CSIs) undertaken by mining companies with their tax contribution to local government. The table below shows data on CSIs undertaken by Zimplats from 2013 to 2017 available from Zimplats’ 2017 integrated annual report. Thus, Mhondoro-Ngezi and Chegutu RDCs can make use of such data to publicly compare with Zimplats’ tax contribution to local government.

Zimplats CSI 2017

  • Disclosure of contribution to Community Share Ownership Trusts (CSOTs) by mining companies in their jurisdiction. Some, mining companies argue that they contribute to community development through CSOTs in addition to local tax revenue and CSIs. For instance, Gwanda CSOT did not receive dividends from Blanket Mine in 2016 according to Caledonia’s ESTMA report.

Kurai Kingsley, the Trade Commissioner of the Canadian Embassy in Zimbabwe encouraged RDCs to push for the adoption of a free online tool, Towards Sustainable Mining, developed by Mining Association of Canada. The platform promotes public online access to key mineral revenue information different sources. Botswana has adopted the tool. This tool will assist to solve information asymmetry within government departments and allow for greater public access to mineral revenue information. 

ZELA has learnt the lesson that whilst the push for adoption of EITI is critical, there is need to work with individual progressive government agencies on mineral revenue transparency such as RDCs and Zimbabwe Revenue Authority (ZIMRA). Use of mandatory disclosures for listed mining companies in EU, UK and Canada can also be a game changer to Zimbabwe’s stalled mineral revenue transparency reforms. ZELA is now working with ARDCZ to come up with a standard template that RDCs can use as a best practice to promote mineral revenue transparency. This is one of the outcomes on the meeting involving RDCs, ARDC and Ministry of Rural Development held at the Rainbow hotel on 15 September 2017.  The ongoing 2018 local budget consultations offer exciting opportunities to start rolling out this exercise.

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