sharing in governance of extractive industries
On 6 June 2018, Zimbabwe Platinum Mines (Zimplats) publicly announced that it has amicable resolved a six-year long dispute with government which was seeking to compulsorily acquire part of its mining claims measuring 27,948 hectares. This dispute was pending in the courts of Zimbabwe.
Consequently, Zimplats agreed to release 23,093 hectares to government “to ensure participation by other investors in the platinum mining industry.” Zimplats now owns 24,632 hectares with a new special lease valid for the lifetime of the mine. A significant development that warrants public scrutiny into how well the country’s mineral wealth is governed for the benefit of all Zimbabweans.
It is a positive development that this dispute was amicably resolved. But it must be noted that the dispute had been going on for six-long years, and such lengthy period riddled with uncertainty on government’s commitment to property rights and Zimbabwe as an unattractive investment destination. Such disregard for investment agreements also provides scant comfort to existing and prospective investors.
Notably, Zimbabwe is one of the least attractive investment destination according to Fraser Institute’s Policy Perception Index. Interestingly, Zimbabwe’s mineral potential is ranked among the top under the same organisation’s Mineral Potential Index. This partly explains why, despite Zimbabwe’s abundant mineral wealth, the country is struggling to attract much needed investments to realise the sustainable development dividend from its huge mineral wealth endowment.
One could also spin the agreement between Zimplats and government as positive in that the released land creates space for the entrance of new players in the platinum industry. In all mineral sectors, the entrance of new players is largely problematic as most of the land has been taken.
It is noteworthy that the new Minister of Mines, Honourable Chitando publicly stated during the Chamber of Mines AGM held last month that from next year, government will enforce the law on renewal of mining titles. Paying ground rental and mining inspection fees will no longer suffice, but evidence to back capital expenditure will be required. He stressed that this is not a new requirement at all. Perhaps Zimplats was cornered by this development and it had no option but to release the ground. In this regard Chitando’s leadership is coming to bear, a man with strong private mining sector background.
Worryingly, Zimplats got a new mining lease valid for the life span of the mine. Its special mining lease was due to expire in August 2019. Terms and conditions of the new special mining lease have not been disclosed. What we know is that in the previous mining lease, Zimplats had a 2.5% royalty stabilisation agreement with government which undermined the country tax code in which platinum royalties were pegged at 10%.
In 2015, Zimbabwe Revenue Authority (ZIMRA)’s annual revenue performance report revealed that mineral royalty income was in the red at $19,421,653.62. A factor attributed to a royalty refund of $101.55 million. Although the report did not state Zimplats, the refund came after Zimplats had won a court dispute with the tax agency on legality of the 2.5 percent royalty stabilisation agreement with Ministry of Mines.
Section 315 (2) (c) of the Constitution requires transparency and accountability in the negotiation and performance monitoring of mining contracts. It remains to be answered whether Parliament was involved in this deal? A government that was established against the backdrop of restoring order should be at the forefront of respecting the Constitution.
Now that government is in possession of released ground, what happens next? The privately-owned Zimbabwe Independent on Friday reported that Lucas Pouroulis, whose company Karo Resources, last month signed a $4.2 billion platinum deal with government, has been given the land in the resource rich Great Dyke.
The African Mining Vision, to which government is a signatory, cautions that known mineral reserves should be disposed through bidding to allow room for government to pick an investor who offers greater development outcomes like infrastructure, skills development, technology transfer and the development of local supply chains in addition to taxes.
The secrecy around the deals being announced currently leaves too much room for corruption. Lessons can be learnt from the acquisition of claims from Anglo American owned Unki Mine by govern.... Government got $100 million from CAMEC, which later resold the Bougai and Kironde claims for nearly $1 billion dollars.
Much as Parliament is preoccupied with the issue of allegedly missing $15 billion diamond revenue from Marange, a lot is going on in the mining sector with mega deals being announced frequently. Parliament should keep its eye on the ball.
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