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sharing in governance of extractive industries

Why Zimbabwe Must Join The Extractive Industry Transparency Initiative

Introduction

Recently, the government of Zimbabwe reignited its interest to join the Extractive Industry Transparency Initiative (EITI) through the 2019 National Budget Statement. A step in the right direction. But it is important to note that since 2011, government repeatedly expressed interest to join EITI or to resuscitate the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI). A domestic version of EITI which suffered a still birth in 2011. Interest on joining EITI disappeared from the fiscal policy radar screen from 2016 to 2017. That said, it is quite critical to look at the drivers, the fundamentals for government to join EITI to ensure that positive policy intentions to join EITI not go to waste as before. This article is part of a series of article being produced by the Zimbabwe Environmental Law Association (ZELA), designed to stimulate multi-stakeholder interest on joining EITI.

Convergence of principles, the Constitution and EITI

The 2013 Constitution, the supreme law has provisions which resonates well with EITI principles. Section 62 of the Constitution speaks to public access which basically is the bedrock of EITI, opening the extractive sector for public accountability. Emphasis on the right of resource rich communities to benefit from the exploitation of resources in their localities is both echoed by the Constitution, under Section 13(4) on National Development and EITI. Contract transparency, another pillar for EITI is a constitutional requirement under Section 315 (2) (c) of the Constitution. To ensure transparency, honesty, cost effectiveness and competitiveness, an Act of Parliament is required to guide negotiation and performance of mining agreements.

Regarding transparency and accountability of how revenue mining, oil and gas is collected, allocated, spent and accounted for, the Constitution caters for this under Section 298, Principles of Public Financial Management. Subsection (1), essentially calls for transparency and accountability in all public financial matters. Section 299 of the Constitution speaks to Parliamentary oversight on state revenue and expenditure to enhance public transparency and accountability. This constitutional role of Parliament can be enabled by implementation of EITI as Parliament have access to granular data on mining sector performance on tax revenue contribution and impact on inclusive development.

There are fears of what will happen if Zimbabwe struggles to comply with EITI requirements. Mutuso Dhliwayo calms the nerves with a good piece of advice, “we are grappling with implementation of the provisions of the new Constitution, we stand resolute though, laws must be aligned with the Constitution. Likewise, implementing the EITI requirements will not be easy. But with political will, Zimbabwe must rise to the challenge.”

Building trust between government and citizens

The wanton plunder of mineral resources witnessed in the past means that government lacks public goodwill, public confidence and public trust on its steward role in resource governance. A point in case is the allegedly missing $15 billion from Marange diamonds. Never mind arguments on the accuracy of the figure, but findings from credible sources like the Office of the Auditor General (OAG) is damning on the same subject. Since the changes in government which happened in November 2017, several mega deals have been sealed in the mining sector. Public apprehension is high on how the deals are primed to cure past ills. By adopting EITI, government will set itself on a firm path to win lost public confidence concerning its stewardship role in the mining sector. This also augurs well with government’s stance to fight corruption which is particularly rife in the mining sector. Although mining sector transparency reforms anchored on EITI may not curb corruption, it sends the right signals to citizens.

Zimbabwe is open for business

To attract essential foreign direct investment (FDI), government is on a rebranding exercise, the new mantra is “Zimbabwe is open for business.” A quite simply appealing message. If Zimbabwe is surely open for business, certainly, what stops government from being open about business, mining sector transparency in this case. Therefore, government must embrace policy reforms to show openness in a sector general perceived globally as murky. One important area of reform is implementation of EITI, an initiative regarded as a global best practice on openness and accountable governance of oil, gas and mining industries. By so doing, government will be sending a message to the international community and its citizens, the Zimbabwe open for business mantra is not a fluke.

The quest to reengage with International Financial Institutions (IFIs)

To move the country away from isolation and to unlock access to finance for development, government is prioritising engagement with International Financial Institutions (IFIs). The IFIs include International Monitoring Fund (IMF). In this bid, government must prove seriousness on enhancing its domestic resources mobilisation (DRM) capabilities. A move which helps to justify the importance of external support to the country’s socio-economic development thrust. Because Zimbabwe is a mineral rich country, demonstrating the nexus between mining and DRM is critical. Without transparency, leveraging mining sector for DRM will prove to be a daunting exercise. In the past, government, as part of the IMF’s staff monitored programme (SMP) managed to publicly disclose audited annual reports for the Zimbabwe Mining Development Corporation (ZMDC). By implementing mining sector transparency reforms in form of EITI, government will be adopting a proactive stance to improve resource governance.

EU, UK and Canada’s mandatory disclosure requirements

Data on various payments made to government by major mining companies operating in Zimbabwe which are either registered or listed in EU, UK and Canada is already in the public domain. Such companies include Caledonia’s Blanket Mine which promotes tax revenue transparency because of Canada’s Extractive Sector Transparency Measures Act (ESTMA). Anglo-American owned Unki Mine, for example, is disclosing information on payments made to government at the behest of the EU accounting directive. Given this important ventilation of Zimbabwe’s mining sector, government must be encouraged to entirely open the mining sector for greater public accountability. Importantly, government once angled for local primary listing of all companies in the mining sector as part of the amendments to the Mines and Minerals Act. Of course, this was dropped due to pressure from investors who felt that the domestic market does not have capacity to mobilise investment capital. However, another important objective of achieving good governance in the mining sector, greater transparency and accountability suffered as a result because listed companies have a high corporate governance compliance bar. This noble objective can still be achieved if government implements EITI.

Conclusion

To win public confidence and trust pertaining its steward role on the management of mineral resources, by adopting EITI, government will set itself a strong foundation to gain public goodwill. There are questions concerning the sincerity of the Zimbabwe is open for business agenda, implementation of EITI can help government to prove to stakeholders that government is open about business, the mining sector essentially. More importantly, the supreme law of the country’s principles jives well with EITI. Therefore, the EITI framework is best suited to ensure that government fulfils constitutional requirements. By joining EITI, Zimbabwe will join several countries in SADC like Mozambique, Zambia, Malawi, Tanzania, and DRC that are part of EITI family

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