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SCOPING MISSION TO GENERATE KNOWLEDGE ON STATE OF THE

EXTRACTIVE INDUSTRY IN THE KINGDOM OF SWAZILAND

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TABLE OF CONTENTS

1. Background

2. Economy Performance (1980s-date)

3. Investor Climate

4. Status of Minerals in Swaziland

4.1. Coal

4.2. Iron Ore 4.3. Gold

4.4. Diamonds

4.5 Quarry

4.6. Other Minerals 5. Mining Revenue

6. Policy and Regulatory Framework of Mining Sector

7. Monitoring of Environmental Compliance

8. The Mining Sector and Corporate Social Responsibility

9. Recommendations

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ACRONYMS

CANGO Coordinating Assembly of NGOs

OSISA Open Society of Southern Africa

MMB Minerals Management Board

MOU Memorandum of Understanding

SNTC Swaziland National Trust Commission

MMA Mines and Minerals Act

EMA Environmental Management Act

CSO Civil Society Organization

GDP Gross Domestic Product

EIA Environmental Impact Assessment

CSR Corporate Social Responsibility

CSI Corporate Social initiatives

FDI Foreign Direct Investment

SNPAS Strengthening National Protected Areas of Swaziland

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1. Background

Swaziland is endowed with limited natural wealth in the form of iron ore at Ngwenya,

coal in Maloma and Mpaka, diamonds in Dvokolwako, asbestos in Havelock/Bulembu

and forestry in Bhunya, Pigg’s Peak and Nhlangano to mention but a few. The country

also has deposits or occurrences of gold, barite, ball clays, kaolin, stone suitable to

produce stone aggregates and silica. Swaziland is, by comparison with other countries

in the region, not a significant player in terms of the extractive sector partly due to the

limited mineral deposits available in the country. At the moment, the country mines and

exports coal after iron ore production stopped in September, 2014 due to over 50%

drop in iron ore prices in world markets.

Swaziland has one of the most scenic landscapes characterised by undulating

mountains, deep gorges, grassland, savannah, forest and aquatic resources. Despite

the small size, Swaziland has a diverse ecosystem and habitats; it is a biodiversity

hotspot in Southern Africa for flora, fauna, species richness and endemism (Harrison et

al, 2014). Swaziland is home to a number of globally endangered and threatened plant

and animal species (SNPAS project document, 2014). Of the 19 globally threatened

vertebrate species, 11 are native to Swaziland and are found within protected areas.

Some of these species include cheetah, vultures and African wild dog amongst many.

Of the 40 species of threatened plants recorded for Swaziland, 29 occur within

protected areas.

This renders protection of such a natural heritage fundamental in order to protect it

from extinction and keep it for generations to come. Most importantly is to translate the

natural resource to a form of livelihood and contribute to economic growth of

communities at the buffer-zones of productive landscapes. Swaziland has 4.45% of its

land covered by six gazetted protected areas, 14 informal, not gazetted protected areas

privately owned and an additional 44 protection worthy areas. Biodiversity conservation

is one of the pillars for sustainable development of rural livelihoods (Nkosi, 2002).

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This means land is a major source of livelihood for rural populations. Development that

pertains to land has a potential to cause strained relationship between the development

proponent and the periphery communities as it results to land ownership changes and

regulation of areas and resources that communities had prior access to.

This imbalance is evident in the disproportionate benefits and shareholding in the stake

follow a skewed pattern as the proponent and State might get a big stake at the

expense of the community which host the wealth.Hence, host communities are often

excluded in decision making to regulate, manage and access to mineral wealth. Yet this

scenario is against the principles endorsed in the Africa mining vision which Swaziland is

party to.

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2. Economy Performance (1980s-date)

During the 1980s, Swaziland grew at a rapid pace that far exceeded the growth of peer

countries. Growth slowed in the 1990s, but the economy still managed to outperform

SADC countries on average. The last decade, however has seen growth in Swaziland

slowdown significantly. Annual GDP growth has averaged 2.3 percent since 2001, nearly

half the growth rate in SADC1.

Figure 1. Average Annual Real GDP growth (1980-2010)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1980 - 1990 1990 - 2000 2000 - 2010

Swaziland BLN SADC Small States

Source: World Bank

Recent trends show that the secondary sector of the economy (construction and real

estates, wholesale and retail) has been performing well since 2013 and the output rose

from 4.3% in 2014 compared to 3.5% in 2013. Construction sector alone grew by

16.3% in 2014 compared to 10.4% in 2013 and it is expected to continue soaring as

more capital projects are in the pipeline. It is concerning that domestic output in

agriculture especially maize as the staple remains low far below the national

1 Swaziland diversification report, 2013

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requirements. The consumption levels are increasing which widens the deficit and

increases reliance on South Africa to service the local market.

Table 1. Domestic Production of Basic Commodities(2011-2015)

Products Production

2011 2012 2013 2014

Maize (‘000 Mt) 84.7 76.0 82.0 101.0

Dairy (Milk and products)

Mt

8.66 9.76 10.64 12.02

Citrus 73,682 46,815 54,905 33,355

Source: Central Bank annual report, 2014/15

An extended dry period between January and March 2015, affected the critical maize

crop development stage and resulted in widespread crop losses and reduced yields.

Table 2: National Food Balance Sheet 2015 (in

‘000 MT) Maize Wheat Rice All

Domestic 81.62 0.00 0.15 81.77

Gross Domestic

Requirement

157.31 43.44 4.99 205.74

Domestic shortfall/surplus

-72.89 -43.44 -4.84 -121.17

D. Planned Imports

Commercial 43.00 36.00 76.00 155

Food Aid 0.81 0 0 0.81

Source: 2015 VAC finding dissemination

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With the shrinking GDP as a result of declining SACU revenues, and forecasted decline

in sugar revenue as a result of more open markets to EU from central America there is

need to diversify the economy and explore other salient sectors to bolster the Swazi

economy. The Government recognises the positive contribution that mining can make

as an engine for economic development of Swaziland by diversifying the export base,

widening the tax base, generating skilled employment, creating demand for local goods

and services, contributing to infrastructure development, producing raw materials for

local usage and acting as a catalyst for wider investment in the economy (National

Mining Policy of Swaziland, 2003). Fiscal autonomy and liberty of a State is achieved

through domestic revenues.

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3. Investor Climate

Following the fall of colonialization in Africa, Governments were given 100% ownership

of mines to garner economic growth and industrialize but many factors including

political interference in decisions; depreciation of prices impeded the anticipated

growth. Following this failure, there was then a move to privatize mines by attracting

FDIs to operate the mines and incentives were put in place. In Swaziland the incentives

include repatriation of profits, fully-serviced industrial sites, provision of purpose-built

factory shells at competitive rates, and exemption from duty on raw materials for

manufacture goods to be exported outside the Southern African Customs Union (SACU).

Financial incentives for all investors also include tax allowances and deductions for new

enterprises, including a 10-year exemption from withholding tax on dividends and a low

corporate tax for approved investment projects, available for businesses that qualify

under the Development Approval Order. New investors also enjoy duty-free import of

machinery and equipment. The law allows for repatriation of profits and dividends

including salaries for expatriate staff and capital repayments. Furthermore, companies

can bring their own personnel unless they cannot find a qualified national. There is also

provision for loss cover which a company can carry over to the next year in case it

incurs a loss in the year of assessment.

The Mines and Minerals Act; Act No. 4 of 2011 Section 133, all large-scale investments

in Swaziland involve for state participation by the Government and the iNgwenyama in

trust for the Swazi Nation as shareholders. However, “public sector and monarchy

involvement in the economy discourages private investment and encourages

monopolistic behaviour that drives prices up and reduces competitiveness of the

country” (USG, Investor Climate Statement, 2015: 3). Also, Swaziland’s land tenure

system, where the majority of usable land is held by iNgwenyama in trust for the Swazi

Nation,” discourages long-term investment in commercial real estate and agriculture.

Chiefs have control over land use and allocation. Settlement of disputes regarding

traditionally held land takes a while to resolve. To elucidate this point, in 2010 conflict

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arose on land held by King in trust of the nation and attempts were made to revoke the

99-year lease agreement with the foreign investor. To-date, a settlement was never

reached (Investor Climate Statement, 2015). Also, parties implicate the King's name to

all lawsuits where his investor interest is concerned and this becomes difficult to pursue

beyond certain borders because according to Swazi culture a King cannot face litigation.

The dual legal system, can be confusing for foreign-owned businesses and has

presented problems. Such grey areas according to the USG report of Swaziland Investor

Climate of 2015, makes the mining sector and natural resources sector a high risk to

invest in.

On another note, the screening process of FDI generally takes long and is found to be

expensive. The Central Bank of Swaziland reviews applications for offshore investment

by companies registered in Swaziland. The reviewing authorities are generally found to

be transparent but the various government ministries are not always responsive to

investor inquiries which the process protracted and a deterrent for investors.

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4. Status of Minerals in Swaziland

4.1 Coal

The coal fields of Swaziland are found in the eastern part of the country and occupy

about one sixth of the total country coverage and has an average width of 15

kilometres. Up to twenty coal seams of various thicknesses occur within the coal-field.

The main Coal Seam has been found to have a consistent lateral distribution and an

average mineable thickness of three (3) metres throughout the coalfield. The coalfields

of Swaziland mainly consist of semi-anthracitic or lean coals and anthracite.

Table 3. Coal Deposits in Swaziland

Area Mineable

(millstones)

Estimated

Annual

Production

Life of mine

(yrs)

Estimated

employment

levels

Mhlume 18.4 665 00 27 665

Area1 9.1 - -

Area2 Mpaka 41.2 500 000 82 600

Area 3 20.6 500 000 41 450

Lubhuku 18.9 510 000 37 500

Maloma 35.3 600 000 58 600

Total 143.5 2 775 000 27-82 2,815

Source: Mineral Resources of Swaziland Report, 2006

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Mhlume coal deposit has high quality anthracite and can be used for smokeless fuel, for

metallurgical purposes, heating and as a source of fuel in boilers for thermal power

stations. Coal from Mpaka is semi-anthracitic coal which was used for cement

manufacturing in Kenya and manufacturing smokeless briquettes for domestic heating

and cooking in Asia and Japan. It can also be used for electricity power generation.

There were vague aspirations that Mpaka will be re-opened for electricity generation

(Times, 2012). Lubhuku coal type can be used in a thermal power station and Maloma

produces anthracite coal and exports all of its production for chrome smelting

operations.

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4.2 Iron Ore

The majority deposits of iron ore formations (up to 60%) are concentrated in the

vicinity of the old Ngwenya Mine and small pockets in the South. Banded iron ore

deposits in south central Swaziland are of a much lower grade than those occurring

north western Swaziland.

Table 4. Iron Ore Deposits in Swaziland

Location Ore Type Grade Tonnage

Ngwenya Banded Haematite Quartzite

Banded Magnetite Carbonate

46.5 96,297,050

North of Mine Banded Magnetite Quartzite, Jaspilite

31.70 67,900,507

Pigg’s Peak and

Havelock Area

35.0 293,550,000

Southern

Swaziland

Taconite: Metamorphosed Ferruginous

Shale

36.0 617,747,557

Total 1,075,495,114

Salgaocar Swaziland (Pty) Ltd. of India announced that it had proposed reprocessing of

the Ngwenya iron ore mine dumps. Salgaocar received a 7-year license from the

Government in June, 2011. There was an estimated 32 Mt of dump hematite iron ore

with an average grade of 44.5% iron in the mine dumps2. The dump iron ore was

beneficiated to about 58% Fe, trucked to Matola Port in Mozambique and eventually

exported to China until September, 2014.

2United States Department of Interior, Geological Survey. 2011 Minerals Year book

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4.3. Gold

Table 5. Gold Deposits in Swaziland

Locality Deposit

Name

Estimated reserves (t) Average

grade (g/t)

Northern Hhohho Daisy (Horo) deposit

46 300 tailings and dumps not included

5.4

Northern Hhohho Daisy (Horo) deposit

46 300 Excl. tailings and dumps

5.4

Hhelehhele Lufafa 1 652 700 1.3

Hhelehhele Lomati 9 331 possible reserve 12 444kg Au

11.9

Hhelehhele Kobolondo Not encouraging 1.2-2.62

Pigg’s Peak towards Bulembu

Pigg’s Peak 75 000 plus Incl. Au in mine dumps and tailings

5.0

North east of Bulembu

Devils Reef Information not available

1.27kg/t

Malolotja Nature Reserve

Forbes Main Reef

Detailed mapping required

47.5

Malolotja Nature Reserve

Waterfall Information N/A 11.9

Avalanche Information N/A 4.3

Ivanhoe 6 000 8.5

She 25 000 6.6

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4.4. Diamond

At Dvokolwako, at surface the pipe occupied 2.8Ha whereas at 50m depths it

occupied 3.4ha and was mined up to depths of 72m and could still be mined to

depths of 450m. The pipe is 600m in length, 160-180m in width and can yield

5million tons in situ. Projected diamond production could be as much as 80,000

carats per year (Minerals yearbook, 2011). Previous mining operations at

Dvokolwako indicate that 80% of diamonds were of industrial grade and 20% gem

quality. At closure in 1996, 250 jobs were lost at Dvokolwako (Mbendi.com). The

Government is currently reviewing 5 applications for reopening of Dvokolwako

mine3 after the mining license for Roux Consolidated was cancelled in 2012 due to

failure to fulfil agreed timeframes.

There are also diamond deposits under Hlane game reserve. The main diamond

bearing sediments crop out in a 5km north-south trend along the Mbuluzane River

established at 170mdepths. The diamonds of small size (average 0.008 carats) and

include a high percentage of well-formed crystals. Unfortunately the diamonds have

not been quantified, hence feasibility studies are recommended. The Kingdom of

Swaziland was accepted as a full Participant (Member) of the Kimberley Process

Certification Scheme (KPCS) in May, 2011.

3Mobbs, P. Minerals yearbook, 2013

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4.5. Quarry

Stone aggregates otherwise known as quarry are produced at Nkwalini, Nonkwane

Mbabane, Gwayimane, Sikhuphe but it is not documented in the Government official

mineral resource repository of 2006. Production of stone aggregates has been on the

increase since 2003, no records were found of its extraction prior to this period. In the

MMA, quarry is not a precious metal or stone“precious minerals” include (a) precious

stones, namely agate, amber, amethyst, cats eye, chrysotile, diamond, emerald, garnet,

ruby, sapphire, turquoise, and any other precious stones that are prescribed; and, (b)

precious metals, namely gold, silver, or other metal of the platinoid group in an

unmanufactured state and, any other rare earth metals that are prescribed”. Stone

aggregate is defined as a building or construction material and further exploration of

quarry is expected in Nhlangano, Pigg’s Peak, and Siphofaneni.

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Figure2. Quarry production (2003-2015)

Source: Central Bank

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5.7. Other Minerals

Table 6. Other Mineral Deposit

Mine

ral

Location Tonnage Type Status

Mololotja

Greenchert

Feasibility study recommended

Granites and

rhyolites

Feasibility study recommended

Barite Londosi 286000 tons Industrial grade Dormant mine

Talc Forbes

Reef/Sicunusa

Feasibility study recommended

Kaolin Mahlangatsha 700000tons Cream white to

pinkish in colour

Dormant Mine

Silica Madinda Hills 230000tons 76%SiO2 Never exploited

Ball Clays Lubhuku Feasibility study recommended

Langa In production

Detailed geological mapping of the Mhlosheni granite pluton is needed to evaluate its

potential for dimension stone production.

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Figure 3.Mineral Resources Map of Swaziland

Source: Mineral Resources of Swaziland Report, 2006

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5. Mining Revenue

The mining sector encountered challenges in 2013/2014 financial year as there was a

50% decline in iron ore prices globally which coincided with the closure of the only iron-

ore mine in the country that was operational for 3 years. Following a boom in 2013,

iron ore in 2014 caused by moderation in demand by steel producing companies

plummeted by 52.1% and shipped a mere 603,251 tonnes compared to 1.26 million in

the previous corresponding period. The impact of the closure of the mine was felt

mainly by the transport contractors and service providers which were key beneficiaries

in the mine operations. Coal which is second of the only two minerals extracted in the

country, also suffered a decline in production due to geological constraints and reduced

production levels.

However, projections in the medium term show that coal production will increase as

well as high prospects to open the diamond mine and a new coal mine. Overall, the

contribution of the sector to GDP growth showed a decline compared to 2012 (35.6),

2013 (32.9) and 2014 (-33.1). With the commissioning of a new gold mine in Lufafa in

February 2016 with an investment of 50 million Emalangeni, it is anticipated that the

sector’s contribution to the economy will improve in the new fiscal year 2016/2017. The

potential of the sector to contribute to the GDP is commendable, and it is hoped that

the proceeds will benefit the citizens directly.

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Table 7. Minerals Production and Sales (2012-2015)

2012 2013 2014 2015

Production

Coal 152 284 257 090 177 930 158 205

Iron Ore 1 032 230 1 258 560 603 251 -

Quarry (cubic metres)

308 440 292 704 310 659 480 311

Sales Value (E’000)

Coal 158.3 245.7 210.3 Data not yet official

Iron Ore 393.8 558.6 381.2 Data not yet official

Quarry 20.6 28.6 36.8 Data not yet official

Total Sales 572.7 832.9 628.3

Conversely, quarry mining is a vibrant sector that has shown tremendous growth in

production and revenue over the years. Extraction of quarry provides many benefits to

the domestic economy compared to other extractives (minerals) whose market is

globally determined and influenced. On the other hand, all quarry production is for

domestic use (fueled by the current thriving construction sector and in the medium

term), hence prices are locally controlled which provides leverage for the sector to

thrive.

One of the principles articulated in Africa Mining Vision is beneficiation; there is need for

great improvement towards value addition of minerals produced in-country. Section 56

(1) (h) of the Mines and Minerals Act of 2011 provides that there must be local

beneficiation or value addition of minerals. One company mines ball clays and markets

brick and block products made on site from the ball clays). Interviews with the Office of

Commissioner of Mines revealed that they are becoming more stringent with applicants

to ensure that extracted minerals are processed locally to add value than to export in

raw form. He pointed out that for mines to get to a phase of processing the minerals,

they need to reach a certain level of operation.

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Salgaocar had not reached that level as it closed within 3 years of operation. Maloma

was already in operation before the provisions to process minerals was prioritized in the

Africa Mining vision and the Mines and Minerals Act of 2011. The King in his speech

from the throne during the opening of 3rd session of the 10th Parliament urged

Government to ensure benefits of minerals to the nation by processing them locally.

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6. Policy and Regulatory Framework of Mining Sector

The SADC guidelines for extractive industry (2015) urges countries to recognize the

value of protected areas and biodiversity and make a commitment not to exploit

minerals inside or within particular types of biodiversity rich areas such as world

heritage sites despite potential economic or political gain or at the least take necessary

corrective and remedial measures to guard ecosystems. However, it is the country’s

prerogative to choose what it considers as priorities. It is necessary to carefully balance

the short-term benefits against the long term benefits of the extractive industry which

can be achieved by political will and internal coordination of different ministries and

strategic at national levels. Often times than not, governments and developers usually

lack guidance to ensure sustainable exploitation of resources. Next the report focuses

on the country’s policy and legal landscape guiding and regulating the mining sector

country and contrast with regional and global principles in the sector and flag out issues

for attention and transformation.

In upholding AU Mining Vision principles, section 22 (1-7) of Minerals and Mines Act,

enumerates restricted areas for mining or prospecting, such as areas of cultural

significance, game reserves, within towns, biodiversity rich areas. There is always a

huge challenge between balancing and managing conflict regarding economic benefits

and environmental management. There is need for mining regulations within protected

areas to guide tensions between exploitation of natural resource and preservation. A

mining right was granted in 2011 to extract iron ore and jeopardized the chances of the

country to declare Malolotja as a world heritage site. Consequent to such challenges,

the Minerals and Management board and Swaziland National Trust Commission work

together to have consensus in areas where such conflicts exist.

One of the possibilities where prospecting and mining becomes eminent despite

restrictions, the proponents will be expected to compensate and provide land for

conservation, known as biodiversity offsets. The commitment for both entities will be

put to test as there is another band of diamond formations located within Hlane game

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reserve and gold deposits within Malolotja nature reserve. It will be interesting to note

whether the biodiversity agenda will take precedence over the economic reasoning.

The process of granting mining rights and vetting of an applicant for financial and

technical capacity, needs strengthening in the country. The Act says that the applicant’s

financial and technical abilities are assessed and put into a score-card as part of vetting

process before license is granted. This is ensued by a visit by members of mineral

management board (MMB) to mining operations owned by the proponent. Given the

limited expertise locally on mining as a developing sector, flaws can occur during the

vetting process which can be arbitrary and allow discretionary judgements, therefore

there must be an objective process and a standard criterion used to guard against and

effectively screen crude investors.

The AU mining vision identifies an acute lack of necessary skills within the mining

sector in many African States which leads to manifold flaws in the processes. Therefore,

this is one area where funding donors can support the States by bringing highly skilled

consultants to support the development of expertise locally so that the country meets

its commitment for States to participate meaningfully in the sector. The Swazi

Government for instance, obtained funding from the Republic of China on Taiwan to

review process of the mining legislation in Swaziland. The Commonwealth Secretariat

(Economic and Legal Section) provided technical advisory role to a locally formulated

Mining and Legislative Drafting Committee which consists of experts drawn from

stakeholders in Government, Academia and Private sector who are legal practitioners,

economists, engineers etc. There is need for more support. The Government has

realized its shortcomings and is making efforts to strengthen the sector. The mining

sector has sent a cadre of 25 students to study within the mining disciple and they are

due to graduate in 2017.

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Also, following the opening of Lufafa gold mine in February 2016, Government

advertised locally for recruitment of six national positions in the mining department.

The Mines and Minerals Act of 2011 Section 133 (1) states iNgwenyama in trust for the

Swazi Nation shall acquire 25% shareholding, 133(2) Governments shall acquire 25%.

The share interest acquired by Government shall be distributed as follows 133 (3):

fifteen (15%) of the share interest shall be maintained in an appropriate fund

established and maintained by Government for the purpose of providing investment

opportunities to citizens. Ten percent (10%) shall be acquired by any person who is a

Swaziland citizen. Tibiyo is run as a private equity investment fund held by King in trust

of Swazi nation. Government does not have jurisdiction over Tibiyo and it is not subject

to parliamentary oversight nor provide public information on assets or financial

performance (USG, Investor Climate Statement, 2015:16).

Therefore, if that is the case, there is a breach in the administration of the funds if they

are not within the auspices of the Government as articulated in the Act. Stakeholders

questioned the rationale for the split of the shareholding between the King and

Government. They asserted that if the King acts in trust for the nation such a clause in

the Act was counterproductive.

Furthermore, the Environmental Management Act (EMA) of 2002, provides for

establishing an environmental fund which is governed by a board of trustees gazetted

by the minister of Environmental Affairs. One of the main objectives of the fund is the

enhancement and restoration of the environment of Swaziland. There are also

regulations and guidelines developed on its administration under section 28 of the act.

However, the fund consist mostly sums appropriated by Government which is not

adequate to cover the costly rehabilitation and decommissioning of mines. Nonetheless,

section 127 of the Minerals Act of 2011 provides for the holder of a prospecting licence

to provide an Environmental bond to counter this. Implementation of this provision

needs strengthening since closed mines are not rehabilitated MMA has discretionary

clauses that cause ambiguity in the administration of the sector i.e. section 132 (7) of

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MMA states, INgwenyama may reduce or temporarily suspend the royalty paid by rights

holder. A prospecting right is also issued in certain cases where special terms and

conditions are given by the King.

Though the iNgwenyama may review the requests citing specific reasons like economic

or financial constraints, due to limited skills in the country on mining sector, chances for

flaws to occur become imminent. The development approval order notice of 1975which

is part of the Income Tax law, allows a company to apply to the minister of finance if

the company plans to make significant CSR investments to be charged a reduced tax

rate up to 10 percent. The application to reduce tax could be made under the auspices

of CSI yet become a conduit to evade tax especially in a country where CSR is not

properly regulated nor an independent structure to monitor its implementation.

There is a general feeling that the state participation stake in mining operations in the

country is high. In addition to the 50% shareholding that accrues for local shareholding,

mining companies are expected to pay royalties at a rate of 3% per annum, 27.5% of

income tax, hence the net profit after all deductions for the proponent remains low. The

taxes impose a significant hurdle for mining ventures in Swaziland and might deter

potential investors. Conversations with community people and former employees

working at Salgaocar revealed that, the company would make it an excuse when

employees complained of low salaries and say ‘your Government takes the biggest

stake in the operations’.

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Table 8.Summary of relevant legislation

Legislation Rationale/Provisions Enforcing

Organization

Of interest in this mission

National Mining

Policy 2003

Provide a robust legal and

administrative arrangements so that

mining is operated in an

economically and environmentally

sustainable manner

Mining

Department

Securing the full economic and social

benefits of mining operations

Constitution of

Swaziland, 2005

The supreme law in Swaziland and

has sections that promote protection

and rational use of natural resources

for present and future use

Government of

Swaziland

Encourage Public participation

through regional councils

Mines and

Minerals Act no.4

of 2011

Consolidate law on mining and

provide for management and

administration of minerals, mineral

oils and incidental matters

Mining

Department

Identify inconsistencies between

practice and provisions in Act and

lobby

National

Development

Strategy 1997-

2002

Framework for national development

Ministry of

Economic

Planning and

Development

Identifies environmental protection

as a cornerstone of sustainable

development

Environmental

Management Act,

2002

Provide and promote the

enhancement, protection and

conservation of the environment,

sustainable management of natural

resources and matters incidental

thereto

Swaziland

Environment

Authority

Legal education for host communities

EIA Guidelines A tool to guide EMA act for

environmental protection and

adherence to standards

Swaziland

Environment

Authority

Inform review process to articulate

shortcomings

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Environmental

Audit,

Assessment and

Review

Regulations,

2000

Outlines processes and criteria for

project screening and public

participation for new projects, spells

out audits for operations

Swaziland

Environment

Authority

Swaziland

National Trust

Commission

(SNTC) Act

No.9/1972

It established the SNTC as a body

corporate charged with general

supervision and control of declared

institutions, parks, nature reserves

and monuments, relics and antiques.

Its objectives include preserving

cultural heritage of the country and

denotes the irreplaceable value of

national heritage

SNTC

Hosting communities sensitized on

national heritage they host and raise

relevant issues during scoping

mission of a potential development

Waste

Regulations,

2000

Governs all types of waste disposal,

the role of SEA and local authorities

in doing so. Provides guidelines for

obligations for different waste types

SEA Local authorities involvement and

consultations when project will affect

water sources of the hosting

community including remedial

actions to ensure community access a

clean water supply

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7. Monitoring of Environmental Compliance

The Swaziland Environment Authority is mandated by the Environment Management Act

of 2002 tasked with the responsibility to safeguard and manage all environmental

affairs in the country. However, it is important to note its limitations in assuming its role

to potential. Primarily, as a Government entity it encounters immerse political

interference which at times compromises the environmental assessment processes.

With the limited resources, both human and financial, the SEA endeavours to live up to

its mandate by being proactive. The EMA further provides for penalties for

environmental violations. Normally offenders opt for admission of guilt and fines to

avoid litigation.

Public participation is provided for in the EIA process, which allows for the participation

of affected and interested parties, starting from the scoping phase to the public review

phase. The scoping phase ensures that EIA study focuses on the key issues that are

relevant to the proposed project and allows the consultation and participation of

stakeholders in the decision making processes.

The regulations further outline the specific categories of parties to be consulted to

inform the scoping phase. The EIA guidelines formulated under the EAARR 2002 is

further specific to consultations in rural areas, particular attention should be paid to the

methods used to consult the public and traditional authorities, an assessment of their

legitimacy and how representative they are should be made” (guideline 7 of EIA

process). This mission discovered that civic participation is not robust especially at

scoping phase of development project but mainly cosmetic participation. Though the

guidelines stipulate that stakeholders have to be provided with an opportunity to inform

the process during the scoping phase, there is limited room to do so. Firstly, there is

generally low knowledge within the population on environmental issues that allows all

sectors to engage meaningfully.

30

Further, the guidelines state that proponents have to notify stakeholders on the

intended development through media advertisements. The print media is limited to

reach all population sectors especially rural areas where most development activities

especially mining occur.

SEA and Mining department cannot play this role but CSO can, by conducting

nationwide education of communities about their role in ensuring environmental

compliance and management in the communities. Furthermore, the stakeholder

database of affected parties consulted during the scoping phase should be part of EIA

report and it should to understand scope of civic participation.

Stakeholders acknowledged the need to close the gap in expertise and strengthen

compliance to EIA processes in order to safeguard the balance between environmental

and development concerns as well as monitoring of standards. Various options were

submitted; a neutral statutory body to absolve SEA role to regulate and accredit

reports. It was a general concern that the EIA reports were of mediocre quality and

there was no evidence to show satisfactory civil participation especially at scoping

phase.

An opportunity exists in the current review of EAARR 2000, to propose a requirement to

append stakeholders database in the EIA report for verification purposes.In the absence

of a structure to check conformity to standards and the fact that private are paid by the

proponents, a lot can go wrong. Another proposed solutions to counter that and ensure

quality EIA reports, was to collaborate with a regional or international professional body

to provide accreditation to EIA consultants. UNDP also supported SEA in this regard by

training private consultants on credible EIA processes.Tied with that UNDP was aiming

to conduct a public service delivery mapping and assess involvement of local

communities to inform development projects.

31

Furthermore, loopholes in the guidelines were diagnosed, for instance there is an

excerpt in the guideline that goes “scoping report it is not a detailed rigid work

programme that must be adhered to at all costs... The only requirement is that this

process of change is fully justified and the reasoning behind it is detailed …”This

statement is counterproductive as it implies the report is a process tick and hence

undermines rigorousness of the process.

32

8. The Mining Sector and Corporate Social Responsibility

For the longest time CSI efforts were treated as a form of philanthropy that enhanced a

company’s brand, or a charitable cause contribution to a “feel good” legacy. CSI

became the pet projects of individuals and received little or no strategic priority. Best

practise in the region indicate that CSI should be part of business strategies,

operational plans and key performance indicators (KPIs) instead of ‘pet projects’ that

gives a good feeling with no real long term sustainable impact. Hence CSR must have

benefit to the investor and the beneficiary4.

This needs policy support that will ensure enforcement. The South African Companies

Act for example require that companies put a requirement that for each mine, a social

and Ethics Board committee (or officer if the company is small to oversee its CSI

activities and link with company KPI. In order to enhance further appreciation for CSI,

companies need to encourage volunteering schemes which create links with the

community and impact their community and vice versa. Furthermore, according to SA

mining regulations, 15% of mining assets should be owned by South Africans and it

emphasizes historically disabled people to allow economic participation of native South

African. By 2009, South Africa had reached 8.9% of target and for 2014 a target of

26% was set. This is a good example to emulate, in contrast to Swaziland, Government

development projects largely thrive to improve the lives of hosting populations such as

relocation of homesteads to give way for the Mbabane-Ngwenya highway and those

relocated to give way for Sikhuphe airport whilst mining companies have negligible

projects. Discussions held with hosting communities of mining companies show nothing

or very little CSR initiatives.

4Rossouw.R. 2015. Best Practice in Corporate Social Investment (CSI) – Community Investment and

Development Management. Community and social development. Pg. 3

33

The community was not aware of any CSR activities rendered by Salgaocar; they

complained that they were not prioritized even for jobs. Furthermore, there was no

knowledge of linkages between the mine and the local community which would broker

relationship between the two. The community was also not aware of any scoping

meetings in which they were involved to voice their concerns about re-opening of the

iron-ore mine.

On the contrary, in Maloma coal mine residents revealed that there is strong mine-

community linkage. Evident to that, there is a committee comprising of elected

community members that represent community interests and issues to the mine

management which the mine attempt to resolve. The community commended the mine

to be responsive to their issues though it doesn’t warrant resolving all grievances. Also,

the community mentioned water and sanitation projects whereby in the recent drought,

they provided water tanks in strategic locations and filled them with water. At some

point the mine supported a gardening project which stalled because of the drought

situation, as well as building toilet in a proximate town. Though these philanthropic

acts are commendable in comparison to the Salgaocar’s case, they were sporadic, what

Rossouw calls pet projects, with very limited impact and utterly unsustainable.

The historical perspective of the current structure of mines in Africa, such as

privatization of mines, power imbalances, participation and decision-making were

skewed towards Government and private companies without due regard to the views

and aspirations of local communities and civil society at large . It is therefore

fundamental that the mining sector engage in social contract for mining that could

result in integrated development, with diverse economic linkages and increased social

well-being, livelihood security and reduced vulnerability of hosting communities.

Elsewhere, in order to counter the negative impacts of mining in hosting communities,

tripartite partnerships between Governments, the community and private companies

are being explored.

34

With higher prospects of a more vibrant mining sector following the call by his Majesty’s

Speech at opening of Parliament in 2016 to expand the sector, Swaziland has an

enormous task ahead to incorporate expectations of the AU vision and implement its

principles. Maloma was reported to have a CSR focal person and a CSR strategy in

place. However more remains to be done to integrate CSR activities than implementing

sporadic projects and mainstream the CSR strategy into overall development priorities

of the country. Mining companies should work closely with non-governmental

organizations and civil society in order to ascertain context specific diagnoses of the

social and development challenges facing near-mine communities5.

The lack of CSR framework in the country in general and specifically for mining

sector,was a point of serious concern by stakeholders. It seemed FDI came to enrich

themselves with complete disregard of their benevolent role towards the affected

parties. There are no mandatory regulations in Swaziland requiring companies to

practice social responsibility. In a study conducted in Swaziland aboutCSR in the hotel

industry show thatcompanies engaged in CSR to create and maintain a favourable

corporate image6. CSO submitted that there will be need for an independent entity

which monitors compliance, and support proponents to conduct assessments and

advises on appropriate projects.

In South Africa there is a social development pool wherein all mining companies

contribute .5% of annual income (Cole, 2016). Though such a fund exists, there are

concerns about its administration. The USGS 2015 Investment Climate Statement

climate decries unavailability of an NGO to take on a role in the country to push such an

agenda.

5Siyobi. B. 2015. Corporate Social Responsibility in South Africa’s Mining Industry: An Assessment.

Governance of Africa’s Resources Programme.Policy Briefing.142.

6Kabir. H. 2011. Corporate social responsibility by Swaziland hotel industry.Social and Behavior. Vol 25

(73-79)

35

The mission observed that CSR is sporadic and piecemeal in the country and the

legislation is very weak to compel mining operations to support host communities,

except in the EIA guidelines though put in a discretionary manner. Section 54 (g) of

Mines and Minerals Act has a requirement for a statement on community development

contingent to granting of a mine license. It does not articulate how the commitment to

community development will be enforced, monitored and accounted for. Furthermore,

the development approval order 1975, provides for reduction in company tax if a

company declare intentions for CSR. After the request has been granted, there are no

clear standards, mechanism to track that the company engages in CSR, or the scope.

There is need to lobby for a strong legal and policy framework to support CSR so that it

is not a choice but expectation. The gold standard in CSR in mining sector, host

communities have to benefit from employment quotas, development projects but most

importantly acquire shareholding.

36

Table 9. SWOT Analysis of the Mining Sector

Strengths Weaknesses

Legislative framework strong as it

upholds most principles of AU mining

vision and other instruments such as

SADC guidelines for extractive industry

Strong linkages with relevant sectors in

regulation of mining sector; Mining

Department, SEA, SNTC

Under the legislative framework, the

country’s constitution recognizes the

mining sector.

Strong linkages also include the Water

department and the Ministry of Labour

and Social Security.

Swaziland is a member of the Kimberly

Process (a forum that consists of

government, industry and civil society)

A strong civil society organization and a

vibrant coordinating assembly of NGOs

Science and Biotech park that can

conduct research on how to add value

of the minerals

Weak implementation of legal and

policy framework

Skills shortage and capacity limited

in mining sector

Weak enforcement and compliance

to the EIA process

Small fines for contravening

provisions of environmental Act

(highest 150 000)

Weak implementation of legal and

policy framework due to the

interference and discretionary

clauses.

The CSR framework in country is

weak

Weak enforcement and compliance

of the EIA process.

Civil society has low capacity on

mining sector to engage or lobby

for change

No accreditations structure for EIA

consulting firms

37

Opportunities Threats

Government sent for training a first

cadre of mining personnel, returning

2017

Mission such as this allows civil society

to engage in the mining sector

CANGO members on the ground and

working in project areas hence can

empower and sensitize

Position exclusion of hosting

populations within human rights /

social protection lens

Review of EIA guidelines

Process to develop extractive industry

guidelines underway (draft)

Different levels of CSI in the country,

there is need to consolidate and

develop standards

25 students are undergoing training on

mining; they are all bonded to serve

the country after completing studies.

The country has a mining and

biodiversity guideline which protects

the mining industry and the SNTC Act

is under review.

CANGO can create a forum or

consortium to lobby on mining issues

All ministries have an environmental

strategy that needs implementation

When minerals located in restricted

areas and conflict arise between

economic benefit and environmental

protection

Inclination towards economic benefit

than preservation of natural heritage

Limited public participation which

makes social development issues to lag

behind within mining operations

Investor fatigue in the sector due to

state participation proportions without

monetary expectations, statutory taxes,

unclear tenure regulations on SNL,

Government share and citizen

shareholding in the sector needs to be

defined or clarified further

Space for citizens engagement is low

as a result of the public order bill, CSO

can be limited to undertake

sensitization mandate within the mining

sector

The country volumes of minerals is low

and less attractive to investors

38

9. Niche for Civil Society Organization in Mining Sector and

Recommendations

CSO can contribute to the mining sector in the country by linking the injustices in the

mining sector within the human rights and or social protection lens. This would mean as

part of community projects, CSO can educate hosting communities on their rights as

per provisions of the law. For instance legal education for support communities (to

eradicate fear to talk, is provided in the law, in the constitution clause 218 (2) ‘The

primary objective of the Tinkhundla – based system of government is to bring the

government closer to the people so that “the people at sub-national or local community

level progressively take control of their own affairs. When communities are aware that it

is their right to influence developments than being passive agents, they might be willing

to be involved in the mining “sector and link with development proponents and EIA

processes.

Stakeholders and affected parties particularly, from rural areas need support to

understand technical processes such as the EIA. Someone has to take the role to

explain the document to laymen language so that it is easy to comprehend. Further,

communities need capacity building so they know, how to effectively participate in EIA

processes, what questions to ask mining proponents that want to start operations in

their community. CSO can actively assume this role and influence mining operations to

be pro poor in their approach. Most importantly, CSO can forge relationships with

mining companies and collaborate in order to support mining companies so that they

link CSI with national development priorities.

In order to systematically articulate and lobby issues of natural resource governance,

CANGO is encouraged to start a consortium for environment and natural resource

justice to track and continuously monitor the sector. There is a Dialogue and Action

Group consisting of young professionals that can support the NGO with expertise in law,

lobbying and articulate governance issues in the sector.

39

Another possible role would be to organize social mining indaba to bring to the fore the

social face of mining activities, learning from the South African experience. Moreover,

there is an acute need for an NGO that will focus on the governance of environmental

affairs and justice. Since there are gold deposits located deep into Malolotja nature

reserve and another band of diamond totally within Hlane game reserve, civil society

can be watchdogs and monitor developments to prevent biodiversity and economic

conflicts that might result.

Given the political climate in-country, image and ability of CANGO to lobby and be taken

seriously so that they are not viewed as a progressive organization is key. Valuable

research as this one must result to change than ‘a good to know document. Once the

structure within CANGO consortium is instituted and a dedicated NGO in place, lobbying

for mainstreaming of CSR into existing mining legislation and operations must ensue to

enforce the provision of a budget for such work within mining operations so that it is no

longer a choice but an obligation.

40

ANNEXES

Annex1. Stakeholder Analysis (Planned vs. Actual)

Planned

Actual Institution Key

Informant

Information Output

Mining Department

Commissioner

of Mines

Overall mining regulatory

framework

Synopsis of mining landscape

including challenges in enforcing

legislation

Done

Swaziland National Trust

Commission

Director of

Conservation

Role in mining sector and

monitor mining operations do

not compromise country

heritage, challenges in executing

role

Done

Central Bank of Swaziland

Research Unit Mining revenue and current

contribution to economy

(proportion) and forecast of all

minerals mined

Done

Ministry of Economic Planning Director of

Planning

Mining trends over the years,

forecast and potential

contribution of sector economy

Pending

SIPA Investment

Portfolio

Investment landscape related to

mining and SIPA role in mining

sector

Appointment

request pending to

date

Maloma Mine

Chief

Executive

Officer

Mining regulatory framework

and its applicability in practise

CSI strategy and activities

implemented

Access not granted,

appointment

request pending to

date

Swaziland Environmental

Authority

Director of

research and

policy

Environmental compliance and

standards monitoring

Done

Traditional leadership of Inner council Compendium of CSI activities

41

communities around mines or Chiefdom

development

committee.

that have been implemented by

mines and perspective of

community beneficiation

Done

Civil Society Organizations and

other non-state actors7

Directors or

designate

perspective on best practises in

the region and garner

recommendations for effective

CSO engage to influence the

mining sector

All except World

Vision, CSC, SCCO,

and Church Forum

not interviewed

non-availability

during mission due

to competing

priorities

7OSISA, CANGO, FODSWA, SERPAC, FSE&CC, World Vision, EU, Church Forum, Save the Children

SWABCHA, Swaziland Christian Youth Network, HURISWA, Council of Swaziland Churches, UNDP

42

Annex 2. Document Repository

1. Africa Mining Vision

2. Mines and Mineral Act , 2011

3. Environmental Management Act, 2002

4. Annual Reports, Central Bank of 2013-2015

5. Development Approval Order Notice, 1975

6. Incentives for Foreign Direct Investment

7. Corporate Social Responsibility strategy for mining companies

8. National Development Strategy, 1997-2002

9. Poverty Reduction Strategy and Action Plan

10. UNDAF Report, 2015

11. SADC Guidelines for mainstreaming biodiversity and ecosystem services in the

extractive industry, 2015

12. ICCM Good practise Guidance for Mining and Biodiversity

13. Salgaocar EIA report, 2011

14. The Constitution of Swaziland

15. Swaziland Diversification Report, 2013

16. Decentralization Policy, 2006

17. Geological Survey and Mines Department (GKoS): Mineral resources of

Swaziland. 2006

18. United States Government. 2015. Swaziland Investment Climate Statement

43

Annex 3: Consultation Tools

National stakeholders

Questions Respondent

What aspects of the policy is challenging to implement

Commissioner of Mines

How does the ministry work with the King’s Office on mining

matters, how far does the jurisdiction of the ministry go

How does the duality affect implementation of standards,

monitoring and enforcement of standards as per the

legislation provisions

Who are the other ministries/institutions involved in regulation

or monitoring of the sector (SIPA, Tinkhundla, MEPD, SEA,

SNTC)

How does the department monitor adherence to mining law

and standards and mine commitments i.e. CSI and community

benefits

Is the department able to effectively fulfil its role and has the

full capacity to do so

Membership to regional and global mining forums and

beneficiation

Bilateral agencies involved and their input so far, plans in

pipeline

Any support, from CSO envisaged so that sector can fulfil its

objectives?

Forecast of the mining industry to GDP of country

44

What is your perspective on the extractive industry in the

country to national development

Central Bank of Swaziland Do you foresee a greater potential to contribute significantly to

the economy or national development

Please provide current trends and revenue contribution to the

economy and national development

What is the potential of the mining sector as well as future

forecast if available mineral deposits will be mined in the

country

What are existing hurdles for the sector to contribute

significantly and what are your suggestions to make the sector

reach its full potential

Bilateral agencies involved and their input so far, plans in

pipeline

In your opinion how is the mining sector performing in the

country in relation to contributing to the economy and overall

development

CSO and other non-state

actors

What best practises from the region and Africa as a whole can

Swaziland learn from, adopt and apply in the sector

Please provide recommendations on how non-state actors can

be effectively engaged to influence the sector to make sector

effective, accountable and contribute to national economy and

development.

45

What is your CSI strategy focusing on?

Mine representative

(director, designate)

How long has it been in place?

Has the company fully implemented the CSI strategy, if not

why?

What is the focus of the mine corporate social strategy?

SEA to identify cases submitted to court related to the mining

sector and assess their success rate

SEA

Director policy,

In your opinion does SEA has the capacity to monitor and

enforce compliance standards to activities that affect the

environment

Please share statistics of cases submitted to court pertaining to

environmental damage in the last 10 years

What were the main issues for taking the companies to court?

What would you rate your success (in %)

46

Annex 4. Community Consultations Interview guide

What community linkages exist with mining company? (List)

CSR Initiatives

Initiative Yes No Start

Date

Initiative Yes No Start Date

Road Community

linkages

Water Employment

Clinic Entrepreneurial

School

Funding

List businesses that benefit from the mine and list how they benefit

What challenges are brought by establishment of mine in your community?

Where do you report (forum within external or mine) the challenges encountered, and

has there been redress?

How long ago were the issues reported?

How is government involved in these issues?

Annex 4: Represented stakeholders during dissemination of Preliminary Findings