Yet Again, Opacity rears its Ugly Head in Zimbabwe’s Mining Sector

By Gilbert Makore and Allan Chaumba

1 March 2013

Zimbabwe has not been able to leverage its sub-surface mineral wealth into financing broad based development. One of the critical factors why the country has failed to parlay its mineral resources into economic growth and development is the pervasive opacity in the extractive industries. There is limited public knowledge on the granting of claims, contract negotiation; production level data, marketing of minerals, revenue generation and revenue use. The cloak of secrecy in the mining sector effectively sidelines the vast majority of the population from participating in the governance and decision making processes related to the sector.

Worryingly, mining related deals are consummated away from the public eye only for details to emerge that the country may have been prejudiced. The Deputy Prime Minister, Arthur Mutambara, has conceded that negotiators of Zimbabwe’s mining deals come to the table deaf, dumb and blind. There is evidence to support his claim. There have been allegations that the ZISCO-ESSAR deal was negotiated without the participation of key Ministries and ended skewed in favor of the private company. To date, despite the various government heads trading barbs through the media, there has been no publication of the said deal or at the very least, its outcomes. There is still no clarity as to whether or not the deal has been given consent by the two parties involved.

Currently, the country is seized with emerging details regarding the Zimplats indigenization deal. The deal is part of Zimplats’ compliance with the Indigenization and Economic Empowerment Act. The Act compels companies to sell off 51% of their shares to indigenous Zimbabweans. As far back as October 2011 it was reported that Zimplats had given 10% of its shareholding to the local community as a step towards compliance with the law. The act of disposing 10% to the local community presupposed general agreement on a deal. However, in May 2012 the Minister of Youth Development, Indigenization and Empowerment and the Zimplats Chairperson appeared at a joint press conference at which it was said that the company had submitted a plan that complied with the law. It then becomes mind boggling that prior to the conclusion of the deal, Zimplats had proceeded to dispose 10% shareholding to the local community only to publicly reappear and say the deal had not been finalized.

There was much celebration by government and community representatives when the community trust was established. The government was lauded as pioneering a ground-breaking model for community development. Yet the finer details of the deal were not made public. The documents establishing the agreement remained hidden from the general public. There was no transparent process around the finalization of the deal. The communities were not consulted but were told what the deal meant for them.

As far back 2011, the Zimbabwe Environmental Law Association (ZELA) had warned that the absence of transparency and accountability in the implementation of the indigenization program would be a harbinger for deals that prejudice the nation and ensuing public discontent around the program. In late

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2012, the organization commissioned a research into the establishment of Community Share Ownership Trusts in Zimbabwe’s Mining Sector. The results of this research were shared with some legislators and a launch of the research paper was done in January 2013. The research clearly enunciated the challenges related to the implementation of the program particularly insofar as it lacked public participation; and transparency and accountability. The research results postulated the Community Development Agreement model as a better model for indigenization given its participatory and tripartite nature of inclusivity with the key stakeholders from government, mining companies and communities having an equal input.

There are now allegations that the deal undervalued the platinum resource that the company sits on. Media reports also allege that the deal is problematic in terms of funding for the acquisition of the shares by the government, the community and the employees. Indications are that there is a likelihood that communities and other empowerment entities may fail to pay for the shares disposed potentially resulting in the forfeiture of the same. There are also allegations that there was no consultation with interested stakeholders in government and that the firm that provided consultancy services for structuring the deal, Brainworks Capital, was awarded that contract irregularly in flagrant disregard of the standing rules governing the awarding of tenders above $300, 000, 00 as set by the Tender Board. Brainworks Capital alleges that the service provided was to a publicly listed company and therefore there was no obligation to go to tender. However, it is the National Indigenization and Economic

Empowerment Board (NIEEB) that signed a mandate letter engaging the advisory firm on June 8, 2012. This is just the tip of the ice-berg in terms of the potential areas of concern with regards to the deal. While various parties to the deal have come out to defend the process and the content of the deal, the finer details are even murkier. The challenge extends beyond the Zimplats deal as indications are that the same consultancy firm was retained to provide similar services in the deals agreed to by Mimosa, Anglo American’s Unki Platinum, Pretoria Portland Cement and Caledonia. The total value of these deals is said to be over US$1 billion.

What remains missing from the public domain are the documents detailing the deals that are ostensibly meant to benefit us as Zimbabweans. The government stance seems to be –do not worry about media reports, trust that we negotiated deals to the full benefit of the nation. Yet in the face of the media reports being published, this surely cannot suffice. The current legal and policy framework governing mining does not provide sufficient scope for transparency and accountability. However, the dictates of good governance certainly provide a basis for their classification as public documents that ought to be availed to the general populace for public consumption. It is hoped that the Mines and Minerals Amendment Bill will contain key provisions on transparency and accountability. There is now global consensus that openness in mineral resource governance is central to unlocking value. The Africa Mining Vision recognizes the need for transparency and accountability while the Extractive Industries Transparency Initiative is now an accepted global standard for extractive industries transparency. There is need to publish all the negotiated documents related to the deal and ensure that the indigenization program, going forward, is participatory. In respect of deals that have already been agreed to, there is need for a commission of inquiry to be established and investigations carried out into the finer details of

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these agreements and what exactly they mean for the nation. As both parties to the deal allege that everything is above board, this should not prove to be a problem.

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