Mining and the IMF Staff Monitored Program for Zimbabwe

The IMF published the Government of Zimbabwe’s Letter of Intent and the IMF Staff Report for monitoring that began in March and ended 17 April 2015. This is all part of the IMF Staff Monitored Program (SMP) that Zimbabwe voluntarily subjected herself to in 2013. The program is aimed at normalizing the country’s relationship with creditors and mobilize meaningful development finance. Should Zimbabwe meet all the quantitative and structural benchmarks under the IMF SMP this would demonstrate the country’s capacity to repay its debts and could unlock funding from not just the Fund but other agencies.

The government’s commitment to implementing various reforms under the SMP is, therefore, high particularly given the continued challenges in mobilizing development finance and a general choke-hold on the economy. In that regard the SMP becomes an important arena for tracking and monitoring progress with respect to various structural reform commitments.

Of particular interest in the recently published LOI and Staff Report are the points below;

Point 13 in the Staff Report: Authorities expect submitting the amended Mines and Minerals Act, including the fiscal regime for mining, to the Attorney General by end-March, to be submitted to Parliament in the third quarter of 2015. They have already started developing regulations to support the implementation of the amended Act, which would help strengthening the tax regime for the mining sector and improving mining revenue transparency. The authorities have committed to continue publishing the audited financial statements of the Zimbabwe Mining Development Corporation (ZMDC).

Point 23 in the Staff Report: In January 2015, the Indigenisation and Economic Empowerment (IEE) Act was amended to include new roles for the line ministries to approve indigenization plans, issue compliance certificates, and monitor implementation. Line ministries are required to define and publish the parameters for their respective sectors. To further clarify the policy, the authorities plan to publish a simplified summary of the law on the Zimbabwe Investment Authority’s website.

General Comments

It is highly likely that the amendments to the Mines and Minerals Act will be tabled before Parliament before end of 2015 and it is important to monitor and influence this reform process as much as is possible.

There is a commitment to publish the audited financial statements of ZMDC. This is a welcome commitment although its tempered by the fact that the government had (in a letter to the IMF on 3 November 2014) earlier committed to ensuring that the 2013 audited financial statements of ZMDC would be published by the end of 2014. This target was not met.

It is not clear if the new roles for the line Ministries address investor or investor confidence concerns. The IMF Staff report also concedes as much. There remains a lot of confusion in government, the general public and investors with respect to the interpretation and implementation of the Indigenisation and Economic Empowerment Act.

UPDATE ON THE PARLIAMENTARY PORTFOLIO COMMITTEE ON YOUTH, INDIGENIZATION AND ECONOMIC EMPOWERMENT MEETING – 7 MAY 2015

Matter: Oral evidence from the Permanent Secretary for Mines and Mining Development and the Permanent Secretary for Youth, Indigenisation and Economic Empowerment on progress made on the follow-up to the pledges made by mining companies to Marange- Zimunya CSOT.

The Permanent Secretaries did not attend the meeting but they sent in representatives at Directorate level.  These included;

Mr Hawadi- Ministry of Mines

Mr Tizoro- Acting GM- Zimbabwe Mining Development Corporation

Mr Masanga- Ministry of Youth Indigenisation and Economic Empowerment

Mr Mashonganyika- Ministry of Youth Indigenisation and Economic Empowerment

Mr Rangu Nyamurundira- National Indigenisation and Economic Empowerment Board

Mr Ngwarati- Ministry of Youth Indigenisation and Economic Empowerment

BACKGROUND

Five mining companies operating in Marange are alleged to have pledged to donate US$50 million into the Marange Zimunya Community Share Ownership Trust with each company in-putting US$10 million. The Trust was launched on 26 July 2012 but the ‘pledges’ have not been fulfilled and some of the companies in Marange have since stated that they never agreed to the pledges.

President Mugabe launching the Marange Zimunya Trust (photo credit: ZBC)

President Mugabe launching the Marange Zimunya Trust (photo credit: ZBC)

PROCEEDINGS

The Chairperson of the Committee indicated that the Committee wrote to the Ministry of Mines and Mining Development and the Ministry of Youth Indigenisation and economic Empowerment seeking information on the progress that has been made on the ensuring that mining companies that made pledges to the Marange Zimunya Community Trust had been honoured. The Chair also noted that the letters to both Ministries had requested evidence of correspondence between the Ministries and with the mining companies involved with respect to the issue of the Marange Zimunya Community Trust.

Outcome of the Committee Meeting and Oral Evidence from the Ministries

  1. There is no official communication that shows that the companies in Marange made pledges to donate to the CSOTS
  2. The Ministry of Youth Indigenisation and Economic Empowerment states that the pledges were verbal
  3. There is however no evidence (audio/meeting minutes) that shows that the companies made the pledges
  4. There Ministry of Youth Indigenisation and Economic Empowerment argues that the companies committed to the pledges and this is evidenced by the fact that it is the companies that produced the dummy cheques for presentation and not the Ministry
  5. The Ministry of Youth Indigenisation and Economic Empowerment has since written to the mining companies (March 2015) to get their official commitment with respect to the pledges and their plans to make good on the pledges.
  6. Out of all the mining companies, only Jinan has written back. Jinan’s letter back to the Ministry of Youth Indigenisation and Economic Empowerment was just an acknowledgement of receipt of the letter from the Ministry and does not necessarily commit to the ‘ pledges’
  7. ZMDC was not involved in the issue of pledges to the CSOT and was only invited to the launch
  8. There is no evidence of correspondence between the Ministry of Mines and Mining Development and the Ministry of Youth, Indigenisation and Economic Empowerment with respect to the Marange Zimunya Community Share Ownership Trust
  9. ZMDC met with the mining companies on 20 June 2013 and directed the mining companies to make contributions to the Trust (each contributing US$200 000 immediately subsequent to this meeting of June 2013)
  10. Marange Resources remitted US$250 000 and Mbada Diamonds remitted US$200 000 to the CSOT’s bank account
  11. Given the production challenges in Marange, the Ministry of Mines and Mining Development’s position is that these pledges be renegotiated down with a view to payment being spread over a period of time

Further Reading:

President Launches Marange Zimunya Community Trust 

Scam Fears in Community Trusts

Marange Community Share Ownership Trust Under Fire 

Community Share Ownership Trusts in Zimbabwe’s Mining Sector: The Case of Mhondoro-Ngezi 

REPORT BY: PUBLISH WHAT YOU PAY ZIMBABWE

Publish What You Pay Zimbabwe is a coalition of civil society and community based organisations united in their call for a more open and transparent mining sector in Zimbabwe.