ANALYSIS OF AUDITOR GENERAL 2014 REPORT ON STATE ENTERPRISES: A FOCUS ON MINING STATE ENTERPRISES

 

Mukasiri Sibanda and Gilbert Makore

The 2014 narrative report on state enterprises and parastatals by the Office of the Auditor-General (OAG) reveals continued rot and mismanagement of public resources. This article takes particular interest in the findings pertaining to the Zimbabwe Mining Development Corporation (ZMDC), a state owned enterprise (SOE) advancing state interests in the mining sector.

ZMDC is involved in the extraction of gold, diamonds, graphite, platinum and asbestos among other minerals. It is its involvement in Marange diamond fields, where it owns no less than 50% stake in all the seven companies operating in Marange, which galvanised its position in mineral exploitation. The diamond entities in which ZMDC has an interest include; Mbada Diamonds (50%), Diamond Mining Corporation (50%), Jinan (50%), Marange Resources (100%) and Kusena Diamonds (100%).The only notable exception is Anjin Investments where ZMDC’s shareholding is 10% although the other 40% is said to be held by Government of Zimbabwe.

Minerals are finite sovereign assets and state equity participation warrants close public scrutiny to determine the extent to which the exploitation of the mineral assets is benefitting the citizenry. Scrutinising the role of direct state participation in mining is particularly important in the context of current international discourse on how corporations are bleeding Africa of critical development finance.

An analysis of the 2014 narrative report on state enterprises and parastatals by the OAG, therefore, becomes opportune and imperative as it provides for reflection on how ZMDC is faring on managing the country’s minerals assets. The findings from the OAG clearly show how poorly ZMDC is executing its mandate as a state agent in the exploitation of minerals.

Some of the findings from the report show that;

  • ZMDC’s latest audited group financial statements are for the year ended 31 December 2013. ZMDC is perpetuating its custom of sharing stale financial information. Timely audited financial statements are one of the key tenets of good corporate governance and their undue delay affects the integrity with which the company is managed. It is, however, important to note that Marange Resources (a ZMDC subsidiary) has its 2014 annual audited reports in place.
  • ZMDC has failed to honour statutory obligations to the Zimbabwe Revenue Authority (ZIMRA), pension funds and medical aid schemes. For instance Marange Resources owes statutory obligations amounting to $16,201,622 as at 31 December 2014 broken down as follows; $11,466,864 (royalties) $2,504,615 (depletion fees), $1,162,674 (depletion fees), $758,270 (Minerals Marketing Corporation of Zimbabwe commission), $167,892 (Pay As You Earn- ZIMRA) and $141,365 (National Social Security Authority).
  • Mineral reserves and ores are not known as no meaningful exploration has been done. This carries the risk of poor economic justification for disposing equity stake to investors as the quantity and quality of concerned mineral assets is unknown. In addition, fiscal plans are most likely to be undermined by poor confidence in revenue. This has been the case since the start of formal exploitation of Marange diamonds in 2010.
  • Joint venture partners have been enjoying dividends without honouring their committed capital investments.
Joint Venture Agreed amount (US$) Amount invested (US$) Variance (US$)
Mbada Diamonds (Pvt) Ltd 100,000,000   47,914,009 52,085,991
Jinan (Pvt) Ltd 200,000,000 134,853,491 65,146,509
Diamond Mining Corporation (Pvt) Ltd 1000,000,000   40,971,654 59,028,346
  • Corporate Social Responsibility (CSR) investment amounting to $3,163,091 lacked proof of receipt from beneficiaries and no breakdown of expenditure was availed. Included under CSR; $195,000 (Kimberly Process Certification Scheme Inter sessional meeting on 4-7 June 2013), $165,000 (Diamond mining conference in Angola & Turkey), $100,000 (Diamond expenses for Israel & China- Dewe L). These travel expenses dwarf the $250,000 given to Marange Zimunya Trust. It is unclear how travel to international conferences by senior executives constitutes CSR. It can be inferred that some of the CSR budgets that the companies tout as representing commitment to community social development are essentially personal and or executive expenses.
  • No proof of ownership of investment in Anjin (private) Limited, Jinan (Private) Limited, Gyme Nyame (Private) Limited, Diamond Mining Corporation and Global Platinum Resources (Private) Limited as share certificates could not be availed.
  • The OAG report noted that there is no Environmental Impact Assessment certificate for Marange resources, a ZMDC’s subsidiary. Notably, the state is both a player and a regulator in the mining sector its partiality in enforcing the rule of law shows double standards and dissipates confidence in mineral resource governance.
  • Mbada diamonds posted an operating loss of $49,651,859 in 2013 after making $56,015,647 profit in 2012. The entity’s current liabilities exceeded current assets by $89,916,504 (2013) and $57,383,887 (2012). The report expressed concern on the business’s ability to operate in the foreseeable future.
  • Marange Resources non-executive board members were given a cumulative total of 2,940 litres of fuel, $27,450 each as holiday allowances and an extra security payment of $758,000 over and above the approved remuneration rates. These payments were not taxed under PAYE contravening the Income Tax Act (Chapter 23:06).
  • The Chairman of the Mining Development Board retired from the Board on June 30, 2013 and was paid US$ 261 000 as gratuity for his three and half years service on the board.This is in contravention of corporate governance  principles which state that non-executive directors shall not receive excessive payments on contract termination.
    The gratuity payment was also not taxed in contravention of the Income Tax Act [Chapter 23:06].

Despite national political rhetoric on state resource ownership the OAG report clearly exposes the need to improve management of SOE that are participating in mining.  Where state participation in mining is not fully accounted for, socio-economic transformation leveraged on minerals resources will remain a pipe dream. It is important to note that the OAG 2014 Report is not the first to expose this decay in SOE. There is, therefore, a need for various actors to ensure that the findings from this report are urgently taken forward and considered.

RECOMMENDATIONS

  • The Ministry of Mines and Mining Development must swiftly act to address the rot as minerals are a finite resource. The Ministry must publicly state how it will address the findings from the OAG Report. ZMDC should be compelled to timeously release its financial information to stakeholders particularly given that this is a SOE.
  • The government must disclose Marange diamond joint venture agreements and all mining contracts to enable public oversight on how sovereign assets are being managed. Contract disclosure can act as a deterrent to cases where joint venture partners with government enjoy dividend income without making good of their committed capital injection.
  • The government must explore possibilities of recovering dividend income that was enjoyed by joint venture partners who failed to honour their capital contributions in full. The process of consolidating diamond entities should not reward truant joint venture partners who have failed to contribute required capital to justify their equity position in Marange diamond exploitation
  • The Parliamentary Portfolio Committee on Mines and Energy and the Committee on Public Accounts must ensure that the report findings are urgently considered. Parliament should investigate how the 40% government equity in Anjin Investments is being accounted for.
  • Civil Society through the Publish What You Pay (PWYP) campaign must make use of already existing and credible information reports of the OAG to raise public awareness and aggregate public demand for government accountability to stop the bleeding of public resources. Demand driven accountability can be coalesced through public awareness and understanding centred on abuse and leakages of public resources. An analysis of implications of poor management of public resources vis-á-vis provision of constitutional socio-economic rights would be vital.

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For more information on the OAG Report Findings please get in touch;

Mukasiri Sibanda- (Economic Governance Officer, Zimbabwe Environmental Law Association)- mukasiri@zela.org

Gilbert Makore (Coordinator, Publish What You Pay- Zimbabwe)- gtmakore@gmail.com

Zimbabwe Environmental Law Association

26B Seke Road, Hatfield, Harare

Tel: +263 57360-3

Website: www.zela.org

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.

DECLARATION OF THE 6th ALTERNATIVE MINING INDABA- “MAKING NATURAL RESOURCES WORK FOR THE PEOPLE”

DECLARATION OF THE 6th  ALTERNATIVE MINING INDABA

 “MAKING  NATURAL RESOURCES WORK FOR THE PEOPLE”

 12th  February 2015,  Cape Town, South Africa

We, the representatives  of  over  300  members  of  Civil  Society  Organisations;  Faith  Based Organisations,   Pan-African   Networks  and  Organisations,   Labour   Movements,   media, international  partners  and Community  Based  Organisations,  have met from  9th    –  12th February,  2015,  in Cape Town  to share experiences and deliberate  on the role  and the impacts of extractives on communities, the environment, animal life and society at large. This  marks  the 6th   year  of  the Alternative  Mining  Indaba  (AMI)  which has  grown from  its modest 40 to over 300 international delegates, and in particular from Africa.

Cognisant  of  the failure  to fulfil  the Millennium  Development  Goals  (MDGs)   and the subsequent efforts towards the Sustainable Development Goals (SDGs) and the post-2015 agenda, financing for development should remain a national obligation.

We are convinced that the capitalist system puts profits  above people, and fails to sustain harmonious relations within  society. The failure of African governments to fulfil regional instruments, including the Africa Mining Vision (AMV),  is a demonstration of its weak governance.

We   have  further  noted  the flagrant  violation  of  ethical  and legal  standards  and believe  that without  principled,  just  and effective  regulation  of  the extractive  and related industries, people will remain impoverished.

We are cognisant of trade and investment policies that have had a negative impact on governments’ ability to fulfil its development agenda and lift communities out of poverty. Governments  have an opportunity  –  and  duty –  to ensure  that natural  resources benefit  more  people  more  widely  and that companie s operating  in  their  respective countries are acting according to ethical and legal standards.

We call upon all African governments to commit to rising to the challenge set  forth in our priority  recommendations  and make citizen-centred  decisions about  the investment of natural resources.

  1. Taxation and Illicit Financial Flows (IFFs)

1.1  There  is widespread consensus and  evidence  of  the devastating  impacts  of  Illicit financial flows (IFFs), tax avoidance and tax evasion on Africa’s ability to address its development and poverty challenges.  There  is therefore  an urgent need for African governments, individually and collectively under the leadership of  the AU to step up actions to stop  the bleeding of resources from  the continent. The launch of  the high level  panel  (HLP) report  on IFF  in  Africa led  by  former  president Mr  Thabo  Mbeki provides an opportunity  for  African  governments,  civil  society  and citizens  to join hands   and  push   for  real   transformative   changes  in   the  international   financial architecture. We support the need for a global framework that enables enhanced domestic resource mobilization, clamping down on corporate tax malpractice and putting an end to illicit outflows of resources from  the continent.

1.2 To realise the above, we call on the African Union  (AU) and African governments:

1.2.1   To  establish  and situate  a specific  agency within  the AU  and its  related processes as the leading African institutional space for dealing with  Illicit financial flows and asserting its eminence and legitimacy in relation to other international bodies in order to play  a greater and more active  role  within  the G20  and OECD processes and not consider Africa’s role as passive.

1.2.2  To strengthen the role of regional and continental groupings such as RECs, UNECA   and  ATAF  by    putting  in   place   adequate  institutional   and  political mechanisms   that  ensure a  clear   vision,   roadmap  and  action  plan  for  the implementation  of  key  measures to tackle  illicit  financial  flows.  Such mechanisms must ensure and protect the role for civil society and citizen’s participation.

1.2.3  To  review their   fiscal  policies  domestically  and regionally  and remove tax incentives  that  erodes their   tax  bases and  promotes tax  competition.  African governments should learn from  other regional experiences, where governments are willing and able to tackle IFFs through the use of innovative country specific anti-tax avoidance practices.

1.2.4  To send a clear and firm message to the international community and call for cooperation in stopping IFFs from  Africa. Since this  is not only an Africa problem, finding  a solution  to  these  challenges  requires  international  cooperation  and leadership to support Africa and not undermine the continent’s efforts.

  1. Transparency and Accountability

2.1      We  call  for  the   real-time  disclosure  of  all  project-level  mining-related  permits, licenses,  compliance  reports,  monitoring results  (including  air,  water, waste  and health) and contracts in a public registry available both online and as a hard copy.

2.2      We call for the  public disclosure of all relevant contractual and fiscal terms relevant to  EI   projects  to  allow  critical  interrogation  of  the  timing and  magnitude  of extractive industry revenue flows.

2.3      We  call  for  the   real-time  public  disclosure  of  beneficial  ownership of  Extractive Industries companies, including, those entities providing services via  government contracts and beneficiaries of trusts.

2.4      We  call  on governments  to adopt  whistle  blowing  protection mechanisms  that incentivise those who publicise corruption and  illegal  government and corporate activities.

  1. Environmental rights and community monitoring

3.1      We call on governments to support mining community initiatives in  tracking and assessing multi-national corporation activities and mitigate the social, cultural and environmental impacts of those activities.

3.2      We  call on governments and MNCs  to negotiate with communities as opposed to consulting, since the latter is inadequate and diminishes our real rights  to negotiate the use of  our land  and environment. Consultation  fails  to include  the right  to say NO.

3.3      We  call  for  the adherence  to the international  law  principle  of  Free,  Prior  and Informed  Consent as  a continuous process, rather than a once-off  practice and adequate government investment in environmental compliance and enforcement.

3.4      We  call  on government and MNCs  to accept,  that where mining is unavoidable and   communities are   relocated,    that   communities be   compensated   in accordance with  the real  value of the land, including the value of the mineral resource under the land and pecuniary rights.

3.5      We call for the  rational and just utilisation of the land and the environment and an end to looting and land grabbing for foreign food production, mining and other forms  of  extractives.  Where the  environment  and livelihoods  are degraded  or destroyed, these actions should lend itself to stringent recourse.

  1. Access to Remedy: Litigation and Mining

4.1      We call on government to revoke mining licenses where there is non-compliance to

Social and Labour Plans (SLPs) that have been agreed to.

4.2      We  call  on government to give effect  to the fact  that SLPs  and Environmental Impact Assessments (EIAs) are public documents which should be readily available to the public.

4.3      We call on government to ensure that SLPs are actually and effectively negotiated with   communities and  workers. We   further   call   on  an  inclusive   process  with communities, as it pertains to EIA.

4.4      We call on government to strengthen judicial systems and to provide equal access to justice for mining communities.

4.5      We   call   on  governments   to  provide adequate   resources for   human  rights commissions to investigate; monitor and take action against human rights  abuses in the extractives sector.

4.6      Cognisant  of  the extreme danger of  climate  change to Africa,  where 200  million people are anticipated  to perish this century because of  droughts  and floods, we demand a proper accounting, mitigation and compensation for the  extremely high proportion of Africa’s greenhouse gas emissions that come directly and indirectly from  mining and smelting.

5.2.3  Investigate  what policy  and laws  must be enacted  at both national  and regional  levels which will  encourage cooperative formations  that can help ASM communities to  thrive  together and  ensure safety and  benefits  for  miners  and communities. ASM activities should also be part of  the policy process at grassroots levels.

5.2.4   Legislation  must be  empowering for  ASM  and for  the  communities that depend on it for their livelihoods and must not be  prohibitive especially where no other alternatives are available to communities living in poverty.

5.2.5  Legislation and Policy should ensure that Artisanal  industrial  beneficiation is funded and supported in order to create industrial capacity at local level that can serve as alternatives to mining for communities living in poverty.

  1. Women and Extractives

6.1      We call  on government to ensure the equal  inclusion of women in  all decision- making processes that directly or indirectly affect them.

6.2      We call on government to create adequate platforms for women to organise and that these platforms are protected.

6.3      We  call  on governments  to amend mining  and labour  legislation  to effect  the gendered re-engineering of the workplace and ensure the enforcement of the law; particularly as it relates to women in the workplace.

  1. Mining, Health and Labour

7.1      We  insist  that the extractive  industry  accepts  its  responsibility  for the  health  and safety of mine workers and communities and to compensate those directly and indirectly impacted. This is especially important for those who have suffered from tuberculosis; silicosis and other mining related illnesses.

7.2      We   call   for  the   regulated   development and  implementation   of   sustainable monitoring  systems in  all  mining  operations  throughout  the  African region.  The monitoring systems must be:

7.2.1   linked to production;

7.2.2   implemented and enforced independently from  industry;

7.2.3   capable of adequate monitoring of exposures and health;

7.2.4   Capable of  adequate monitoring on a  global  and societal  basis,  so  as  to monitor the broader effects of mining on communities.

7.3   We call on the Medical Bureau of Occupational Diseases (and other bodies throughout the  region   charged with   the  administration   of   compensation   for occupational  lung  disease) to fulfil  their  statutory  obligations and requirements, including   the  obligation   to  provide  detailed   reports   on  the  exposure  of mineworkers to harmful toxins, which includes data on:

7.3.1   What mineworkers are exposed to;

7.3.2   The levels of exposure; and

7.3.3   How many mineworkers have been exposed.

7.4   We  call  on all  corporations involved  in  mining throughout the  region  to include details of dust monitoring and the mitigation of risk of exposure to dust on their mines in their  due diligence reports.

7.5   We  call  on the AU to harmonise the standards,  regulations,  policies  and practices relating to occupational health and safety regionally.

We  hereby affirm  our commitment to the above  stated  issues  and pledge our on-going support on the same with  unflinching resolve. We are also committed to working together with  governments, corporations, communities and other progressive forces to ensure that these demands are met.

Declared at the 6th  Alternative Mining  Indaba held in Cape Town, South Africa in February

2015  with  participants from:  Angola ,Argentina, Australia, Belgium, Botswana, Cameron, Canada,  Chad, Colombia,  Congo, Democratic  Republic  of  Congo, Ethiopia,  France, Ghana, India, Ivory Coast , Kenya, Lesotho, Madagascar, Malawi, Mozambique, Niger, Nigeria and  Norway,  Republic  of  South  Africa, Senegal  ,  South  Sudan  ,  Swaziland  , Sweden , Switzerland , Tanzania , Togo, Uganda, Zambia, Zimbabwe.

The Alternative Mining  Indaba is supported by  Economic Justice Network of FOCCISA; Oxfam South Africa; Oxfam America; Bench Marks Foundation; Open Society Foundation of South Africa; OSISA; Diakonia; Norwegian Church Aid (NCA)  and Kairos.

  1. Artisanal mining

5.1      We call  upon government to decriminalise artisanal  mining, so  that miners can be trained;  safety  standards  can be maintained  and whole  communities  can be liberated from  the oppression of criminal gangs.

5.2      With  reference  to 5.1,  proactive  measures must be  found  inter  alia  through the formation of a national Commission which will bring the activities of artisanal miners into the mainstream protection and support of the state.

In addition, this national Commission should:

5.2.1   Consider  how  markets  for  the   sale  of  ASM  mined  minerals  and for  the purchase chemicals such as  mercury, can be created to ensure the regulation  of the sector and the protection of human and environmental health.

5.2.2   Pay  special  attention  to  the  intersections where women  are  faced  with violence,  oppression and  exploitation   in  order to  ensure that  protections   and safeguards  are built  into the legislation  which decriminalises  ASM and brings the sector under the protection of the state.

Mining’s alternative summit: Painting a different picture of Africa’s most conflicted industry

REBECCA DAVIS 12 FEB 2015 12:43 (SOUTH AFRICA) THE DAILY MAVERICK

http://www.dailymaverick.co.za/article/2015-02-12-minings-alternative-summit-painting-a-different-picture-of-africas-most-conflicted-industry/#.VORQBfmUdqV

How can you tell the difference between the Mining Indaba and the Alternative Mining Indaba? One trick is to look for people who are actually miners, or who come from mining-affected communities. If there are any around, chances are good that you’re at the Alternative incarnation. Another trick is to ask people if they paid up to R23,000 for a ticket to the event. If the answer is ‘yes’, then they’re at the Mining Indaba. REBECCA DAVIS has been at the other one.

In 2002, a young man called Fortunate Siziba was walking home in Mapanzure, Zimbabwe, at night when he fell into an open, unsecured, un-lit pit previously used for chrome mining. The pit was 17 metres deep. Siziba was left partially blind.

In 2012, nine-year-old Asa Mpofu fell into an open, unsecured, un-lit chrome mining pit in the same area. She drowned.

In neither case was any compensation paid by the chrome mine operators, or even an apology given. The most assistance that Siziba received from the mine operator was to be transported “in the bucket of a front-loader” to a nearby clinic.

Over the course of a few days at the Alternative Mining Indaba, you hear so many of these kinds of stories that it becomes hard to keep track of each individual case. The atmosphere here is a world apart from that in the glitzy exhibition halls of the Cape Town International Convention Centre, just a few kilometres down the road, where the Mining Indaba is taking place. There, well-heeled movers and shakers in the mining industry make deals, talk investment, and compare annual returns.

Here at the Alternative Mining Indaba, people are angry. They are so angry, in fact, that the very first address of the first day cannot be completed without activists demanding the microphone, determined to have their say.

At a march to the Mining Indaba on the summit’s first day, placards summed up the range of issues at stake: “Please leave my land, I am using it for agriculture (I am a widow)”. “Stop polluting our water.” “Africa is not for sale!” “Our mineral resources, our future!” “It’s not development when the environment is being destroyed.” “No to tax dodging!”

This year saw the biggest Alternative Mining Indaba yet, at around 300 delegates. It’s growing every year, and every year those attending seem more passionate, more vocal and angrier.

“These companies are in Cape Town [at the Mining Indaba] to discuss how to exploit the natural resources in Africa and all over the world to benefit a few,” the Economic Justice Network’s Malcolm Damon told the audience on the first day. “They may be 7,000 [delegates]. But we represent the concerns of millions of people whose lives are affected by the extractives industry.”

At points the discourse of the Alternative Mining Indaba appears straightforwardly anti-mining. At one stage, mining is compared to rape: violent, penetrative and non-consensual. But that’s not the message at the core of the summit.

“We are not anti-development,” Southern Africa Green Revolution’s Matthews Hlabane said. “We are anti-development we don’t understand.”

“Development” at all is something of a contested term in these circles – promised by mining companies, yet often failing to materialise in the way governments or communities hope.

Southern African Resource Watch’s Georges Bokundu summed it up most flatly in a presentation on the second day, with regards to the situation in his home country: “Mining copper, gold [and so on] has brought no development to DRC. Only more conflict.”

Part of the problem is how little say communities are generally granted into what mining companies do around them. Mining legislation in South Africa and other countries demands that mining companies produce Social and Labour Plans – SLPs – which should lay out their plans for how they will contribute to socio-economic development around the mine. As the Legal Resources Centre’s Wilmien Wicomb pointed out, however, these are generally kept secret from the communities – who then have no way of knowing whether mining companies are sticking to whatever they promised in order to win their cherished mining rights.

This lack of information also affects community-members concerned about the environmental impact of mines.

Lawyer Gilbert Makore, of the Zimbabwean Environmental Law Association, said that “most communities have never seen an environmental impact assessment report”. Even if they are granted access to such a report, the language is often highly technical, and often in English only. Corruption occurs between some environmental consultants, too, who produce copy-paste reports for different mines. Even when such consultants are not corrupt, Makore said, they can “go in, hold one meeting with a local leader, and then pass that off as community consultation”.

What emerges from the Alternative Mining Indaba is not solely a simplistic picture of mining companies being bad and local communities being good. The failure of African governments to protect the interests of their people is also cast into stark relief.

A man from Kankoyo, in Zambia, requested the microphone on the summit’s second day to give his account of the effects of copper mining on his community. They are neighbours to a major copper mine, and the resulting mining activities have had a “devastating impact” on their environment, he said, claiming that the soil can now only support the growth of mango trees and small plants. Residents complain of respiratory problems.

Houses have developed cracks in the walls ranging in size from relatively small to big enough to allow two people to shake hands. The soil erosion which results from mining leaves the house foundations unsupported, he explained.

In 2012 the community presented their problems to the mining company. “But we were surprised,” he said. They discovered that in terms of the agreement signed with the Zambian government, the mine was exempted from environmental liability.

This is an extreme tale, but there is little doubt that governments do not do enough to ensure that environmental or social contracts are stringently adhered to by mining companies.

The LRC’s Wicomb pointed out that erstwhile South African mining minister Susan Shabangu was receiving annual reports from Lonmin, was aware that the mine was failing to live up to its socio-economic obligations in the Marikana area, and took no action for a long time.

Unsurprisingly, the shadow of the Marikana Massacre continues to hang over the Alternative Mining Indaba.

The Bench Marks Foundation’s Hassen Lorgat said that there was a tendency among certain conservative media pundits, government and corporations to see what happened at Marikana as an “aberration” – an unpredictable event spawned by union conflict – to avoid discussing ”corporate neglect of workers, abuse of power and privilege of exploiting our mineral resources”.

In Lonmin’s own 2011 Annual Report, Lorgat pointed out, they had already identified risks including “poor community relations due to internal and external factors that could result in civil unrest”.

What you hear at the Alternative Mining Indaba disrupts a great many seemingly black-and-white media narratives. One is about the zama-zama, or illegal miners, who are continuously vilified and criminalized. Mention of the zama-zama has recurred throughout the summit in tones of outrage or concern about their criminalisation – as if “legitimate” mining activity can only be undertaken by European and North American mining corporations. One delegate summed up what seemed to be a widespread sentiment: It’s like when Europeans kill endangered animals and they call it hunting, but when Africans do it they call it poaching.

The “n” word – “nationalisation” – is one that has cropped up relatively infrequently in discussions, superseded by basic concerns for the environment and human rights, advice on how to litigate against mining houses, and so on. But Action Aid’s Brian Kagoro sounded a note of caution at the summit’s opening.

“We risk here, as the elite of civil society – civilocracy – becoming irrelevant,” Kagoro said, in the face of an “emerging radical critique” – exemplified by political movements like the Economic Freedom Fighters.

“If you want mining to carry on, in just a bit more humane way [than previously], there will be another Alternative Mining Indaba happening in the streets.”

AU should take steps to adopt recommendations of the High Level Panel on Illicit Financial Flows

Africa is estimated to be losing an estimated US$50 billion every year to illicit financial flows (IFFs) and this figure has been growing. The estimated US$50 billion may indeed be a conservative figure as there is no accurate publicly available data on all transactions. The amount of money that Africa loses to IFFs is approximately double the amount of Official Development Assistance that the continent receives annually. IFFs refer to money that is illegally earned, transferred and or utilized. Much of IFFs in Africa is a result of the commercial activity of multinational corporations operating across the continent. It is without doubt mining; gas and oil companies operating in Africa are key actors in IFFs. IFFs are made possible through secrecy, tax havens; money laundering and transfer pricing among other techniques. The situation in countries like Zimbabwe and Angola is dire as there are no up to date statistics to compute the possible tax or revenue losses that the countries suffer as a result of IFFs.

African Ministers of Finance set up a High Level Panel (HLP) on Illicit Financial Flows in 2012 and it is chaired by H.E Mr Thabo Mbeki. The panel was set up having realised the negative impacts of IFFs including; reduced tax base, reducing capital available for infrastructure and social development programmes, draining foreign currency reserves; negating investment inflows and domestic resource mobilisation efforts. IFFs also contribute to continued African dependency on aid; conflict; and weakened democratic accountability institutions. The HLP on IFFs’ mandate is to investigate the nature and scale of IFFs and put forward recommendations for the continent to tackle IFFs.

The HLP will launch its final report on Sunday, February 1 2015 at the United Nations Conference Centre in Addis Ababa, Ethiopia. The launch of the Report will follow its prior submission to the Assembly of the African Union (AU) on 31 January 2015. Civil society organisations across Africa call on the AU to take the necessary steps to ensure that the recommendations of the HLP are adopted and implemented. This is critical to the future development of the continent and its ability to self-finance that development. The report and recommendations of the HLP on IFFs is coming at a time when there are reports that over 70% of the AU budget remains funded by Western donors. It is high time that Africa takes superintendence over her own development.

The call for action is not just targeted at the AU but extends to the international community as there is realisation that IFFs require a global solution. Africa alone cannot resolve this challenge given the interconnectedness of today’s global economy

Publish What You Pay has for over decade called for a more open and transparent extractive sector. Information on beneficial owners of mining companies and strong transparency and accountability principles within national legislation will go some way in ensuring that IFFs are addressed.

Reflections on five years of the Africa Mining Vision

This post first appeared on 4 December 2014 on The Publish What You Pay website http://www.publishwhatyoupay.org/resources/reflections-five-years-africa-mining-vision
Gilbert Makore – Coordinator, PWYP Zimbabwe 

Background

The Africa Mining Vision was adopted by African Heads of State and Government in February 2009 in Addis Ababa, Ethiopia. It represented the highest political affirmation that there is a need for a paradigm shift in terms of Africa’s current mineral regime. The AMV is the most comprehensive vision for Africa’s mining transformation agenda as it seeks to break with the myopic focus on resources and looks at the whole mining value chain; from contracts negotiation right through to the use of mining revenue for sustainable development. The Vision is for“transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”.

Some of the specific tenets of the AMV include:

A knowledge-driven African mining sector that catalyses & contributes to the broad-based growth & development;

A mining sector that has become a key component of a diversified, vibrant and globally competitive industrialising African economy;

A mining sector that has helped establish a competitive African infrastructure platform, through the maximisation of its propulsive local & regional economic linkages;

A mining sector that harnesses the potential of artisanal and small-scale mining to stimulate local/national entrepreneurship, improve livelihoods and advance integrated rural social and economic development

The critical success factors for the attainment of the Vision include: the level and quality of the resource potential data; contracts negotiating capacity; ongoing African resources development and governance capacity; improving the capacity to manage mineral wealth and addressing Africa’s infrastructural constraints.

Five years since the adoption of the AMV, the question is- what has been its success and what have been the failures? It is also important to reflect on the reasons for both the successes and failures. Such reflections are important as the failure or death of the AMV would be a travesty, particularly for African citizens who have long borne the negative impacts of mining with no commensurate benefits.

Status of AMV Implementation

The implementation of the AMV has been far from impressive. Far from motivating African governments to urgently take steps to transform their mineral regimes; the AMV has been often ignored or given a wide berth.

The main positive since the adoption of the AMV has been the establishment and operationalisation of the African Minerals Development Centre (AMDC). The mandate of the AMDC is to coordinate the implementation of the AMV Action Plan. It is, among other issues, charged with identifying gaps and areas of need in Member States; and undertaking and coordinating policy research on strategies and options for realising the Mining Vision. The AMDC has developed a guide to assist countries in developing national mining visions aligned to the AMV and has also begun to provide support to a few countries (e.g. Lesotho) to ensure their mining regimes are based on the AMV. Yet even this could be counted against the continent as the AMDC is not funded by Africa. For all the talk about superintendence over its mineral resources, Africa has not taken lead in funding the AMDC which is supposed to coordinate the implementation of the AMV. This raises concern as to whether or not there is sufficient commitment to the successful implementation of the AMV.

On the whole, the AMV is off target on most of its set objectives for 2009-2014. During this five year period, member states were expected to have mainstreamed the Extractive Industries Transparency Initiative (EITI) principles in national laws and policies. It was also expected that countries would have begun looking at the possibilities of using future generation or stabilisation funds for inter-generational equity. Other issues include formalising artisanal small scale mining (ASM); integrating gender equity in mining laws and policies; and strengthening the negotiating capacity of public officials.

There has been no marked improvement on most of these across Africa. Where some of these issues have been addressed, it has not been due to or in the context of the AMV. Perhaps one of the biggest indictments of African governments is that most officials and Parliamentarians are unaware of the AMV beyond cursory knowledge.

Implementation Status in Zimbabwe

Zimbabwe managed to develop a Draft Minerals Policy that is wholly based on the tenets of the AMV. However, this Draft, crafted in March 2013 is yet to be adopted. The country has also enacted legislation to establish a Sovereign Wealth Fund and has taken steps to compel mining companies to increase beneficiation and value addition, primarily in the platinum mining sector. This is in line with the AMV. However, serious gaps remain in practice in terms of promoting transparency and accountability. While the Ministry of Finance has repeatedly highlighted the need for the adoption of the EITI, this is yet to be done.

Role of the Publish What You Pay Campaign and Recommendations

There are some overlaps between PWYP and the AMV. These mainly relate to the focus on improving aspects of the whole mining value chain and promoting transparency and accountability. Indeed, the AMV specifically references the PWYP Campaign and the EITI as demonstration that accounting for mineral revenues has become a topical issue. It is, therefore, particularly important for PWYP to raise awareness of the AMV and campaign for its implementation particularly aspects that relate to transparency and accountability. The AMV should represent a point of leverage as African governments have already committed to it and thus recognise the need for reform. Raising awareness of the AMV also requires that CSOs themselves deepen their knowledge of the AMV and its tenets. It may also be important to conduct audits or reviews of the AMV implementation in each member state as a basis for renewed evidence-based advocacy towards the implementation of the AMV.

These are personal reflections based on a Third World Network Africa, Southern Africa Resource Watch and ITUC- Africa convened meeting on ‘Five Years of the Africa Mining Vision (AMV): Strengthening Networking of CSOs and Social Constituencies for More Effective Influence’ held on 19-20 November 2014 in Lusaka, Zambia