By Mukasiri Sibanda
The Chamber of Mines of Zimbabwe held its 77th Annual General Meeting (AGM) at Elephant Hills Resort, Victoria Falls from 19 to 21 May 2016 under the theme “Revive, Accelerate & Sustain Growth.” A positive chord in the face of the plunge in mineral prices. Indeed, this optimism was confirmed by impressive projected growth in the gold, platinum and base metal sectors. For instance, gold production was expected to leap to 50 tonnes in 2020 translating to $1.8 billion annually from improved efficiencies and expansion of current operations. Without discounting the value of learning the current status and future prospects of the mining industry from the AGM, it would be remiss not to share my perspective from the view point of civil society.
After all, mining by nature involves the extraction of public resources that are finite and the benefits must be shared among generations. Critically, mining cannot avoid allocation of environmental, social, economic and cultural costs to communities which strain community rights. This has brought to fore the international discourse on business and human rights advanced under the United Nations Guiding Principles (UNGPs). The UNGPs has three pillars, the right to respect, the right to protect and the right to remedy. Thus business must respect, government must protect community rights. Access to remedy in case of human rights violations must be provided for by both government and mining companies.
Regrettably, the Chamber of Mines agenda and proceedings were mute on the role of business and human rights. The sidestepping of community rights at the AGM leaves the industry without the shock absorbers in this bumpy and rugged road to leverage minerals for broad based economic development. Failure to give space to some government agencies critical to the protection community rights such as the Environmental Management Agency (EMA) signals that the mining business might be lukewarm in embracing sustainability best practices. People, planet, profit or society, environment and economy in that order, known as the triple bottom line is key to business sustainability, and more than ever, for the mining industry.
Reputational risks balloon when business prioritise profits and use resource rich communities as cost centres. The damage done to the environment particularly chrome mining has turned the great dyke into a great threat for instance. It is difficult to see how revival and accelerated growth can be sustained as envisage by the AGM theme without comprehending implications to the environment. Nevertheless, the Deputy Minister of Mines, Honourable Freddy Moyo must be commended for urging mining companies to deal with the bad boy image of poor environmental management practice.
From another angle, International Financial Corporations (IFCs) have taken on board community rights as part of the package for considering provision of capital to business. So they are incentives to the industry with massive long term appetite for capital which is scarce on the domestic market to prioritise business and human rights on its agenda.
Some positives, however, can be drawn from the involvement of the Reserve Bank of Zimbabwe (RBZ) which emphasised the importance of stopping the bleeding of finance for development through Illicit Financial Flows (IFFs). The Panama Papers implicated around 280 Zimbabwean entities and individuals according RBZ. It was quickly cautioned though that some of the transactions in Panama papers may not be illegal, but, may be a question of moral blameworthiness.
IFFs in the mining sector are so topical given that the High Level Panel report indicated that Africa is losing roughly $50 billion annual and the mining sector accounts for the greatest share through mispricing and misinvoicing. One of the country’s largest mines, Zimplats, is caught up in Panama papers for allegedly using an offshore company HR Consultancy to dodge payroll related taxes by paying its senior management in Panama, a tax haven. In addition, the RBZ lamented high service or management fees paid by mining companies to related offshore companies which erodes finance for development. As a mitigation measure, the threshold for management fees has now been set at 3% by the RBZ 2016 monetary policy statement.
Remarkably the Permanent Secretary from the Ministry of Mines and Mining Development shared some diamond sector statistics such as revenue paid to government from 2010 to 2015, the latest diamond production and exports by volume and value, average selling price and cost per carat and profit generated. The importance of this disclosure albeit the unproductive fallow period must not be lost considering the limited transparency in the mining sector and more so, Marange diamonds.
|2010-2015 Diamond Payments to Government|
Given that the general public has limited access to mineral revenue data, a discussion on institutionalising mineral revenue transparency either through adoption or adaption of the Extractive Industry Transparency Initiative (EITI) was much needed. Mining companies have more to gain by disclosing the payments they make to governments and by influencing government to publicly disclose the revenue it receives from mining companies. Such disclosures discourage corruption, help to dispel public mistrust on the management of mineral resources and lowers business reputational risk profile.
All in all, the AGM showed that miners have an optimistic outlook in the growth of the sector. Probable this great news to a country whose growth prospects are hinged on mining. Hopefully, the 2017 Chamber of Mines AGM should embrace stakeholders like EMA, labour and communities in its agenda apart from government ministry.