Govt probes shady mine deals
Zimbabwe is revisiting all mining contracts signed in the last 20 years to interrogate potential risks associated with individuals, entities and investors it signed agreements with by taking a closer look at the levels of disclosure.
The move seeks to identify any unfair tax exemptions, incentives or tax holidays, offshore procurement and management contracts that may prejudice the mineral-rich Southern Africa state.
In addition, the initiative is aimed at assessing any legal loopholes in the contract agreements and outline the economic implications of the fiscal provisions in the mining agreements.
It is widely believed that corruption is rife in Zimbabwe’s lucrative mining sector, which the Government intends to grow to a US$12 billion industry by 2023.
Minerals constitutes close to three quarters of the country’s export receipts. Former President Robert Mugabe once claimed in 2016 that up to US$15 billion dollars had vanished due to illicit financial flows in the mining of diamonds.
The Office of the Auditor General has previously flagged corruption in the Ministry of Mines and Mining Development, where five officials from the state-owned Zimbabwe Mining Development Corporation (ZMDC) purported to the Government that they had formed a joint venture with a South African firm, BSGR, to mine diamonds.
In reality, it emerged they had formed a private joint venture with a South African company, Canadile Miners to exploit diamonds in Marange District, Manicaland province. It is believed they may have siphoned off US$6 million before the scandal was unearthed.
Zimbabwe, like most developing countries, has sought to replicate anti corruption strategies of the Organisation for Economic Co-operation and Development (OECD) countries with limited success.
It has been noted that OECD countries have achieved significant control of corruption through development processes and institutional reforms such as improving enforcement of the rule of law, changing the expected returns of corruption.
In 2005, Zimbabwe set up ZACC, which is currently running the Against Corruption Together (ACT) campaign spearheaded by the judiciary. These efforts have, however, achieved modest results given Zimbabwe was ranked the 17th most corrupt country in the 2016 Transparency International Corruption Perception Index (CPI).
According to a policy document availed to Parliament, the Government will hire a research consultant to undertake the investigation, which would also give recommendations on how to improve contract negotiations, which are advantageous to the country.
“The Government of the Republic of Zimbabwe has received financing from the African Development Fund (ADF) toward the cost of the Tax and Accountability Enhancement Project (TAEP), and intends to apply part of the agreed amount for this grant to payments under the contract for a research on the impacts of contract disclosure in the mining industry in Zimbabwe,” reads the policy document in part.
Using funding from the African Development Fund’s tax and accountability enhancement project, the exercise will also investigate the need for specific training needs of the Mines and Minerals Development Committee.
Secretary for Mines and Mining Development Onesimo Mazai Moyo, said he was not aware of the planned research into potential prejudice the country may have suffered from contract irregularities or limited disclosures in the country’s mining contracts over the last 20 years
He referred inquiries to the Ministry of Finance and Economic Development, whose officials could not be reached by the time of going to print yesterday, but he indicated all major mining contracts go through Cabinet.
“I do not think so (that there are irregularities in the contracts) because most of the major ones go through Cabinet, so there is no likelihood that an investor may come and the agreements are concluded in the offices of the permanent secretary (mines) and the (mines) minister alone,” he said.
According to Transparency International the Mines and Minerals Bill, currently before Parliament, should provide for parliamentary oversight of mining contracts in line with section 315 of the Constitution of Zimbabwe to ensure transparency and accountability in the negotiation of mining contracts.
Transparency International Zimbabwe regards itself as a non-profit, non-partisan local chapter of the global movement against corruption and has been at the forefront of questioning transparency and accountability in Zimbabwe’s extractive sector.
The organisation is part of the first cohort of 20 Transparency International (TI) Chapters involved in TI’s global programme to improve transparency in the process of awarding mining permits.
This global programme seeks to improve transparency and accountability in the extractive industries, focusing specifically on the very first link in the mining value chain: decisions by the Government to grant mining or exploration permits and licenses and negotiate contracts.
Research revealed 19 vulnerabilities in the process and practice of awarding blocks of claims for precious metals, which lead to 22 corruption risks. It says two-thirds of these corruption risks are almost certain to happen. A quarter of them have a catastrophic impact when they do occur.
A total of 16 corruption risks were assessed to be major; having either of, or both, a near certainty of occurring and a catastrophic impact.
While Zimbabwe is endowed with deposits of an estimated 40 minerals, only gold, diamonds, platinum group elements and nickel make a significant contribution to the economy. TIZ has previously undertaken a study focussing on the award process for types of mining licenses used for mining precious metals such as gold and platinum group metals.
According to TIZ, the country’s mining sector is plagued by corruption, despite the passing of some ‘best practice’ legislation and policies to combat corruption.
Corruption is often defined as the abuse of entrusted power for private gain. In the framework of the report on Zimbabwe, corruption is a deals-based way to sustain agreements among certain individuals or groups.
These agreements are based on the country’s legislation and structured around social practices and cemented by cooperation and trust among the individuals or groups engaged in corruption, TIZ said.
“While it has been argued that in the short- term, corruption can “grease the wheels of the economy,” in the long- term, it negatively affects economic growth by diverting resources from more productive uses and negatively affects equity by disproportionately benefiting those in power,” it said.
The Zimbabwe Environmental Law Association (ZELA), says despite going in circles on the adoption and implementation of the Extractive Industries Transparency Initiative (EITI) in Zimbabwe, consensus for mining sector transparency reforms exists among stakeholders.
“Through fiscal policies, the government has repeatedly committed to either implement EITI or revive the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI), a homegrown version of the EITI that suffered stillbirth in 2013.
“Recently, the Government raised concern that data inadequacy and inaccuracy has stalled progress for a comprehensive mining fiscal regime which balances national development interest and the interest of investors,” ZELA says.