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Communities empowered to drive the tax justice campaign

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By Mukasiri Sibanda

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16 June 2017


Introduction


How communities are engaging with government and mining companies to fight for a fair share of mining benefit is at the heart of the Tax Justice agenda. So, as part of its drive to empower mining communities, the Zimbabwe Environmental Law Association (ZELA) conducted a tax justice training of trainers meeting in mineral rich Runde district on 15 June 2017. 15 participants were involved from mineral rich communities such as Mhondongori (platinum), Murowa (diamonds) and Mapirimira (chrome). The tax justice training of trainers meeting employed the critical reflection approach. Below are some interesting highlights of the meeting focusing on five areas that are critical for communities to focus their demand for a fair share of mining benefit. The areas include taxes paid to both local and national government; local employment and skills development; community enterprise development, sharing of mining developmed infrastructure and corporate social investments (CSIs).

What community must monitor on mining taxes and why is it important

Faced by dwindling and unpredictable traditional levers of development finance such as official development assistance (ODA), tax has emerged as a resilient & predictable domestic source for financing development. For most mineral rich countries, the presence of mineral wealth, which often contribute impressively to export earnings, exciting but a challenging opportunity are on offer to reap public revenue to invest in health, education, clean, safe and portable water among other essential services.

Therefore, communities must be able to monitor and track if mining companies are paying a fair share of taxes, how government allocates and utilise the money it garners from mining and the accounting for the expenditure results as well. At local level, local government annual negotiates with mining companies on taxes that should be paid. Without public scrutiny, there is a risk that bad deals that shifts the flow of mineral revenue in favour of mining companies can be agreed.

Also, it is important for community monitors to access if taxes paid are regressive or progressive. Regressive taxes are the ones that lead to a situation where the rich pay a less taxes in proportion to their wealth as compared to the poor. As it stands right now, mining companies that extracts precious mineral like platinum, gold and diamonds are paying taxes to local government using labour as a unit or base. For instance, for the first 100 workers, a unit I charged. Modes of production has shifted in the mining sector from being labour intensive to capital intensive. The mining sector is employing less and less people unlike in the past. Unless the base or unit for charged local taxes is not changed from labour to mineral production volumes or values, mining contribution to local government will always be depressed and regressive.

As elusive, complex and technical as the illicit financial flows (IFFs) phenomenon might be, it is important for mining impacted communities to be the engine of the Stop The Bleeding Campaign #StopTheBleeding. IFF are defined as illegal or immoral but legal activities that promote the shifting of income from producing countries to tax havens or lower tax jurisdictions. Hence the fiscal capabilities of producer government are weakened as the case with several mineral rich African countries.

Building on existing local opportunities to advance tax justice work

Communities must take advantage of public budget consultations conducted by local government to ask key questions on revenue generation, allocation, utilisation and the results thereof. Unfortunately, communities are not attending in their numbers local public budget consultation meetings. “Last year in Mapanzure ward, the public budget consultation meeting was aborted after a few people turned out” Kudakwashe Zireva, a community monitor. It was reported though that the community turn out at food aid meetings was quite high.

Apart from local public budget consultation meetings, community monitors must take leadership roles in service delivery social accountability platform such as the school development committees (SDCs) and health center committees (HCCs). Such platforms give community monitors the chance to gather first hand data on service delivery challenges that communities are facing. For instance, if a new classroom block is needed to stop overcrowding or to curb under the tree learning, community monitors can document and share publicly such stories to pressure government and mining companies into action. Participation at SDCs and HCCs also strategically places communities monitors to curb leakages from corrupt procurement practices that weakens quality of service delivery.

Why local employment and skills development and what monitors must do?

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Mining investment bring employment and skills development opportunities. Local must not miss out from job opportunities generated from mining activities in their localities. It is not only about getting jobs, but skills development to enable local to have a fair chance of earning salaries that helps them escape the poverty bracket. Besides, skills such as boiler making, fabrication and building can be used in other sectors of the economy like agriculture and manufacturing.

So, communities must be able to access data on the employment quota reserved for locals, the nature of the jobs, number of men and women employed to hold to account mining companies and traditional chiefs. Armed with such data, communities can be able to know if or not they are fairly benefiting from employment opportunities. If there is need to verify if locals are getting employment opportunities as agreed, the availability of data can help community monitors to do a social audit. That is door to door verification of employment beneficiaries deemed as locals. This will deter corrupt tendencies that side line locals from employment opportunities. Off course, special focus should be on women equal access to employment opportunities in the mining sector as the sector is notorious for marginalising women on employment opportunities. In addition, community monitors can be key players through data gathering on influencing choices such as rotational employment opportunities for locals that is practiced by the likes of Murowa diamonds.

Community enterprise development & what are the issues

By nature, mining companies need goods and services to extract mineral wealth. Communities must be able to tap into business opportunities generated by mining activities. To do that, communities must have information on the nature of goods and services consumed by mining companies, procurement procedures and guidelines, the procurement quota reserved for locals and the real beneficiaries. The new indigenisation and economic empowerment framework that aims qualifies a company as compliant with indigenisation requirements if it retains locally at least 75% of its gross revenue offers exciting opportunities to community monitors. Without grassroots participation in such policy making processes, there is an inherent risk that mining impacted communities can lose out albeit with such well-intended policy frameworks. So, clear advocacy messages are needed on the nature and types of business that should be earmarked for the local community especially non-technical and low complex goods and services.

“the management and politicians are behind most of the community businesses that are supplying goods and services to mining companies. Communities members are simply fronting; they do not own the business” A community monitor’s voice. As such beneficial ownership disclosure is quite important to root out such corrupt practices.

Other opportunities stem from promoting transparency and accountability in the disposal of crap metal by mining companies. Scrap metal is important feedstock needed by local entrepreneurs to fabricate tools and equipment needed in sectors such as artisanal and small gold scale mining in Zvishavane.

Corporate social investments and opportunities for community monitors

Although it is voluntary, corporate social investment (CSI) activities particularly from multi-national enterprises have potential to contribute to community development. However, without transparency and accountability, it is hard for community to hold to account mining companies on CSI. Community monitors must play an activity role to ask for CSI policies, procedures and guidelines from mining companies. It is important for community monitors to check if there is a clear revenue allocation for CSI for example 2% profit before tax earmarked for corporate social investments; radius considered under CSI, integration of the CSI plans with local development plans from local government, prioritisation of expenditure for instance where a mining company invest more on a VIP section of a football stadium that renovation of a hospital.


Mukasiri Sibanda (@mukasiri) is an economic governance officer. He is interested in mineral resource governance. He blogs at Mukasiri's Blog. Mukasiri works with the Zimbabwe Environmental law Association