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Caledonia’s ESTMA Report: Accountability Opportunities in Zimbabwe

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By Mukasiri Sibanda

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29 June 2017


Introduction


In an environment where a chorus from communities, CSOs and government on improved transparency in the mining sector is strong and persistent, what accountability opportunities and challenges does Caledonia’s Extractive Sector Transparency Measures Act (ESTMA) Report present? This blog explores if there is added value from Caledonia’s ESTMA report to the Publish What You Pay campaign in Zimbabwe. Basically, the ESTMA Report produced by Caledonia largely focuses on Blanket Mine located in Gwanda rural district of Matebeleland South province.

What is in the Report and opportunities to enhance accountability?

Reporting period and timeliness of information

The reporting period is an important aspect of any report. It reveals the timeliness of information and how easier it is to be compared with other independent reports based on their reporting periods. Caledonia’s ESTMA reporting period runs from 01 January to 31 December 2016. This reporting period fits perfectly with the reporting cycle of the public funds as prescribed by the Financial Management Act (Chapter 22:09). Ideally, this makes it easier to compare Caledonia’s ESTMA Report with other public funds like the local government fund and Rural Electrification Levy (REL).

Accuracy of information & social audit opportunities

Quality assurance of information is necessary considering that corporates have been accused a number of times for “creative accounting.” So, the attestation by the reporting entity and the independent auditor that the report is factual, complete in all material respects as required by ESTMA gives a fair measure of comfort to the users of information.

There is an opportunity for PWYP Zimbabwe to carry out a social audit and give its own opinion on accuracy of information shared by Caledonia’ ESTMA report. This process involves triangulating payments made to government by Caledonia with data on what government received from Caledonia’s Blanket mine. Even if PWYP Zimbabwe fails to get the requisite cooperation from government, it can still form its own opinion that it could not attest as to the accuracy and completeness of the Caledonia’s ESTMA report. This will form a good basis for a campaign for greater transparency on what government is getting from mining companies.

Improved transparency on payments made to government

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  • From the report, one can easily track the various payments made by Blanket Mine to different government departments in 2016. This entails taxes and royalties paid to the Zimbabwe Revenue Authority (ZIMRA), fees paid to local government and ministry of mines and payments made Zimbabwe Electricity Supply Authority (ZESA) such as the Rural Electrification Levy (REL) and infrastructure improvements.

    Tax revenue a reliable source of development finance

  • From the Report, tax revenue is a predictable and reliable income stream when compared to dividends. Narrowing down to local public funds for development, tax was paid to Gwanda rural district council whilst no dividends were paid to Gwanda Community Share Ownership Trust. Without a doubt, Community Share Ownership Trusts have heightened community interest in areas where they have been successfully launched. PWYP Zimbabwe should therefore guard against possible diversion of community interest in transparency and accountability of local taxes paid by mining companies.

    Since Blanket Mine is on an expansion drive and PWYP Zimbabwe should check if this is translating to improved payments to local government. This data is critical to show if the taxes paid to local government by mining companies are regressive or not. Certainly, the fact that labour, a production factor which has been supplanted by technology is being used as a basis for calculating local tax paid by mining companies. Hence PWYP Zimbabwe can leverage on ESTMA report data to show cause why local tax policy should be reformed.

    Gold rushes fuel violence, smuggling & environmental damage

  • Gold rushes are frequent throughout the year in Bubi. People from outside the district normally flock to Bubi during gold rushes and they are known as ma Shurugwi. The name ma Shurugwi stems from the fact that the artisanal miners are so daring and violent when searching for gold. Gold rushes have been given as one of the main reasons why Bubi district has the second highest prevalence of HIV and AIDS in Zimbabwe. A lot of environmental damages are caused by gold rushes in Bubi. The gold that is produced through gold rushes is barely sold to government. Police are also accused of corrupt practices that abets gold rushes as they seek to be given kickbacks instead of controlling the illegal activities.

    What the report tells us about government’s intentions to scrap royalties

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    Clearly, royalties dominate payments made to government by Blanket Mine. It is worrying that early this year, the Minister of Mines intimated early this year that government is mulling scrapping royalties for the gold sector . If this comes to fruition, mineral revenue flows from mining will be hit hardest thereby weakening government’s ability to invest in social protection of poor and vulnerable groups of society.

    Mining contributes significantly to Rural Electrification Levy

    Increasing access to electricity is one of the priorities of the Sustainable Development Goals (SDGs). Looking at the ESTMA report, mining companies are significant contributors to the rural electrification levy, $466,322 was paid by Blanket Mine in 2016. Therefore, PWYP Zimbabwe should include transparency and accountability of public funds such as the rural electrification levy

    Legal reforms on disclosure, lessons for Zimbabwe

    It is important to note that the disclosure on payments made to government by Caledonia’s project on Blanket mine came because of Canadian law, the ESTMA. At the domestic level, mineral revenue transparency deficiency need legal reforms. This is so even though the Constitution clearly provides for public access to information in general under Section 62 and specifically for the mining contract negotiation and contract performance under Section 315 subsection 2 (c) and the Zimbabwe Stock Exchange Listings Requirements for mining companies.

    It is interesting to note that the draft Mining and Minerals Amendment Bill has a provision for mandatory primary listing of all large-scale mining companies. If passed, automatically, the Bill will be a game changer to enhance public transparency in the mining sector. However, the Canadian experience shows that legal reforms to promote disclosure of payments made to government by mining companies is a necessity. Government can even take further legal steps of ensuring that even non-listed mining companies disclose per project the various payments made to government.

    Without government’s disclosure of payments received from mining companies, public reconciliation of mineral revenue remains a pipe dream. Whilst one can easily pick the various payments made by Blanket Mine to government from the ESTMA Report, data on what government receives from mining companies is barely available and accessible to the public.


    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