MAC: Mines and Communities

Zimbabwe embarks on community "empowerment"

Published by MAC on 2013-04-01
Source: News Day, Mail & Guardian, Reuters

But it's a rough and controversial journey...

The govenment of Zimbabwe has embarked on an Indigenisation and Economic Empowerment plan, loosely modeled on South African legislation.

While mining-impacted communities initially welcomed the initiative, there's been a lot of "devils in the detail"...

Yet again, opacity rears its ugly head!

by Gilbert Makore/Allan Chaumba

News Day (Zimbabwe)

27 March 2013

ZIMBABWE has not been able to leverage its sub-surface mineral wealth into financing broad-based development.

One of the critical factors why the country has failed to parlay its mineral resources into economic growth and development is the pervasive opacity in the extractive industries.

There is limited public knowledge on the granting of claims, contract negotiation production level data, marketing of minerals, revenue generation and revenue use. The cloak of secrecy in the mining sector effectively sidelines the vast majority of the population from participating in the governance and decision making processes related to the sector.

Worryingly, mining-related deals are consummated away from the public eye, only for details to emerge that the country may have been prejudiced. Deputy Prime Minister Arthur Mutambara has conceded that negotiators of Zimbabwe's mining deals come to the table deaf, dumb and blind. There is evidence to support his claim.

There have been allegations that the Zisco-Essar deal was negotiated without the participation of key ministries and ended up being skewed in favour of the private company. To date, despite the various government heads trading barbs through the media, there has been no publication of the said deal or at the very least, its outcomes. There is still no clarity as to whether or not the deal has been given consent by the two parties involved.

Currently, the country is seized with emerging details regarding the Zimplats indigenisation deal. The deal is part of Zimplats' compliance with the Indigenisation and Economic Empowerment Act. The Act compels companies to cede 51% of their shares to indigenous Zimbabweans. As far back as October 2011 it was reported that Zimplats had given 10% of its shareholding to the local community as a step towards compliance with the law. The act of disposing 10% to the local community presupposed general agreement on a deal.

However, in May 2012 the Minister of Youth Development, Indigenisation and Empowerment and the Zimplats chairperson appeared at a joint Press conference at which it was said that the company had submitted a plan that complied with the law. It then becomes mind boggling that prior to the conclusion of the deal, Zimplats had proceeded to dispose 10% shareholding to the local community only to publicly reappear and say the deal had not been finalised.

There was much celebration by government and community representatives when the community trust was established. The government was lauded as pioneering a ground-breaking model for community development.

Yet the finer details of the deal were not made public. The documents establishing the agreement remained hidden from the general public. There was no transparent process around the finalisation of the deal. The communities were not consulted, but were told that the deal meant for them.

As far back 2011, Zimbabwe Environmental Law Association had sounded a warning that the absence of transparency and accountability in the implementation of the indigenisation programme would be a harbinger for deals that prejudice the nation and ensuing public discontent around the program.

In late 2012, the organisation commissioned a research into the establishment of community share ownership Trusts in Zimbabwe's mining sector. The research clearly enunciated the challenges related to the implementation of the program particularly insofar as it lacked public participation, transparency and accountability. The research results postulated the Community Development Agreement model as a better model for indigenisation given its participatory and tripartite nature of inclusivity with the key stakeholders from government, mining companies and communities.

There are now allegations that the Zimplats deal undervalued the platinum resource that the company sits on. Media reports also allege that the deal is problematic in terms of funding for the acquisition of the shares by the government, the community and the employees. Indications are that there is a likelihood that communities and other empowerment entities may fail to pay for the shares disposed potentially resulting in the forfeiture of the same.

Even after all this, what remains missing from the public domain are the documents detailing the deals that are ostensibly meant to benefit us as Zimbabweans. The government stance seems to be "do not worry about media reports, trust that we negotiated deals to the full benefit of the nation". Yet in the face of the media reports being published, this surely cannot suffice.

The current legal and policy framework governing mining does not provide sufficient scope for transparency and accountability. However, the dictates of good governance certainly provide a basis for their classification as public documents that ought to be availed to the general populace for public consumption. It is hoped that the Mines and Minerals Amendment Bill will contain key provisions on transparency and accountability.

Implats objects to Zimbabwe plan to seize mining claims


28 March 2013

HARARE - South African miner Impala Platinum Holdings Ltd said on Thursday its Zimbabwean unit had launched an objection to Harare's plans to repossess nearly half of its mining claims.

The Zimbabwean government published a notice on March 1. saying it planned to take away land belonging to Implats unit Zimbabwe Platinum Mines, in what it said would stop mining firms from holding onto claims for speculative reasons.

"Implats confirms that its subsidiary, (Zimplats) lodged an objection on 27 March 2013 to the preliminary notice with regard to the President's intention to acquire compulsorily 27,948 hectares of land held by Zimplats," Implats said in a statement.

The official objection means the government cannot arbitrarily seize the mining claims without agreeing with Zimplats. If it insists on repossessing the land, Zimplats can approach the local administrative court to stop the government.

Implats, the world's second-largest platinum miner, in January agreed to sell a majority stake in Zimplats to local black investors for $971 million to meet black ownership targets set by President Robert Mugabe.

(Reporting by MacDonald Dzirutwe; editing by James Jukwey)

Mining may contaminate Zambezi water

Stephen Chareka

Mail & Guardian (South Africa)

28 March 2013

Zimbabwe faces a possible row with neighbours Botswana and Mozambique after it emerged that planned mining activities in the Matabeleland North region could disturb wildlife and contaminate the Zambezi River, according to a conservation group.

Zimbabwe, through a special presidential grant, has allowed China Africa Sunlight Energy to mine coal in the Gwayi valley.

But a conservation group is up in arms, saying the project may damage relations with regional partners, degrade the environment and affect the tourism sector adversely.

Gwayi Valley Intensive Conservation Area chair Langton Masunda said the Gwayi and Shangani rivers spill into the Zambezi and if there is contamination in either of them, then people downstream in Mozambique will be affected, leading to possible conflict.

Masunda said that coal mining would result in the contamination of underground water streams because chemicals such as ammonia, benzene and carbon would be released into the ground as a result of coal-mining activities.

Wildlife and dam at risk

He said Zimbabwe also shares wildlife population with neighbouring Botswana and mining activities in the Gwayi valley "would be disastrous because wildlife would be pushed into Botswana, which is well known to have dryer conditions than us". This, he said, would mean Botswana would have to find artificial water supplies for the wildlife.

Masunda said that the mining activities would also affect the habitat of the hundreds of elephants that President Robert Mugabe decreed in 1990 would be kept safe from culling or hunting.

Mugabe decreed that the elephants that roam the scenic safari area of the Hwange National Park were protected. The now more than 600 elephants became known as the presidential herd, and the decree stated that the elephants would be a symbol of Zimbabwe's commitment to responsible wildlife management. In 2011, Mugabe renewed his pledge to protect and conserve the elephants.

Matabeleland, Masunda said, has for many years planned to relieve the region of its water woes through the Matabeleland Zambezi Water Project, which would rely on the construction of the Gwayi-Shangani Dam. Coal-mining activities in the area, he said, would affect the construction of that dam.

However, China Africa Sunlight Energy has said that it started consultations this month for a mining environmental impact assessment to listen to all concerns.

Environmental impact assessments

The miner has tasked a private company, Environmental Guardians Services, to conduct the assessment in part of the 120 000-hectare area.

Environmental Guardians Services said it has scheduled meetings at which it will hold talks with various stakeholders that include chiefs, local authorities in Lupane and Hwange and the Gwayi Valley Intensive Conservation Area.

Michael Montana, a consultant with Environmental Guardians Services, said they expected the concerns raised by the conservation body to be presented to its stakeholders meetings.

The assessment, Montana said, would include these concerns and be submitted to the Environmental Management Agency.

Montana said they would solve some of the problems in a "practical legal manner", but that others "are just impractical".

Montana said they had taken soil samples from the area for tests on chemical composition and would recommend to China Africa Sunlight Energy that these are maintained.

"We do not rule out the possibility of contamination, but measures will be put in place to avoid that," he said.

"The water used to wash the coal will be put into a pond and recycled. That water will carry a lot of chemicals, but efforts will be made [to ensure] that the water is recycled and does not come into contact with the streams."

Environment and Natural Resources Management Minister Francis Nhema said he would only comment on the matter after he had been given the environmental assessment report.

"We are waiting for the report. Those concerns will be included in the report for determination. I know that the organisation you are referring to is part of the stakeholders that would make an input towards the report," he said.

But China Africa Sunlight Energy does not appear to be waiting for the outcome of the environmental impact assessment.

The company's spokesperson, retired Colonel Charles Mugari, said it has already secured water rights from the ministry of water resources, a power generation licence and finalised modalities related to the national grid connection with the Zimbabwe Electricity Supply Authority.

'Very little negative environment impact'

Mugari said his company had contributed $1-million to a community share-ownership scheme under the controversial indigenisation programme. It would also invest $2.1-billion to carry out three projects: thermal coal with a planned output of three million tonnes a year, washed coal peas at one million tonnes a year and coking coal at 500,000 tonnes a year.

Mugari said most of the mining would happen underground, "hence very little negative environment impacts can be expected".

He said that the mine was expected to produce power to relieve the farming and manufacturing sectors, set up gas projects as well as a fertiliser plant.

"It is naive to imagine that developments of this nature cannot degrade the environment. What is important is that stakeholders in the situation should work together for a win-win situation. Zero sums as the end game will not work," he said.

China Africa Sunlight Energy is a joint venture between Oldstone Investments, a Zimbabwean investment vehicle, and Shandong Taishan Sunlight, a Chinese conglomerate formed in 2011 to focus on coal mining, methane bed gas extraction and thermal power generation in the area.

Zimplats refuses to pay US$17m Brainworks bill

By Gilbert Nyambabvu

New Zimbabwe

28 February 2013

ZIMPLATS and its South African parent, Impala Platinum (Implats), have refused to pay advisory fees demanded by a Harare firm for consultancy work on the platinum producer's US$970 million indigenisation compliance deal, telling the government to pick up the tab.

In letters seen by New, Implats and Zimplats said Brainworks Capital's US$17 million fee was the responsibility of the Zimbabwe government and the National Indigenisation and Economic Empowerment Board (NIEEB) which engaged the firm.

Zimplats also stated that they could not be expected to pay Brainworks since the company rendered its services to the NIEEB and the Zimbabwe government.

NIEEB chief executive Wilson Gwatiringa wrote to Zimplats on February 13, asking the company to pay Brainworks US$16,7 million "representing fees for the provision of advisory services to the government of Zimbabwe and the (NIEEB) in the implementation of the Zimplats indigenisation plan".

Gwatiringa added that "the submission of the invoice to your company for payment is in line with our principals' directive that advisory charges incurred by the (NIEEB) and the government ... will be paid by the companies that are indigenising."

But Zimplats wrote back on February 22 begging to differ.

"Regrettably (Implats) advised that they are not in a position to honour the payment on the basis that Brainworks was engaged by the NIEEB and was acting for and advising the NIEEB/the government in the negotiations ...," said Zimplats CEO, Alex Mhembere.

"Neither Implats nor Zimplats was involved in any way in engaging Brainworks Capital to act as advisors of NIEEB/the government of Zimbabwe or were we privy to the contractual arrangements relating to Brainworks Capital's fees and Zimplats.

"As such both Implats and the board of Zimplats believe that the issue of Brainworks Capital's fees should therefore be settled between NIEEB and Brainworks Capital."

Brainworks Capital has been the subject of bitter recriminations both in and outside the coalition government after it emerged the company would likely pocket up to US$45 million for advising on nearly all the indigenisation deals reached between the government and foreign mining companies to date.

Foreign firms are now required by law to localise control and ownership of at least 51 percent of their Zimbabwe interests as part of an economic empowerment programme driven by President Robert Mugabe's Zanu PF party, but opposed by his coalition partners.

Apart from the Zimplats deal, Brainworks says on its website it also offered consultancy services on the US$550 million Mimosa mine compliance plan, Anglo Platinum's US$142 million deal for its Unki mine as well as transactions involving Canada-based gold producer Caledonia Mining and South Africa's Pretoria Portland Cement.

But it is the Zimplats deal, by far the biggest agreed to date, which has raised eyebrows amid claims the transaction may be financially detrimental to the country and allegations that Brainworks was handed the advisory contract without going to tender.

However, in a strident defence of the deal, Zanu PF politburo member and former information minister Jonathan Moyo said the transaction had yet to be finalised.

He insisted that there was nothing irregular about Brainworks' involvement, adding that "of particular significance is the fact that the two percent charged by Brainworks Capital is payable by the indigenising company, and in this case, Zimplats. It is not payable by the indigenising entities or by the tax payers. So what's the fuss about?"

But Zimplats says paying Brainworks' fees would also likely breach of corporate governance standards.

"We believe you are aware that technically, the company cannot pay one shareholder costs without extending the same to other shareholders as that can be misconstrued as a dividend payment," the Zimplats CEO wrote in his letter to the NIEEB.

"Furthermore, Implats raises concerns of corporate governance of their side if they were to pay the (Brainworks) invoice on behalf of NIEEB/government as this would be tantamount to influencing the decision of an advisor to a counterpart in the negotiations."

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