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Will what belongs to Caesar be finally rendered, to ensure communities benefit from Marange diamonds?

By Fadzai Lydia Midzi Zimbabwe Environmental Law Association

Introduction

Mining communities in Zimbabwe mostly feel short-changed when it comes to benefiting from mining activities. This is a matter which goes beyond the social license to operate, a rights-based lens must be applied.  In terms of Section 13 (4) of the Zimbabwean Constitution on national development, “The State must ensure local communities’ benefit from the resources in their areas.”

The mining sector, in Zimbabwe, holds the keys for Zimbabwe’s economy recovery, stabilisation and growth.  As evidenced by the plan to rake in US$ 12 billion annually from by 2023, expectations are high, communities wonder about their share of the pie[1].  Diamond along with gold, platinum, chrome, hydrocarbons and lithium are part of the minerals which anchor the US$12 billion mining plan. By 2023, diamonds are expected to contribute US$1 billion annually[2]. If this target is realised, it will surpass the $742 million peak diamond earnings realised in 2012. For communities affected by diamond activities in Marange and Chimanimani, growth in diamond production doesn’t bring much hope considering past missteps. Amidst pomp and fanfare, Marange-Zimunya Community Share Ownership Trust (M-Z CSOT) was launched in 2012.  Five diamond mining companies were supposed to equally contribute to US$50 million to M-Z CSOT. Unfortunately, for M-Z CSOT, the US$50 million proved to be a pipe dream. With the coming in of the Zimbabwe Consolidated Diamond Company (ZCDC), legacy issues meant that the new kid on the block had no goodwill from communities. Two years after ZCDC started operations, the company made a US$5 million to M-Z CSOT. The impact sought was betrayed by Zimbabwe’s currency woes as the money was converted into local currency, its value was massively eroded. To adhere to section 13(4) of the constitution, the following opportunities for benefit sharing are available in the diamond sector.

Empowerment of Artisanal Small-Scale Mining (ASM)

ASM is a lucrative way of benefit sharing in the diamond sector, where communities can be involved directly in the mineral value chain. Communities want a fair share of benefit from diamonds evidenced by constant reference to the period where there was ‘uncontrolled’ diamond mining during the early stages of diamond discovery in Zimbabwe. One of the community members alluded that “ When diamond was discovered in Marange and there was uncontrolled ASM mining we saw a lot of economic impact  and tangible developments in the community, but when mining was controlled and ASM was banned all we have had is promises and no tangible benefits”. Communities expect to see tangible benefits from diamonds which was the expectation presented to them when mining companies came however, up to now these expectations have not been met. Failure by mining companies to meet the standard benefit that communities expect led to conflicts as communities continue to see ASM as being more worthwhile and beneficial to them. Communities feel there was greater economic impact (at a community level) from diamonds during the times of uncontrolled alluvial panning than what is being realised now following formal diamond mining arrangements. Kimberly Process Washington declaration[3] encourages the formalisation of ASM to improve traceability of ASM production, regulate and formalise ASM trade in alluvial diamonds to curb illicit cross border trade by moving ASM into formal trade. Strengthening property rights decreases property disputes and reduces conflicts between mining companies and ASMs. To them it is a scramble of resources and all they want is to quench their appetite for development and economic opportunities presented by diamonds in their localities. In the 2016 Budget statement[4], Former Minister, Patrick Chinamasa indicated that formalisation of Artisanal Diamond Mining adheres to the Washington Declaration on Integrating Development of Artisanal and Small-Scale Diamond Mining with Kimberly Process Implementation. This can also put the country at an advantage of diamonds being declared conflict free by resolving ASM and mining companies’ conflict through formalisation of ASM.

Community Share Ownership Trust (CSOT)

Though lacking legal backing following the repel of the Indigenisation Act by the government in 2018. The CSOT continues to be an important part of benefit sharing for the mining affected communities. The Marange-Zimunya CSOT was promised 50 million[5] contribution from five mining companies expected to contribute 10 million each but only five million was given to the CSOT by ZCDC. This continues to raise hopes unfulfilled in communities, breeding anger and conflict when expectations are not met. ZCDC promised to boost the M-Z CSOT by contributing five million yearly [6]another expectation which is yet to be met. There has been a growing trend were CSOT are given once off contributions which cannot sustain them as far as community development is concerned. The M-Z CSOT contribution was affected by inflation and failed to meaningfully contribute to community development. The funds were turned to local currency and with procurement processes being delayed and spearheaded by Procurement Authority of Zimbabwe, the CSOT suffered a huge loss and failed to meet the community expectations The other contentious issue is on the ownership of the CSOT especially with the removal of the legal backing the CSOT is left vulnerable.

Payments made to RDC

The payments made to RDC are a good means of benefit sharing as they contribute to community development through improving local service delivery. The Constitution, Section 276 (2) (b) provides a provision for local authorities to mobilise resources from economic activities to fund local service delivery. Rural District Council Act (Chapter 29:13) allows RDC to charge land development levies on mining companies in their localities. Mining Companies are expected to comply with the local by-laws of the local authorities. The land levies are charged as a unit of labour which limits the RDC to effectively mobilise resources but rather charging according to profit and production will maximise its chances to effectively mobilise resources for community development projects. However, with a weak taxation system  embedded in the RDC Act mentioned above already in place the RDCs are made more vulnerable to inflation due to delayed payments by the mining companies who delay the payments of levies until the money (charged in local currency, $ZWL) loses value. This also questions the issue of compliance when there are payments delays with the community being disadvantaged.

Corporate Social Responsibility (CSR)

At a local level, remote location increase expectation for employment, economic benefit from mining companies’ host communities. This puts pressure on companies who are desperate for social license to operate from the host communities. CSR comes as an important means of benefit sharing in the community, with most companies having CSR policy in place, CSR have become a very popular way of community plough back. Aligning mining operations with management of social license to operate issues is very important for corporate sustainability. The economic crises prevailing in Zimbabwe is a challenging business operating environment which makes it difficult to budget for CSR. CSR should be one way of ensuring that mining companies plough back to the community following the removal of the Indigenisation Act. It is now the most abundant means of benefit sharing available with communities at an advantage. One of the Mining companies at a multi-stakeholder dialogue meeting indicated that “We take social license to operate seriously as it is the basis of our business model”. This indicates how important it is for companies to be transparent in benefit sharing and allocation. ZCDC has been doing CSR initiatives[7] but however greater transparency and communication is needed. Lack of transparency in distribution of CSR benefits is a risk for companies as it may lead to protests by local people demanding greater benefits. With new investors coming in such as Vast Resources including Anjin come back, community benefit from these investments should change for the better.

Conclusion

Therefore, it is important for the Government to put measures to ensure that there is transparent, equitable benefit sharing in the diamond sector. Transparent benefit sharing is key to resolving conflicts and maintaining social license to operate through CSR initiatives. One of the easiest ways to resolve conflict is through sharing information timeously in a transparent manner.  The Government should consider formalising ASM which follows Kimberly Process Certification (KPC) implementation and solves the challenge of internal controls that form one of the pillars of KPC. Disclosure of taxes paid to RDC and Government to ensure that Communities get a fair share of benefit from the mobilised resources is also important. Mining Companies should adhere to timeous payments of taxes and levies as part of compliance with the laws.

All communities want is tangible economic benefits that transforms their way of life.


[1] https://www.bloomberg.com/news/articles/2019-10-14/zimbabwe-unveils-plan-for-12-billion-in-mineral-revenue-by-2023

[2] https://www.bloomberg.com/news/articles/2019-10-14/zimbabwe-unveils-plan-for-12-billion-in-mineral-revenue-by-2023

[3] https://www.land-links.org/wp-content/uploads/2016/09/Washington_Declaration_Kimberley_Process_Implementation.pdf

[4] https://www.tradezimbabwe.com/wp-content/uploads/2016/03/2016-National-Budget.pdf

[5] http://www.zimsentinel.com/diamond-pledge-not-yet-honoured/

[6] https://www.zcdco.com/zcdc-pledges-grow-marange-zimunya-csot/

[7] https://www.zcdco.com/social-investment/

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