Zim’s shady mining contracts: A case for African Mining Vision

mutuso-dhliwayo1-cut.gif

Mutuso Dhliwayo

THE Zimbabwe Environmental Law Association (Zela) has been closely following the Zisco-Essar deal, including the Minister of Mines and Mining Development Obert Mpofu’s recent appearance before the parliamentary portfolio committee on trade and commerce. Mpofu complained about how the Zisco-Essar deal was negotiated and concluded. He called for the agreement to be revisited on the basis that it does not unlock value to the nation. In his own words, the Indian-based company, Essar, will pay US$750 million for iron ore worth over US$30 billion.
Mpofu’s calls follow similar remarks by Finance minister Tendai Biti and Deputy Prime Minister Arthur Mutambara.
Their sentiments echo the voices of civil society organisations like Zela which have raised concerns regarding the way mining contracts, including among many others, Zimplats and Chiadzwa diamond deals, were negotiated.
In his oral evidence to the parliamentary committee, Mpofu pointed out that despite his ministry being the custodian of Zimbabwe’s mineral resources, he was not privy to the provisions of the agreement, but had managed to get bits and pieces through informal means. It is both surprising and alarming the “custodian” of Zimbabwe’s mineral resources also has to rely on informal means to get information about an agreement which he should have been consulted on.
This shows how flawed Zimbabwe’s mining contracts negotiation system is and that if we continue with this business-as-usual attitude, Zimbabwe’s significant and diverse mineral resource base will just remain a comparative, not competitive advantage. Contracts determine the extent to which a country derives benefits from its mineral resources.
There is need for an urgent paradigm shift on mining contracts and mineral deals negotiations to move away from the current system where ministers tend to outdo each other at the expense of the nation.
Contract negotiations should be guided by the Africa Mining Vision adopted by heads of state and government of the African Union (AU) in February 2009.

The Africa Mining Vision is an aspiration of the highest political leadership to move into a new orientation of choices of mining policies and institutional culture. Their intention was and still is that Africa’s rich and diverse mineral heritage should be used as a springboard to address the continent’s chronic poverty and underdevelopment through broad-based sustainable economic development.
The Africa Mining Vision now has an Action Plan for Implementation, which was adopted at the second AU conference of ministers responsible for mineral resources development held in December last year.
The organisation’s vision is “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”. The question is whether mining contract negotiations as evidenced by the Zisco-Essar deal are based on the tenets of the Africa Mining Vision, or indeed our own national legal dictates? Based on Mpofu’ oral evidence and observations by Biti, Mutambara and civil society organisations, mining contract negotiations in Zimbabwe contradict aspirations of the Africa Mining Vision.
Civil society organisations have called for transparent and broad-based negotiations of contracts as championed by the Africa Mining Vision instead of limiting them to a single ministry.
This was after the realisation government has limited skills to effectively negotiate with mining companies. Lessons from Africa and around the world show that strong, transparent and participatory governance processes, at all levels along the mining value-chain, can assist mineral-rich countries attain sustainable economic and socio-economic development.

Generally, negotiations are extremely asymmetrical because mining companies are highly-skilled and well-resourced, while governments are poorly-skilled and under-resourced.  The Zisco-Essar, Zimplats and Chiadzwa diamond deals amply demonstrate government’s limited negotiating capacity over contracts, hence the need to broaden contract negotiation processes to include other stakeholders such as civil society, rather than making it the prerogative of government.
This is in line with principles of the Africa Mining Vision which calls for an inclusive mining sector in which all stakeholders have a voice and participate in policy and decision-making processes.
Contracts between the state and mining companies are very different from commercial contracts between one mining company and another. The Africa Mining Vision reinforces the need for transparent negotiation of mining contracts.
However, based on Mpofu’s recent oral evidence, lack of transparency is not only limited to the general public. Even key ministries like Mines also have to rely on “bits and pieces (of information) through informal means” to know what is going on, hence calls for transparency and access to information at all levels.
Why is there this secrecy and who is benefitting from it? Certainly not the country, based on the financial prejudice Mpofu alluded to in this deal, or Biti’s complaints about Chiadzwa diamonds.
While it is good to put the Zisco-Essar deal under scrutiny, there have also been calls to put the spotlight on Chiadzwa diamond deals. The Chiadzwa diamond contracts should be re-negotiated based on the principles espoused in the Africa Mining Vision.
There is no justification whatsoever for Zimbabwe to continue signing skewed contracts. The African Development Bank has an African Legal Support Facility which provides technical advisory services to help African countries rich in mineral resources negotiate better mining deals.
There is also the Model Mining Development Agreement (MMDA) which can be used as a template in negotiating mining contracts. Why isn’t the government utilising the African Legal Support Facility and the MMDA?  Deals like Zimplats, Zisco-Essar and those in Chiadzwa must be officially investigated in the national interest.
In defence of the Zisco-Essar deal, the Minister of Industry and Trade, Welshman Ncube, argues the Mines and Minerals Act (Chapter 21:05) does not require value addition of minerals before a licence can be granted and that requiring Essar to do so would be unprecedented as such criteria were not used in the negotiations of platinum and diamond contracts.
Although legally sound, this defence is not sustainable as it seeks to continue the current dig-and-export model which characterises mining not only in Zimbabwe, but also the whole African continent, and has not helped its social and economic development.
Ncube, however, raises a point which has been highlighted on several occasions by Zela concerning the regulatory framework in the form of the Mines and Minerals Act. This is an old, colonial and archaic piece of legislation passed in 1961 whose main focus is on the extraction of mineral resources with no regard to sustainable development.
This law is not compliant with the aspirations of the Africa Mining Vision in various key areas. For example, while the Africa Mining Vision is development-oriented and places mining at the centre of industrialisation in mineral-rich economies, Zimbabwe’s legislative and regulatory framework in the form of the Mines and Minerals Act is not progressive.
The Act therefore needs to be amended, based on the tenets and principles of the Africa Mining Vision. The current processes to reform the Mines and Minerals Act through the Mines and Minerals Amendment Bill should be guided by the Africa Mining Vision if the sector is to underpin sustainable growth and structural transformation in Zimbabwe. It is imperative that proposed amendments derive from a fully consultative and participatory process.

 

  • Dhliwayo is the director for the Zimbabwe Environmental Law Association. He holds a Masters degree in Environment and Development from the University of KwaZulu Natal and a Bachelor of Laws Honours (LLBS) Degree from the University of Zimbabwe.
  •  E-mail: mutusod@zela.org or mutusod@hotmail.com

Top