HomeAnalysisCeteris Paribus: Insight on Community Share Ownership Trusts (I)

Ceteris Paribus: Insight on Community Share Ownership Trusts (I)

Eben Mabunda
Last week, Blanket Mine, a 64% subsidiary of Caledonia Mining Corporation Plc, paid US$360 000 to the Gwanda Community Share Ownership Trust (GCSOT) as dividends. This was in fulfilment of a dividend that was declared in September 2021.

In 2012, Caledonia facilitated the ownership of 51% of Blanket by indigenous Zimbabweans in accordance with the prevailing legislation at that time. This included a 10% ownership by the local community via the GCSOT.  In 2020, following changes in legislation, Caledonia increased its shareholding in Blanket to 64%, but GCSOT retained its 10% ownership.

The dividend payment ignites attention on the very concept of Community Share Ownership Trusts (CSOTs) in Zimbabwe.

In 2010, the government  introduced a variety of schemes aimed at establishing shared economic benefits between private sector companies and communities. Through Statutory Instrument (SI) 116 of 2010, the Indigenisation and Economic Empowerment Regulations, three types of share ownership schemes were introduced. These are: the Employee Share Ownership Scheme, the Management Share Ownership Scheme and the Community Share Ownership Scheme (CSOS). Several significant changes have since been made to the legislation but its fundamentals remain in place.

The CSOS established CSOTs as vehicles of community development. The thrust of the CSOTs at inception was to ensure that communities benefit from the exploitation of natural resources within their areas.

The approach had been implemented in countries like South Africa, India and others as a hybrid of Corporate Social Responsibility (CSR) which was coined in Europe in the 1890s. However, the concept of CSRs lacked the legal backing to enforce the corporate world to compensate the communities of the damage left during their operations, necessitating the rise of CSOT in developing countries.

According to (Shumba, 2013) CSOTs provide several merits among them: “… promote the sustainable use of natural resources, management and protection. They encourage efficient and equitable distribution which is important for communities to participate in the economic mainstream. CSOTs promote economic empowerment, capacity building and community participation. This enables communities to participate in the economic mainstream and it gives them the capacity to address their real development needs.”

The implementation of CSOTs as a rural development approach has often been marred with a number of challenges which are both administrative and operational. It has in the past been constrained by poor funding, lack of managerial skills, limited community participation, poor communication, and a lack of community sense of ownership among others.

Under SI 116 of 2020, the law required that every business would dispose of 10% of its shares to the community in order for it to be considered as having complied with the indigenisation and economic empowerment policy. Initially, 61 CSOT’s were set up according to the findings of Silveira House. However, there was only partial compliance by some businesses and no compliance at all by the majority

A recent report by Silveira House showed poor implementation of CSOTs across the country with only a few corporates like PPC and Caledonia: “… businesses pledged a total of USD$128 million nationwide. However, US$45 million, which amounts to 35% of the pledges, was actually paid. Only 26 out of the 61 CSOTs (42%) received some form of funding from qualifying businesses. Only two qualifying businesses namely Blanket Mine (Gwanda) and PPC (Pvt) Limited (Colleen Bawn) complied through the issuance of share certificates to the respective CSOTs. This translates to 3,3% of all CSOTs, since 2010 and as of 2018 to date, 55/61.”

“The six CSOTs that are currently in operation have managed to do so due to the fact that out of the disbursements they received they have managed to invest the surplus of their resources after carrying out some community projects,” added the report.

  • Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.net

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