Barely two weeks after the Global
Conference on the Extractive Industry’s Transparency Initiative (EITI) between
the 24th and the 25th of February in Lima Peru, the
president of Zimbabwe R.G Mugabe publicly stated that an estimated 15 Billion
of diamond revenue from Marange diamond operations has been lost. In the same
statement he quantified that the government might have received less than 2
billion in diamond revenues since the onset of formal diamond mining in 2009.
In his statement he stated “…our
people who we expected to be our eyes and ears have not been able to see or
hear what was going on and lots of swindling, smuggling have taken place and
companies that have been mining…I want to say robbed us of our wealth and that
is why we have decided that this area should be the monopoly area and only the
state should be able to do the mining in the area”.
The statement by the President came
on the back of the declaratory order by the Minister of Mines and Mining Development
that diamond-mining companies should stop operations forthwith due to their
resistance to government plans to merger all the companies into one entity, the
Zimbabwe Consolidated Diamond Company.
The President’s statement is
particularly concerning given that the government has at least a 50% stake in
all the 6 joint ventures that were operating in the diamond fields. When the
biggest shareholder complaints about corruption, lack of accountability and
leakages of revenue meant for government it is very unsettling.
The EITI global conference is
arguably the biggest conference where issues of transparency and accountability
in the extractive sector are discussed. Despite the challenges of secrecy in
Zimbabwe’s extractive sector, government and industry representatives were
conspicuous by their absence.
The absence of these two key
stakeholders was also witnessed during the 2015 UN Forum on Business and Human
Rights, a forum that is hosted annually to reflect on the UN guiding principles
on Business and Human Rights. Both platforms are key in that they promote
tri-focal discussions among civil society, industry and the government on
extractives.
The Zimbabwean government seems to be
conveying the sentiment that such platforms yield no meaningful results
overlooking how there is immense benefit from learning and sharing with others
that are in the same situation or adopting and domesticating experiences of
others that have gone through the same experiences. The dismissal of these
initiatives despite the evidence of them enhancing mineral resource governance
in many countries may result in the country failing to benefit from its
resource endowment.
The EITI is an international
standard for transparency in extractive industry. In countries participating in
the EITI, companies are required
to publish what they pay to governments and governments are required to publish
what they receive from companies. Would Zimbabwe be in its current deplorable
situation if EITI principles were being implemented in country?
The 2016 EITI conference, which ran
under the theme “From Reports to Results”
focused on how the progress registered in publishing EITI reports now needs to
be elevated to ensure there are more results and actual reforms in the EITI
implementing countries. Currently there are 51 implementing countries and among
these 31 are compliant with EITI
requirements. For both the EITI candidate and compliant countries, almost half
(23) are from Africa.
In Zimbabwe, the challenges of
opacity in the extractive sector, particularly in diamond mining, have come to
a head at a time when there has been a continued decline of international
mineral commodity prices, a review of indigenization guidelines and proposals
for a new mines law. All these are factors that make it imperative for the
government to set a new path. During “booms” like we anticipated in Zimbabwe
post the diamond rush of 2009 and the subsequent assurance by government of
windfall revenue, so much was at stake and we too detail for grunted that it
became difficult to rationally consider transparency and accountability.
Nevertheless, the fall of diamond
prices and the reported depletion of alluvial diamond reserves, presents
Zimbabwe with a unique opportunity to take time to pause, reflect and structure
the industry in the best way possible given that the country has so many best
practices to learn from to improve mineral resources management. To chart a new
course, the government has to be open to ideas and shun the thinking that solutions
of choice are always those that reject international best practice. There has
to be recognition that mineral resource governance has to tap into the
collective wisdom of Zimbabweans and the global citizenry.
Contrary to some positions that have
been shared before, the EITI has 3 key processes that allows the government to
still maintain self determination within the framework:
Firstly, a national
multi-stakeholder group (government, industry and civil society) decides how
their EITI process should work.
This presents room for independence to
tailor make an initiative that is contextual to match the country’s aspirations.
Having the three stakeholders engage is important in creating a shared
understanding of the Extractive Industry sector. This ensures that expectations
are managed and sets a basis for accountability.
Secondly, Government revenue and
company payments are disclosed together with other information about the
extractive sector.
The importance of this process for
Zimbabwe cannot be overemphasized. The country needs to know the revenue mining
companies are paying to government as well as any other information on the
sector. Otherwise if government is not willing to disclose the revenue they are
receiving from mining then the question is; who is benefiting from this
secrecy?
Zimbabwe, like many African
countries, needs to play catch up on development and one of the obvious routes
is the exploitation of mineral resources and judicious use of mineral revenues
for broad based sustainable development. Transparency and accountability is
critical in ensuring that the contradiction between rich mineral resources and
continued poverty-what most call the resource case, is addressed.
It is important to note that
information that should be disclosed should cover the whole value chain of
mining, which includes contacts and licenses, production, revenue collection,
and social and economic contribution of the sector.
Thirdly, the findings are
communicated to create public awareness and debate about how the country should
manage its resources.
Progress and development is nested
in a country’s ability to promote multi-stakeholder engagement, public debate and
the flourishing of ideas. There is a need to break with the culture that
government leaders have a monopoly on ideas.
In Zimbabwe a version of EITI was
once set up in 2011 under the name the Zimbabwe Revenue Transparency Initiative
(ZMRTI). This points to a general consensus on the benefits that such
initiatives can offer to a resource rich country like Zimbabwe.
The ZMRTI comprised three
stakeholders, including the government (Office of the Deputy Prime Minister,
Minister of Mines, Reserve Bank of Zimbabwe), mining companies (ZMDC, MMCZ and
the Chambers of Mines) and civil society (Zimbabwe Environmental Law
Association and Chiadzwa Community Development Trust and universities). Since
inception the government noted that there were two major challenges to overcome
– the mistrust between government and civil society, and the lack of financial
resources.
Although ZMRTI was a promising
initiative towards EITI, it suffered a stillbirth. The current situation
requires that the Minister of Finance urgently take lead in resuscitating this initiative
as has been promised in at least the last 3 National Budget Statements.
Good governance can lead to trust
when there is participation of all stakeholders and this is more important in
the extractive industry. There should be a common platform to share, review and
learn from each other and the EITI offers a multi-stakeholder engagement
platform for government, business and the civil society. Such tripartite
engagements are not new and their results are known with the Kimberly Process Certification
Scheme (KPCS). The Kimberly Process (KP) is a joint governments, industry and
civil society initiative to stem the flow of conflict diamonds-rough diamonds
used by rebel movements to finance wars against legitimate governments
Natural resources are owned by the
people of a country and managed through the custodianship of the government.
Business on the other hand make investments to exploit these natural resources
not to be owners but rather to make profit which should also cascade down to ensure
that it changes the lives of the community as well as provide revenue that can
be used by governments to support development.
The African Mining Vision states
that the key element in determining whether or not a resource endowment
will be a curse or blessing, is the level of governance capacity and the
existence of robust institutions. It goes on to argue that some elements
critical for consideration include new global resource and resource rent monitoring
systems such as the EITI and Kimberley Process.
In its wisdom, the AMV also
acknowledges that it is clear that there is no “one size fits all” strategy for
strengthening African resource governance and institutions. Nonetheless, there
are a few broadly applicable strategies such as accession to international
protocols (e.g. African Peer Review Mechanism, EITI) and the establishment of
critical institutions to facilitate the optimal exploitation of natural
resources.
That African governments are sceptical
to EITI is not a secret, but ever since embracing EITI some of the African
countries have seen immense benefits. For Nigeria the EITI process has exposed
outstanding debts by the national oil company to the Federal Government,
recovered uncollected taxes, identified weaknesses in the regulatory bodies,
audited oil-related transfers to subnational government, estimated oil theft,
and examined oil sales. Whilst in Ghana the EITI has led to improvements in
tracking the use of revenue on the local level. These are just but two examples
that can demonstrate for Zimbabwe the potential of EITI in addressing a
scenario such as the ‘loss’ of 15 billion.
The High Level Panel Report on
Illicit Financial Flows, which was led by former South African president Thabo
Mbeki, identified the EITI as an important part of international architecture
designed to tackle illicit financial flows of resources from the African
continent. The same report comments that in some African countries the
institutional architecture for responding to IFFs was at best uneven or, as in
several key instances, non-existent. Lack of transparency, secrecy and the
difficulty of obtaining information and systematic data remain key challenges
across the board and Zimbabwe is not spared.
Zimbabwe’s economic blueprint, the
Zimbabwe Agenda for Socio-Economic Transformation (ZIMASET) states that the
mining sector continues to be a major foreign currency earner and has potential
to become the pillar for economic growth through value addition and
beneficiation. However, the sector continues to be constrained by energy and transport
infrastructure challenges, depressed international mineral prices and shortage
of utilities among other factors and (I will add) Transparency and
Accountability.
That Zimbabwe should consider EITI
is inherent for countries that choose mining to be the central nerve to the
economy. The Mbeki High Level report on Illicit Financial flows notes that reliance
on extractive industries for revenue and export earnings in Africa usually
means that the sector has a high degree of discretionary power and political
influence. This is the source of the secret and unequal contracts that African
countries sometimes enter into with multinational mining companies. These
contracts in turn undermine efforts to promote transparency and accountability
in the extractives industry but with EITI all stakeholders will become involved.
In conclusion it is important to
restate the late Justice Louis D. Brandeis of the United States’ words that “sunlight
is the best disinfectant”, Zimbabwe more than ever needs to shine the light on
the mining sector and one possible path to follow is the EITI.
From the lessons learnt from
countries implementing EITI to the strong recommendations in documents such as
the AMV, the high level panel on illicit financial flows and the shortcomings
of the current mining regime, all seem to point to the need for Zimbabwe to
consider implementing the EITI.
