Policy and Legal Gaps in Zimbabwe’s Mining Sector

By Lyman Mlambo, Chairman of the Institute of Mining Research

Introduction

According to the Fraser Institute, there are two main conditions that determine the relative attractiveness of a country for mining investment, especially FDI. The first condition is the availability of the mineral resources. Zimbabwe hosts more than 60 different types of minerals in significant quantities. The second condition is the mining policy regime. The policy environment is a product of the policy maker (government, in general) and there is a lot of discretion, unlike with the first condition. The objective of a good mining policy regime is not just optimal extraction of mineral resources leading to growth, but also to foster broad-based development and national economic structural transformation through diversification and industrialization. The criticality of good policy making is premised on the empirical fact that abundant mineral resources can result in a resource curse, a not-so-rare paradox. With the policy forming the foundation or guide upon which legislations are based, a discussion of policy necessarily entails a discussion of the legal framework as well. This logical development from policy to legislation must be appreciated so that we do not put the cart before the horse, which has happened often in this and other countries. This article briefly outlines the existing policies and laws governing the mining sector and highlights the gaps that need to be addressed.

Mining Policy Framework, Dynamics and Gaps

There is currently a national policy vacuum in the mining sector. The work to produce a national minerals development policy has been long-drawn, with the first draft having been produced in 2013. However, we are currently seeing greater commitment and pace to finalize the policy, and we could probably have one by the first half of 2022. The current draft has several progressive provisions including: (i) mining Cadastre system, which is already being rolled out; (ii) mineral beneficiation, value addition and local content development; (iii) formalization and support of artisanal and small-scale mining (ASM); (iv) environmental stewardship; (v) institutional capacity building for better delivery of services to the mining industry; among others. Lack of finalization of the policy remains the main drawback which has left any Acts governing the mining sector or any part of the sector without policy foundation.

With the ASM sector contributing significantly to production, with reference to gold mining which contributed more than 61% in 2021, lack of a specific ASM policy is a significant drawback to this demonstrated potential. The Ministry of Mines and Mining Development is in the process of producing a strategy document for artisanal and small-scale gold mining (ASGM) sector, to guide the sustainable development of the sector, including formalization (that is, registration of titles and conventionalization of equipment, technical operations and organizational structures in the sector).  Among other objectives, the draft provides for reduction or elimination of usage and emissions of mercury in line with the Minamata Convention which the country recently ratified, increase in women participation in the ASGM sector, improvement of entrepreneurship skills, and diversification of rural economic livelihoods through linkage development. However, this draft is taking long to be finalized while the talk on formalization has largely remained rhetorical.

The country has a Diamond Policy, which was first launched in 2012, and was subsequently revised in 2018. This is the only mineral-specific policy in place. There is need to come up with mineral-specific policies for all minerals precisely because each specific mineral has peculiar issues relating to its exploration, development, mining, processing, beneficiation, value addition and marketing. However, the Ministry of Mines and Mining Development is also working on drafts for these. The Diamond Policy is based on sound principles such as transparency and accountability, sustainable community development, environmental management, optimal commercial exploitation, empowerment of indigenous Zimbabweans, and adherence to regional best practices. These principles have given rise to many progressive provisions such as real-time access to details of on-site mine operations, establishment of a central processing and valuation facility (the Diamond Value Management Centre) and establishment of a Gemology Centre in Mutare which would have a School of Gemology catering for the whole value chain of all precious and semi-precious stones, among others.

The diamond policy has been heavily criticized for lack of provisions for public disclosure of contracts and contract awarding processes, lack of clarity on the extent of participation  of government entities in the day-to-day management of operations or in the Management Board of joint ventures, ambiguity and heavy ministerial discretion on establishment of Community Share Ownership Trusts, lack of provisions for establishment or upgrading of local mineral analytical facilities to complement the prohibition on exportation of mineral samples, among many other gaps. The policy has suffered from an implementation lethargy. The Diamond Value Management Centre and the Gemology Centre which were supposed to have been constructed in Mutare by 2019 have not even been started. The provision for the dedication of 10% of diamond production to the local market to support local value addition has not been met, with some reports indicating only 0.1%.  Security provisions of the policy are also not being effectively implemented and illicit flows in the sector are rampant.

The country has a Local Content Policy in place, which also covers the extractive sector.  However, the problem is implementation deficit. While the policy provides for incorporation of local procurement plans in mining agreements or contracts for each mining project, this is not happening in practice. The upstream (supplies) sector is as capital and skill-intensive as the downstream (beneficiation and value addition) sector. There are serious financial constraints on the development of these critical sectors which hold promise for industrialization of the country. The local content policy is not well-aligned with Industrial policy, especially on the development of downstream linkages which are essentially industrial activities. This suggests review of both policies, including provisions on finance, infrastructure and skills development. Another major issue with the local content policy is its disregard of industrial minerals or the so-called ‘development minerals’, which are minerals with natural potential in the development of local linkages. For example, phosphates are used in local production of fertilizers, limestone is used in production of agricultural lime, and there are various materials used locally in construction activities.

Mining Legal Framework, Dynamics and Gaps

The main Act governing the mining sector in Zimbabwe is the Mines and Minerals Act (Chapter 21:05) of 1961. This Act is too old to deal with contemporary issues which have emerged since 1961. It also does not directly provide for transparency in the sector, which has resulted in opportunities for corruption. It has gone through several amendments of a piecemeal nature since 1961. The anachronism in this Act has made the development of the Mines and Minerals Amendment Bill 2018 imperative. Once passed, this Bill will bring with it many improvements, for example, the cadastre system and the requirement for any new works to be provided with work programs to reduce speculation, which is strengthened by the inclusion of the ‘Use It Or Lose It’ principle. However, the amendment process, which started in 2010, has taken long to be finalized as it has passed through several Ministers’ hands (Ministers Amos Midzi, Obert Mpofu, Walter Chidhakwa and now Winston Chitando). The Bill itself has also been heavily criticized by Civil Society Organizations such as the Zimbabwe Environmental Law Association (ZELA). The Bill needs to be critically reviewed to address these criticisms.

The second Act directly related to the mining sector is the Precious Stones Trade Act. This regulates the possession and transaction of diamonds and emeralds, leaving their mining under the Mines and Minerals Act. This Act leaves out two other precious stones, namely sapphires and rubies, apart from the more than 33 different types of semi-precious stones the country hosts.  The latter are also not mentioned in the Mines and Minerals Act, leaving them unregulated in mining, possession and marketing. Without a policy and legal framework, it can be assumed that all that is being mined of semi-precious stones is lost, but lost ‘legally’. The Act gives a lot of power of discretion to the Minister and the Permanent Secretary, which is not subject to judicial review, to accept or refuse the issuance or renewal of a license and to dispose of confiscated precious stones without giving any specific basis for such decisions. The regional best practice in the governance of the gemstone (precious and semi-precious stone) sector is provided by the Botswana case, whose analysis will require a separate article.

Some of the other Acts that have a bearing on the mining sector include the Rural District Councils Act (29:13), Communal Land Act (20:04), Urban Councils Act (19:15), Indigenization and Economic Empowerment Act (14:33), District Development Fund Act (29:06) and the Zimbabwe Investment and Development Agency Act (14:37). The Rural District Councils Act, by ascribing authority to RDCs for managing rural land as well as resources therein through issuance of permits, effectively disentitles the people for compensation in the event of mining-related evictions. The closely related Communal Land Act and Urban Councils Act similarly do not provide protection to people being evicted to pave way for mining, even from their ancestral lands. The Indigenization and Economic Empowerment Act, enacted under the Indigenization and Economic Empowerment Policy, has remained vague regarding Community Share Ownership Trusts (CSOTs), leaving the establishment and continued existence of each CSOT to the Minster’s discretion. However, for the mining sector, the 51% local equity requirement has been removed. The District Development Fund Act, which provides for management of rural development funds given to RDCs by mining companies, is vague in terms of the administration of the Fund, which provides opportunities for corruption.

Absolute gaps which exist in the legal framework include lack of the Diamond Act, Gemstone Act, Local Content Development Act and other mineral-specific Acts. As indicated earlier in the article, policies can only be effective if they are implemented through Acts. The Diamond Policy has no corresponding Act, which has made its implementation as well as codification of the Kimberly Process Certification Scheme unclear. The same situation affects the implementation of the Local Content Development Policy. The country will also need a whole Gemstone Act that covers all the precious and semi-precious stones in line with the envisaged Gemstone Policy. The envisaged mineral-specific policies will also require respective Acts to implement them, unless a significant review of the Mines and Minerals Act is done at the establishment of these policies.  It is worth noting that Zimbabwe already put the cart before the horse with respect to the development of the national Minerals Development Policy and the Mines and Minerals Act. It therefore, would make sense to push the Policy faster than the Mines and Minerals Amendment Bill, in order to use the window provided by the latter to achieve the required sequence in retrospect.

(This article was largely drawn, through summaries and extracts, from a paper entitled “Overview of Natural Resource Governance in Zimbabwe”, presented by Lyman Mlambo on 15 November)