What the laws in each country say
Each of our countries has an elaborate legal framework which regulates the extraction of resources. This section will detail the laws and rules. Since the country studies reported on them in detail, it will be divided into country specific sections:
Each of our countries has an elaborate legal framework which regulates the extraction of resources. This section will detail the laws and rules. Since the country studies reported on them in detail, it will be divided into country specific sections:
Angolan law gives the state a monopoly of all mining activities, including exploration and exploitation of all mineral resources. Companies are expected to obtain a license to mine. To obtain one, they accept obligations which include: integrating Angolan labour as far as possible and offering workers professional training; giving preference to Angolan companies as subcontractors and compensating for any damage or loss to third parties as a result of any operations; ensuring the protection of workers and the environment. Entities that regulate the extractive industries are not independent. State companies Sonangol (petroleum) and Endiama (diamonds) regulate and intervene in the operations, playing the role of referee and player at the same time.
Endiama is legally enshrined as the executor of mining policies and the commercialisation of diamonds. The law permits exploration by hand of selective diamond deposits where these are not explored on an industrial scale. The diamond exploration zones are segmented into restricted areas, protected areas, and those of deposits. The law prohibits the carrying out of any further economic activity in the restricted and protected zones. This is because companies awarded the grants have to indemnify owners of the existing commercial, industrial, agricultural and cattle breeding establishments within the area. Expropriation by public utility, both in favour of the state as well as benefiting companies with grants, is permitted. The law is severe when it comes to crimes relating to the illicit prospecting, exploring, extraction, theft, possession and trafficking of diamonds as well as the illegal entry of diamonds into national territory. These crimes are punishable by 8 to 12 years imprisonment.
The petroleum law establishes the regulations pertaining to accessing deposits and exercising operations in disposable areas (including surface, submerged national territory, interior waters, the territorial sea, the exclusive economic zone, and the continental platform). It excludes activities such as refineries, storage, transporting, distribution and commercialisation of petroleum (which are regulated by a separate law). Prospecting licenses are required and are issued for a maximum of three years. According to article 12, an extension may be requested by the licensee, or the national concessionary. In terms of environmental protection, article 24 specifies that companies should take the necessary precautions to protect the environment and guarantee the preservation of health, water, soil and subsoil, air, biodiversity, flora and fauna, the ecosystem, scenery, atmosphere and the cultural, archaeological and aesthetic appeal. Article 25 states that petroleum companies are liable for any third party damages caused during operations, except where they can prove that they proceeded inoffensively.
Democratic Republic of the Congo
The Congolese mining industry is governed by the Mining Code, Law No. 007/2002 of 11 July 2002, and by the subsequent mining regulations enacted by Decree No. 038/2003 of 26 March 2003. During the post-war period (1999 to 2006) and while the transitional government was in place, many mining and other natural resource deals were signed, which were subsequently found to have been based on corrupt practices. The transitional government and the international community were keen to pass new legislation quickly to ensure that the country’s natural resources could be properly managed. Many of the laws were considered inadequate, which has led to additional laws being created. In light of the new laws, the status of some of the agreements signed during the immediate post-war period are disputed. Companies were allowed to start operating without producing Environmental Impact Assessments (EIA). The Mining Code suffers from these inconsistencies, and is subject to several additional laws.
The main provisions of the 2002 Mining Code and the 2003 Regulations make it clear that consultation over potential loss of assets and land with affected parties is required. Compensation should be at the actual replacement value plus 50 percent, or the assets must be returned to their original condition. However, a resettlement action plan (RAP) is not required under DRC law; and mining companies have to comply with international best practice in drawing up a RAP for a mining project in the DRC.
The key documents of national legislation relating to social and community issues in the mining industry include the Mining Code 2002, Law No. 007/2002 of 11 July, 2002; and Mining Regulations enacted by Decree No. 038/2003 of 26 March 2003. Additional relevant documents and laws include the Forestry Code, Law No. 011/2002 of 29 August 2002, the Investment Code, Law No. 004/2002 of 21 February 2002, and the Labour Code, Law No. 015/2002 of 16 October 2002. The evolution of mining codes in Africa (regulatory and legal frameworks aimed at creating stability within the domestic mining sector) is described as having three generations, each building on and learning from its forerunners. The DRC Mining Code is considered as one of the third-generation mining codes, which place greater importance on the participation of affected people, and require some levels of state involvement to meet wider environmental and social development objectives. In particular, it has made provisions to ensure that revenue distribution favours social development and those impacted by mining activities. In terms of the code, 60 percent of royalties remain in the hands of central government, 25 percent is paid to the provincial administration where the mining project is located, and 15 percent to the town or administrative territory in the area where the mining takes place. The funds are allocated exclusively for the building of basic infrastructure in the interest of the community.
The Directorate of Mines and the Directorate of Protection of the Mining Environment are responsible for administering these laws and supervising mining activities with regards to social and environmental impacts. The Cellule Technique de Coordination et de Planification Minière (CTCPM), which sits within the Ministry of Mines, provides advice and co-ordination for mining activities in DRC. The CTCPM also plays a role in developing mining policies and strategies.
Chinese companies working in the DRC have to conform to these laws and policies. The Chinese and DRC governments have also ratified international human rights standards like the International Covenant on Economic, Social and Cultural Rights and the Convention on the Rights of the Child. Consequently their provisions should be respected by all companies operating in the DRC. Many of the key standards of the International Labour Organisation (ILO) have also been ratified (for example, Convention 100 and Convention 111 on the elimination of discrimination in respect of employment and occupation and Convention 138 on the elimination of child labour and Convention 182 on the elimination of the worst forms of child labour).
The use, management and exploitation of natural resources in Mozambique are regulated by a complex web of institutions, policies, strategies, laws, and regulations.
At the institutional level, the bodies responsible for the regulatory framework for natural resources vary depending on the issue at hand. At the highest level, it is the responsibility of the Assembly of the Republic (Assembleia da República), Mozambique’s Parliament, to pass general laws on issues concerning natural resources, and of the Council of Ministers (Conselho de Ministros), the executive power, to enact decrees regulating how these laws will be implemented. To make them operational at the central and local level, the responsibility lies with the Ministry of Agriculture (Ministério da Agricultura, MINAG), Ministry of Mineral Resources (Ministério dos Recursos Minerais, MIREM), and Ministry for the Coordination of Environmental Affairs (Ministério para a Coordenação da Acção Ambiental, MICOA). Other Ministries, such as the Ministry of Public Works (Ministério das Obras Públicas, MOP) and the Ministry of Tourism (Ministério do Turismo, MITUR) are often also involved in setting up the regulatory framework for natural resources. At the Ministry of Agriculture, the main ministry involved in the forestry sector, the National Directorate of Geography and Cadastre (Direcção Nacional de Geografia e Cadastro, DINAGECA) and the National Directorate of Land and Forestry (Direcção Nacional de Terras e Florestas, DNTF) are the directorates mainly involved in the regulatory process. Both are represented at provincial level by service units – the Provincial Geography and Register Services (Serviço Provincial de Geografia e Cadastro, SPGC) and the Provincial Services for Forestry and Wildlife (Serviço Provincial de Florestas e Fauna Bravia, SPFFB). At provincial level, the services are accountable to their line ministry and the provincial governor.
Since independence, the government has produced several development policies, strategies and planning instruments. Strategic planning, even if often more an exercise in theory than in practice, is at the centre of Frelimo’s style of governance. There are general, sector-wide and issue-specific policies and strategies. For the long-term, Mozambique’s main national policy, or vision, is Agenda 2025, which provides a comprehensive analysis of the country’s situation and its challenges up to 2025. It is complemented by the Millennium Development Goals (MDGs), to which the government has pledged its commitment, and the National Action Plan of the African Peer Review Mechanism (APRM), which the country concluded in late 2009 and is being implemented. In the medium-term, there is the government’s Five-Year Programme (2010-2014), and there was (until 2010) Mozambique’s Action Plan for the Reduction of Absolute Poverty 2006-2009 (PARPA II), the country’s second poverty reduction strategy paper. PARPA II has expired and has been replaced by the Action Plan for the Reduction of Poverty 2010-2014 (PARP). Most sector-wide and issue-specific policies and strategies are designed to be implemented within a 3 to 5 year time-frame. In the short-term, there is the Economic and Social Plan (PES), approved every year by the government to spell out that year’s main objectives and activities, based on the medium- and long-term strategies and priorities. Budgeting, mobilisation, and allocation of resources to implement the strategic plans are undertaken through the Mid-Term Fiscal Scenario (CFMP) and the State Budget (OE). All ministries have annual plans that detail their day-to-day activities.
Agenda 2025 was drawn up by academics, representatives of political parties, and civil society organisations during broad popular consultation at the beginning of the 2000s. Launched in 2003, after unanimous approval by the Assembly of the Republic, the document discusses several potential scenarios for Mozambique, identifying challenges, threats and opportunities that might emerge in the next years, but it does not have any clear strategy either for the extractive industries or for the forestry sector.
PARPA II sets out objectives that should contribute to reducing absolute poverty and promoting rapid, sustainable and strong economic growth. Economic development should, according to its priorities, guarantee the sustainable use of natural resources and the implementation of transparent mechanisms in their management and use. It also recognised that most Mozambicans depend on the use of natural resources for the maintenance of their livelihoods and for income generation, and that, given this, the plan could only achieve its objectives if natural resources were well-managed and preserved, with a focus on the relations between their use and the benefits that accrue to the poo. On forestry, minerals and the extractive industries in general, the document is almost silent, mentioning briefly the importance of protecting the forests, of raising citizens’ awareness of legal norms protecting the forestry and wildlife, of continuing the prospecting of minerals, and of promoting geological mapping.
The current Government Five-Year Plan (GFYP) (2010-2014) was approved at the beginning of 2010, when Mozambique’s new government was sworn in. Extractive industries are discussed in a fragmented fashion (forestry, fisheries and mineral resources in separate headings). On forestry resources, the GFYP is very brief, saying that the government intends to redesign and implement a policy for the sustainable use of natural resources and to establish commercial business farms. On mineral resources, there is more information, and the government commits itself to continue to promote and ensure their sustainable use. Also, it states its commitment to the implementation of EITI.
Several policies and strategies discuss how the government should approach the management and regulation of the forests. The National Environment Policy was approved in 1995, in the context of the GFYP for 1995-1999. There, the government clearly recognised the interdependence between development and the environment. Among the policy’s general objectives were: 1. Ensure that natural resource management is geared towards the continuing economic relevance of natural resources for future generations, and; 2. Ensure the integration of environmental considerations into socio-economic planning. The policy lists areas that demand special attention, as well as strategies, priorities and specific activities. It does discuss important areas (such as fisheries), but is silent on some areas that have become crucial to the country’s development (such as mineral resources), and hardly discusses others (such as forests).
In 1997, the Council of Ministers approved the Policy and Strategy for the Development of Forests and Wildlife. It was enacted in the spirit of ECO-92, the UN Conference on Development and Environment held in Brazil in 1992, and should have guided the government’s activities in the area for five years. Amongst the priorities (which reflected government’s national priorities) were: 1. Improve the use of forests geared towards their industrial transformation; and 2. Reduce the exports of raw wood and increase the exports of processed wood.
The National Environment Policy and the Policy and Strategy for the Development of Forests and Wildlife were enacted within the context of Mozambique’s first democratically-elected government (1995-1999). From 1997 until 2007, no other specific policy or strategy for natural resources was approved, even if new laws and regulations were enacted. Finally, in 2007, the Council of Ministers approved the Environment Strategy for the Sustainable Development of Mozambique, which should be implemented in 5 years. It is longer and more detailed than previous instruments, but is more vague and fragmented. It provides an assessment of the current situation of the environment in the country, but offers only a list of objectives and activities that should be pursued by the government without providing a proper strategy, integrated with other national strategies. It does not include any discussion on the use of mineral resources and forests.
Mozambique has signed on to the EITI since May 2009. Since then the country has produced two reconciliation reports. It is still struggling to become an implementing country.
As for short-term policies, the Economic and Social Plan (PES) provides the context for yearly government activities in various areas, including natural resources. The PES for 2010 is one of the few government strategic documents that does have a specific heading for extractive industries, but it restricts the sector to minerals (excluding forests and other extractive areas). On forests and wildlife, government actions are limited to a few activities, such as finalising the analysis of twenty applications for logging concessions.
Mozambique’s constitution sets the general framework for the country’s laws, regulations, policies and strategies. The current constitution, which was approved in 2004 (replacing the 1990 Constitution) includes the right to the environment among people’s fundamental rights, stressing that (art. 90): 1. ‘Every citizen has the right to live in a balanced environment and the duty to defend it, and 2. The state and local authorities, with the assistance of civil society organisations working on environment issues, adopt policies to defend the environment and foster the rational use of natural resources.’ Specifically, the constitution advances that the state, to guarantee an environmental balance and the preservation and conservation of the environment, should implement policies that seek to (art. 117): ‘a) prevent and control pollution and erosion; b) integrate environment goals into sector-wide policies; c) promote the integration of environment values into policies and educational policies; d) guarantee the rational use of natural resources, safeguarding their capacity to renewal, ecological stability and the rights of future generations; e) promote the right organisation of the territory in order to obtain the correct placement of activities and a balanced socio-economic development’.
Prior to the enactment of the current constitution, environmental laws were in place, which are still valid insofar as they do not contradict the constitution. In October 1997, Law no. 20/97, the Law on the Environment, was enacted, whose main objective was to establish the legal basis for the right use and management of the environment, guaranteeing the consolidation of a sustainable development process. Law no. 20/97 provides the principles and guidelines for the state and private actors for every action that involves the environment. It says that environmental management should aim at improving citizens’ life,that it should be cautious and avoid negative irreversible environmental damage, and that citizens should participate actively in environmental affairs. After Law no. 20/97 was enacted, its main topics were regulated by scattered legislation.
Law no. 10/99, of 7 July, the Law on Forests and Wildlife, established the principles and basic rules on the protection, conservation and sustainable use of forests and wildlife resources. Among the principles laid out by the law, it stresses the importance of a complex balance that combines social and economic development and the preservation and conservation of biodiversity with the involvement of local communities, the private sector and civil society, in a joint effort to reach the path towards sustainable development (art. 3). It also refers to the importance of the state in promoting the establishment of industries to process forestry and wildlife products, and increase the export of manufactured goods. Importantly, it establishes the different regimes through which forests can be exploited. Accordingly, there are two different regimes of forest exploitation: a) based on simple logging licences; and b) based on forest concession contracts. In the simple licensing regime, there are limits to the quantities and the period of licensing, and only Mozambicans and local communities can be given this license, whereas in the use based on concession contracts, individuals and private companies can use the forest with no specific limits to the size of the concession. Put differently, although Mozambique instituted a system of “simple license” forest concessions that restrict Mozambican loggers to a limited amount of timber, this system is being abused."
Law no. 10/99 was regulated by Decree no. 12/2002, which spells out how forest and wildlife management and exploitation will be carried out in practice. The decree establishes that simple logging licences are given for one year, and that the application should be analysed by the provincial governor and issued by the Provincial Service of Forests and Wildlife. Applications for concessions are subjected to a much more detailed and thorough process, since they involve larger areas and can be granted to foreigners. The areas that can be made available to concession holders vary from 20 000 (granted by the provincial governor) to 100 000 hectares (granted by the Ministry of Agriculture) or more (granted by the Council of Ministers). Concession grantees are obliged to manage their natural resources in a sustainable fashion, and to establish an industrial unit to process their wood.
At the international level, there are few binding legal instruments with regards to the environment, but there are conventions and declarations that provide guidelines to national policies. Mozambique often takes part in international summits to discuss these issues, and has showed its commitment to translate international agreements into national law. The 1992 Rio Earth Summit produced Agenda 21, the Rio Declaration on Environment and Development. Some years later, Mozambique’s government, in the preamble to the Policy and Strategy on the Development of Forests and Wildlife, said it included the objectives and priorities established in chapter 11 of Agenda 21 (Combating deforestation) and also other recommendations from the document. Regionally, Mozambique acceded to some binding instruments, such as the African Convention on the Conservation of Nature and Natural Resources in 1981, and the SADC Protocol on the Mining Sector in 1998. In 2002, the government also ratified the SADC Protocol on the Conservation of Wildlife, and the Application of the Law in SADC.
As a result of changes in the laws governing the timber industry, by 2008 32 concessions had been approved covering 1,2 million hectares, and another 16 concessions (covering 611 545 hectares were in the approval process. Mozambicans are the largest group of concession owners: nine operators controlled 11 concessions; seven were in joint ventures with Asians; and eight Asians had exclusive control. In particular, Singaporean-Chinese Cheng Kee Meng has interests in 10 concessions covering 258 000 hectares. Of those awaiting approval, two were community concessions; one a Mozambican national; three local Zambezian industrial operations; two long-established simple license operators; one Malawian; two Libyans; and five Chinese. While the Chinese market has been the destiny for Mozambican timber, the players involved in the industry are far from exclusively Chinese.
As Chinese officials point out, South Africa’s highly developed legal system sets it apart from other African countries. Given its unique features, Beijing’s interaction is more structured, broader and more complex than its interaction with other African countries.
The Department of Mineral Resources (DMR) is mandated to formulate and implement an overall minerals and energy policy to ensure the optimum use of minerals and energy. Within the DMR, the Minerals Policy and Promotion Branch is responsible for formulating and promoting a policy which will encourage investment in the mining and minerals industry, with a view to expanding this sector of the economy and promoting development. The Mine Health and Safety Inspectorate (MHSI) is responsible for implementing mine health and safety legislation, while the Mineral Regulation Branch (MRB) focuses on transformation in the mining industry and promoting sustainable development. The overarching policy of the DMR is based on the principles of the Freedom Charter, according to which South Africa’s mineral wealth will be transferred to the ownership of the people as a whole. The Minerals and Petroleum Resources Development Act (MPRDA), 2002 (No. 28 of 2002) provides the legal framework for exploitation of the country’s minerals. The government’s long-term objective is for all mineral rights to be vested in the state, but generally the state’s role has been to provide an appropriate legal framework as well as the necessary infrastructure to facilitate efficient raw material exploitation.
In May 2004, the Broad-based Socio-economic Empowerment Charter for the South African Mining Industry was promulgated, and a scorecard devised to facilitate application of the charter. The charter has led to numerous black economic empowerment deals with back-owned companies. It stipulates that by 2014, historically disadvantaged individuals should control 26 percent of the mining industry. The DMR reports good progress on Black Economic Empowerment (BEE) in the mining sector, with 21 junior mining companies being established by 2008. A number of new black-owned mining companies have become important players in the industry.
The National Environment Management Act (NEMA) identifies the Minister of Mineral Resources as the responsible authority to ensure compliance with national environmental standards. A single and comprehensive environmental protection plan for all mining operations is being implemented across the country. Regular inspections are made to ensure compliance. As a consequence of significant environmental damage caused by mining, the DMR has contracted the Council for Scientific and Industrial Research (CSIR), the Council for Geo-Science (CGS) and Mintek to develop solutions to rehabilitate closed mines and protect the environment. This process resulted in the Sustainable Development Through Mining Programme to address a closed mines database, regional mine closure strategies, a sustainable development strategy for minerals and mining and mine environmental management guidelines. The DMR is promoting a gender empowerment programme in the mining industry, and has strengthened the South African Women in Mining Association (Sawima).
The Mine Health and Safety Council (MHSC) is responsible for protecting the health and safety of mineworkers. It focuses on building a healthier and safer mining environment by working with industry management and unions to reduce mine accidents. The agreed objective of this interaction is to decrease mine fatalities by at least 20 percent a year. Another objective is to eliminate silicosis and noise-induced hearing loss (or occupational deafness). A central activity is to reduce the social costs of disease and injury to mineworkers and their communities. In recent years, the DMR has begun working with the SA Police Service (SAPS) to develop a comprehensive strategy to deal with illegal mining, now one of the biggest threats to mineworkers’ health and safety in South Africa.
Section 86 of the Health and Safety Amendment Act imposes criminal liability on mine managers where there has been negligence, but has been suspended until concerns about constitutionality are resolved. A key issue of debate in the mining industry is the accelerated effort to improve health and safety. Companies are legally obliged to fulfil certain requirements, but at the same time, many have developed new and innovative health and safety programmes. New requirements for handling and using mine explosives are being introduced to bring South Africa in line with international best practice.
The Mining Qualifications Authority (MQA), under the authority of the Department of Labour is responsible for facilitating the development of appropriate knowledge and skills in the mining, minerals and jewellery sectors. The MQA is specifically focussing on addressing skills shortages and promoting transformation in the mining industry. Training targets are set by the National Skills Development Strategy, informed by BEE, which demands that of all people trained, 85 percent should be black, 54 percent women and 4 percent people with disabilities. The MQA’s Mining Charter Support Strategy is based on an Executive Preparation Programme, the Graduate Development Programme, bursary schemes, the Universities Employment Equity Project, and direct educational support for small-scale miners. Grants for small mines, mineral beneficiation, jewellery manufacturing and diamond processing are also provided. Human resource development guidelines drafted by the MQA call for improved opportunities for historically disadvantaged South Africans in the industry, with 40 percent of blacks and 10 percent women required to occupy management positions by 2010.
The DMR promotes the establishment and development of small-scale mining through the Small-Scale Mining Board (SSMB) and the National Small-Scale Mining Development Framework. According to the DMR, approximately 3000 new jobs can be created for every 15 small-scale mining projects. The SSMB helps aspiring small-scale miners in identifying mineral deposits, concluding environmental impact assessments (EIAs), legal and contractual arrangements, mining-feasibility studies, market research, and sourcing mining equipment. The focus of activities is on developing viable mining projects and assessing the feasibility of new projects. The South African Small-Scale Mining Chamber was established in 2005 to represent the interests of small mining operators. With a view to job creation, the DMR has supported 18 small-scale mines, with a number of new projects under consideration.
In response to the challenges faced by the industry, the government has established the Mining Industry Growth, Development and Employment Task Team (Migdett), intended to improve its competitiveness and growth. The specific objectives are to save jobs in the face of falling global demand for raw materials, and to position the industry for growth and transformation. The task team is investigating all aspects of the mining industry in South Africa, with a view to positioning it to take advantage of the expected demand increase within twelve to eighteen months.
The current mining policy was adopted in 1995, and with it came a major shift in the mining sector, as the new policy encouraged foreign investment in exploration and new large-scale developments. It further encouraged private investment in medium- and small-scale mining. Until April 2008, the mining sector was regulated by the Mines and Minerals Act of 1995 and amendments. The Act had abolished mandatory state participation, simplified licensing procedures, and minimised constraints on prospecting and mining activities, creating a favourable inward investment environment. The 1995 Act permitted the government to enter into long-term development agreements with companies, and established the terms under which the mines were sold and the rights and responsibilities of the Zambian State and the new mining companies. The agreements, under which the government could extend more incentives than the Act granted, provided preferential tax treatment for the companies with a view to promoting investment in the sector when copper prices were low.
Mining administration is the jurisdiction of the Ministry of Mines and Minerals Development (MMMD), which consists of a Geological Survey Department (GSD), Mines Development Department (MDD), Mines Safety Department (MSD) and Human Resource Department (HRA). MDD and MSD have key responsibilities, especially as they relate to licensing and inspecting mining operations to ensure that they are in line with appropriate legislation and regulations. For instance, the MSD has the responsibility to ensure safety in all mining operations. It is the body mandated with monitoring and enforcing compliance with the Mines and Minerals Environmental Regulations.
A framework for responsible development has also been created through the publication of environmental protection and pollution-control regulations. Environmental concerns are addressed by Statutory Instrument No. 28 (1997), and environmental impact assessment regulations enacted under the Environmental Protection and Pollution Act of 1990. For a mining project, a developer is expected to follow the guidelines of Statutory Instrument No. 29 (1997), also called the Mines and Minerals (Environmental) Regulations of 1997, enacted under the repealed Mines and Minerals Act of 1995. The regulation of environmental impacts of the mining sector also involves other sectors, each with its own regulatory instruments: water affairs, tourism, transport, radiation protection, health, energy, national heritage conservation, local government, and land. These bodies are responsible for sectoral regulations and constitute delegated authorising agencies (DAAs) under the EPPCA. ECZ defers to these agencies on specific technical issues, but retains the role of overall coordination of their contributions. For example, it is the DAA for issues arising from mining licenses. Close coordination between ECZ and all DAAs on mining activities is crucial given their complex cross-sectoral environmental impacts.
Zambia’s national planning framework (the Fifth National Development Plan or FNDP) states that the strategic focus for the mining sector will be to promote large- and small-scale mining by strengthening the institutional framework support and improving the policy and regulatory framework. The FNDP cites, among other things, weak institutional framework and outdated policies and legal frameworks as constraining factors to the growth of the mining sector.
The recognition of the need to improve the management of the extractive industries in Zambia, as in other resource-rich African countries, presents opportunities for the legislature to provide oversight that would promote greater transparency, accountability and responsiveness in government. Zambia joined the EITI in 2009, and has established a multi-stakeholder group to oversee its implementation. As in the case of Mozambique, it has been able to produce two reports. It is not yet an implementing country. Initiatives such as EITI and the Publish What You Pay (PWYP) campaign have drawn attention to the need for increased transparency and accountability in managing extractive industries.
A new tax regime was introduced in April 2008. In recognition of high copper prices and the generally more favourable investment climate, it was revised to be more consistent with international standards. The major change was the increased rate of corporate income tax for companies in the mining sector from 25 percent to 30 percent, and the rate of mineral royalties for companies in base metals mining from 0,6 percent to 3 percent of the gross sales value. Mineral royalty rates for other precious metals increased from 2 percent to 3 percent. Later, the government re-introduced withholding tax on payment of dividends, interest, royalties, management fees and payments to affiliates at the standard rate of 15 percent. It also introduced a variable profit tax for when the profit ratio is above 8 percent, and a graduated windfall tax (levied on production value) for when world copper prices exceed US$2,50 a pound. Capital allowances (depreciation of capital equipment), were reduced to 25 percent from 100 percent per year. A reference price was introduced to assess mineral royalties and any transaction for the sale of base metals, gemstones or precious metals to related or associated parties. (The reference price was to be the price tenable at the London Metal Exchange or any other commodity exchange recognised by the Commissioner General.)
The major mining companies and the Chamber of Mines of Zambia rejected the new regime, some arguing that the development agreements were still binding and that the tax changes were too harsh and would trigger recession, unemployment and poverty. In early 2009, the government announced a reversal of its policy. More specifically, following consultations with the mining industry, and in light of the impact of the global crisis on mining, the tax regime was changed to remove the windfall tax but retain the variable profit tax to capture any windfall gains that might arise; to allow hedging income to be part of mining income for tax purposes (this had been removed in 2008); and to reinstate the 100 percent capital allowance as an investment incentive.
General mining policy seeks to sustain development of the country's mineral resources and create employment opportunities. Government is working on statutory instruments to change its policy on state participation in all mining ventures. The policy would provide for government to hold at least 51 percent interest in all ventures, and a 100 percent stake in all alluvial diamond mining projects. Mining houses would be required to set aside 10 percent of their annual gross profit for investment in local communities. There are also facilities geared towards the development of small-scale miners.
Discussion of Zimbabwe’s mining policies must be situated in the broader policy framework. The first step when investing in any sector is to obtain approval, which is granted by the Zimbabwe Investment Authority (ZIA). Currently the project should meet four basic criteria: a minimum capital threshold, generating employment for the locals, a strong value addition component, and compliance with the 51 percent local ownership requirement. Some sectors have been reserved for 100 percent indigenous ownership, although foreign (including Chinese) investors still dominate in these sectors. To synchronise the basic criteria and reduce approval time from 72 days to 5 days, ZIA was transformed into a One Stop Investment Centre in 2010.
The Mines and Minerals Act provides the legal framework for investment in the mining sector and is administered by the Ministry of Mines through the Mining Administration Board. It was enacted in 1961 and several amendments have been made since then. According to this Act all minerals are vested in the president, and one acquires rights to work mineral deposits through an application to the Mining Commissioner. Mining activity is open to local and foreign individuals and companies.
An exclusive prospecting order (EPO) confers the exclusive right to prospect for specified minerals in any defined area in Zimbabwe. It is obtained through an application made to the Mining Affairs Board (MAB), and on payment of a deposit fee per hectare (or part of a hectare) per month. Areas cannot normally exceed:
- 130 000ha for coal, mineral oils or natural gas
- 2600ha for precious stones other than diamonds and
- 65 000ha for any other mineral.
Government is amending the Act to reduce the size of the areas for the different minerals. The proposed maximum for coal should not exceed 20 000ha and maximum area sizes for other minerals will also be substantially reduced, but mining houses’ representatives feel that these reforms are very limiting. The maximum possible period for operating an EPO is six years (initially for three years, with a possible extension for a further three). License holders must submit work programmes to be carried out in the next six to 12 months, and report on work done in the past six to 12 months.
To prospect, an investor must have a prospecting license. These are valid for two years, while an approved prospector's license is valid for five years and can be renewed. Holders are entitled to peg and register claims. The claim then becomes a registered mining location where mining activity can take place. Mining claims which are worked continuously do not have expiry dates. The permit to mine is called a mining claim. It confers on the holder the exclusive right to mine the mineral resource for which the claim was registered, and of prospecting for other minerals on the claim. It must be inspected annually for a fee. The holder is required to fulfil minimum conditions. These are a commitment to a development work programme, or production, or capital expenditure. The situation on the ground is that government has had to work with the small claims available, as large claims are being held speculatively (and this applies to all minerals). Most (65 percent of known gold and chrome claims) are owned by small-scale miners who do not have capital or equipment to develop and work the claims. They also lack the resources to carry out exploration work. To unlock value, government is proposing a ‘use it or lose it’ policy.
The Minerals Marketing Company of Zimbabwe (MMCZ) was formed in 1992, and is responsible for marketing all the country's minerals and metal products except gold and silver (which were sold through the Reserve Bank of Zimbabwe before the reforms introduced in 2009). MMCZ finances its operations by a commission charge of 0,875 percent on sales for its clients.
As noted above, the Indigenisation and Economic Empowerment Act provides that 51 percent of old and new investment, mergers etc for enterprises with a net asset value of US$500 000 should be owned by indigenous Zimbabweans. Current investors must dispose of 51 percent at a negotiated price, either to government (through ZMDC, the Statutory sovereign Wealth Fund) or Employee Share Ownership Scheme and Community and Community Share ownership Scheme or Trust).
Zimbabwe's second Five Year Development Plan (1991-95) provides that environmental impact assessments (EIAs) should be undertaken for major development projects. The advent of the Environmental Management Act brought environmental issues into sharper focus. This Act prevails over any other Act on environmental issues. After the issuing of a mining license by the ministry of mines an EIA must be conducted and reviewed by the Environmental Management Agency (EMA) and the Ministry of Mines and Mining Development before mining operations can commence.
The Labour Relations Act (No. 16) of 1985 (now known as the Labour Act) provides for the fundamental rights of employees (including the establishment of workers’ committees at the shop-floor), defines unfair labour practices, regulates conditions of employment, and outlines a dispute resolution mechanism.
Government has put forward proposals for amending the Minerals Act. Its rationale for introducing legislative changes (e.g. the ‘use it or lose it’ principle, punitive fees, increasing royalties, and reducing the maximum allowable prospecting area. ) is to encourage the efficient utilisation of land under mining title, bringing the contribution of the mining sector to fiscus at par with other sectors. These changes were implemented in 2011 attracting sharp criticism from the chamber of mines and other stakeholders.
About the author(s)
Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.