HARARE– Progress within the highly ‘lucrative but shaky’ extractive sector is hampered by weak oversight institutions notwithstanding mining being a driver of economic growth, an official in the ministry of Finance has said.
This was said by the permanent secretary in the Ministry of Finance and Economic Development, Dr Desire Sibanda at an inaugural Mineral Resource Governance summer school organised by Zimbabwe Environmental Law Association (ZELA).
Dr Sibanda made these remarks in candid reflection of a plethora of challenges bedeviling the mining sector which has proportionally seen its contribution to economic development shrink in the past years.
He said without this oversight role, mining was an avenue used by multinational corporations to siphon natural resources from African states, Zimbabwe not the least spared, through illicit outflow of funds caused by several factors.
Dr Sibanda said companies operating in African nations are given too many incentives and tax subsidies due to desperation of countries with lowly ratings on the perception of ease of doing business.
He said secretive mining contracts, lack of capacity to enforce tax compliance and evasion as well as lack of transparency were the immediate causes of leakages.
“Legislative oversight institutions are very weak and this phenomenon is common in Africa.
“First companies operating in Africa are given too many incentives and tax subsidies. This is because we invite the Chinese and the Russians. Many multinationals are flocking to Africa because the returns are very high.
“Sadly there is a high degree of tax avoidance by mining companies. There are too many secret mining contracts in Africa and countries have failed to benefit because of that.
“Lack of institutional capacity to enforce compliance as tax authorities are ill equipped to tax huge multinational companies who boast of international accountants and tax accountants,” he said.
Dr Sibanda said because of this nature of corporate governance, where mining has contributed to economic growth it has flourished in an enclave manner disadvantaging host communities.
He said mining companies have left the “citizens in the mineral rich African countries to live in poverty and companies are not contributing much in promoting rural development in these areas.”
Dr Sibanda also said to plug these leakages government should adopt robust and transparent monitoring and accounting procedures to get full value of Zimbabwe’s vast mineral endowment.
ZELA executive director Mutuso Dhliwayo also said there was need to spruce up the current legislative regime in order to turn this comparative advantage.
He said there was need for serious reflection the Mines and Mineral Act which was adopted and amended from the colonial era, without which economic development was a pipe dream.
He said the law was silent on how other stakeholders fit in the mining value chain, relegating to the terraces essential stakeholders in the development matrix.
“We need to seriously consider a lot of things in order to turn our comparative advantage into a competitive advantage and come up with solutions to challenges holding back the extractive sector.
“While some have called for the amendment of the Mines and Mineral Act we feel there is a need to repeal the act so that it represents the cross sector needs for sustainable economic development.
“Legislation should give the framework to mining that should allow for linkages so that it doesn’t become an enclave,” he said.
ZELA’s inaugural summer school in Mineral Resource Governance drew together civil society, government, traditional leadership, business and media to critique the traditional models of resource based development. It is earmarked to strengthen the capacities of stakeholders in natural resource management in providing support structures for mining to effectively contribute to economic development.