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Email: scanlen@mweb.co.zwFax: +263-4-702569, 700826 Landline: 702561-8 / 799636-42
Website: www.scanlenandholderness.com
SEPTEMBER 2013
THE FUTURE OF MINING LAW IN
ZIMBABWE
BY STERNFORD MOYO
HIGH
LEVEL
OVERVIEW
OF
ZIMBABWE’S MINING LEGISLATION
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1. LEGISLATION
The basic legislation regulating mining
activities in Zimbabwe is the Mines and
Minerals
Act,
[Chapter
21:05]
and
Regulations made thereunder. It is a
1961 piece of legislation which has
suffered minor amendments over the
years.
2. ADMINISTRATION
The administration of that legislation is
the responsibility of the Minister of
Mines who generally acts through Mining
Commissioners for the various districts
and in respect of major decisions acts on
the advice of the Mining Affairs Board.
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3. GRANTS AND CONCESSIONS
He also makes recommendations to the
President for issue of concessions or
Mining Grants which are generally issued
in respect of such activities as coal, gas
and oil.
4. DOMINION
Dominion in all minerals, vests in the
President. Miners acquire rights to mine
and such rights are protected by law.
Where rights are lost in terms of the
law, the President’s residual ownership
is
restored
unfettered
by
any
encumbrance arising from the granting
of the rights.
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5. PROSPECTING
The
usual
starting
point
in
the
acquisition of mining rights is obtaining
a prospecting licence which entitles the
holder to prospect, peg and register
claims in terms of the Act. A registered
claim is a mining location where mining
activities can take place.
6. ORDINARY PROSPECTING
LICENCE
A prospecting licence can be issued as
an ordinary prospecting licence which is
valid
for
two
years.
The
prospectors’licence itself is valid for five
years. Both are renewable.
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7. EXCLUSIVE PROSPECTING
LICENCE
Additionally, it is competent to obtain an
exclusive
prospecting
order
which
confers exclusive rights to prospect for
specified
minerals
in
any
location within Zimbabwe.
identified
Exclusive
prospective orders are issued for a
maximum of six years, being three
years renewable for a period of three
years.
8. HOLDING OF MINING RIGHTS
Mining rights are held in various forms.
The simplest form is a mining claim
which is a permit to mine.
A single
claim will normally cover a very small
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area.
It is common to have several
contiguous claims grouped into a block
of mining claims. The pegging has to be
maintained and annual reports have to
be
submitted
to
the
Mining
Commissioner for the relevant district.
9. LEASE
For
ease
claims
of
administration,
forming
a
block
several
can
be
transformed into a mining lease through
an application made in terms of the Act.
A mining lease generally confers longer
term rights which are renewable in
terms of the Act.
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10. TRANSFERABILIY
Mining rights cannot be transferred or
alienated in any manner without the
approval of the Mining Commissioner.
In the case of Mining Grants or Mining
Leases, the approval of the President is
required. The application goes to the
Mining
Affairs
Board
which
make
recommendations to the Minister and
the Minister makes recommendations to
the President.
11. RIGHTS CONFERRED
Basically, a holder of Mining Rights is
entitled to the exclusive right of mining
any ore or deposit of any mineral which
occurs within the vertical limits of the
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area covered by his or her location. The
only exclusion will be coal, oil and gas
which
are
mined
in
terms
of
a
Presidential Grant.
12. TITLE NOT IMPEACHABLE
Their title is not impeachable.
The law
does not allow impeachment of title to
mining
claims
which
have
been
registered for a period of two years or
mining
claims
which
have
been
consolidated into a mining location.
13. CIRCUMSTANCES UNDER WHICH
RIGHTS MAY BE LOST
Under the law of Zimbabwe title and
enjoyment
of
mining
rights
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will
be
endangered
in
the
following
circumstances:
13.1 BREACH
OF
TERMS
AND
CONDITIONS
In the event of failure to comply
with the terms and conditions of
the mining location in a material
respect.
13.2 FAILURE
TO
OBTAIN
INSPECTION CERTIFICATES
In the event of their failure to
obtain
any inspection
certificate
within the prescribed period.
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13.3 FAILURE TO WORK
In the event of their failure to
adequately
work
the
mining
locations.
13.4 ACQUISITION
FOR
PUBLIC
PURPOSES
In the event of acquisition of
mining location by the President
on
the
grounds
that
such
acquisition is necessary for a
purpose beneficial to the public.
13.5 WASTEFUL MINING METHODS
In the event that if it is established
that the miners are using wasteful
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mining
methods
or
wasteful
metallurgical processes
13.6 FAILURE TO COMMENCE
If a miner fails, within a reasonable
period
after
operations,
commencing
to
declare
mining
output
in
terms of the law or render a false
return or false declaration regarding
output or violate any law.
13.7 CESSION WITHOUT APPROVAL
In
the
event
assignment
of
without
approval.
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cession
and
ministerial
13.8 FAILURE TO PAY DEBTS
In the event of a miner’s failure to
pay debts when they fall due if that
failure persist for a period of 90
days.
13.9 FAILURE TO PAY TAXES
In the event of a miner’s failure for
any
reason
whatsoever
to
make
payment on due date of any monies
including taxes or royalties owing to
the Government in terms of the
mining location agreement or any
law relating to it for a period of 30
days after notice shall have been
served on a miner by the Ministry of
Mines or the relevant government
agency.
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14. LAND
ACQUISITION
NOT
APPLICABLE
Application of land acquisition law is
specifically excluded.
15. THREATS
OF
LICENCE
CANCELLATION
UNDER
INDIGENISATION LEGISLATION
Although section 5 of the Indigenization
and
Economic
Empowerment
Act
Chapter 14:33 allows the Minister of
Youth
Development
Empowerment
and
Economic
Indigenization
to
issue a written order to the licensing
authority of a business ordering it to
decline to renew the license, registration
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or
other
authority
to
operate
the
business concerned or to terminate, not
later than six months from the date
when the Minister will have issued the
order, the license, registration or other
authority to operate, that provision is a
provision
to
ensure
enforcement
of
notification and approval requirements
as provided for in section 3(1) (b) (c)
(d) or (e) of that Act.
16. PROBLEMS
WHICH
MINING
LAWS OF THE REGION SHOULD
AIM TO ADDRESS OR PREVENT
16.1 Underperformance
of
the
Mining
Sector
16.2 Insufficient geological information and
exploration activity
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16.3 High risks emanating from:
16.3.1 The capital intensive nature of
mining;
16.3.2 Cataclysmic
changes
in
world
metal prices;
16.3.3 Variations in production levels;
16.3.4 High costs and taxation
16.3.5 The global character of mining
which demands international
competitiveness;
16.3.6 Unstable
legal
and
fiscal
frameworks
16.4 Insufficient
investment
Zimbabwe.
16.5 Corruption
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flows
into
16.6 Tax abuses and illicit financial flows
16.7 Excessive ministerial discretion
16.8 Lack
of
easy
transferability
and
marketability,
mortgeability
of
mining assets
16.9 Uncertainty over the role of the state
16.10 Imbalance between national and local
developmental
objectives
and
the
interests of investors
16.11 Lack of adequate infrastructure
16.12 Problems
of
control
over
artisanal
mining particularly with regards to:
16.12.1 Environmental risks;
16.12.2 Health risks;
16.12.3 Safety;
16.12.4 Accountability in respect of taxes
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17. GROWING RESOURCE
NATIONALISM DEMANDS
17.1 Granting to all nationals equitable
access to minerals and sustainable
development.
This
view
is
commonly supported by the theory
that
resources
are
a
common
heritage of all Zimbabweans. This is
just political rhetoric because any
Zimbabwean
prospecting
can
licence
obtain
and
a
register
claims. I see nothing other than
finance that limits access to mining
rights.
17.2 State custodianship of all natural
resources. Again, this is exciting
political rhetoric for the masses.
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Under
the
Act
Zimbabwean
dominion
minerals
vests
in
in
President in his capacity as Head of
State. The State holds same as a
Trustee
for
and
on
behalf
of
Zimbabweans.
17.3 Expansion
of
opportunities
for
historically disadvantaged groups.
This
is
already
Indigenization
covered
and
by
the
Economic
Empowerment Legislation. In fact, if
there is any problem, it is that, that
law expects investors to lose control
of their investments.
17.4 Creating a relationship between rate
of
depletion
and
fulfillment
of
national and local developmental
objectives. There is nothing to stop
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the
State
achieving
appropriate
provisions
this
in
by
mining
and development agreements.
17.5 State ownership of and exploitation
of strategic resources. There is a
clear conflict between the State’s
role as a regulator and creator and
enabling environment and the role
of the State as an operator.
18.
POSSIBLE
FUTURE
CHARACTERISTIC
ZIMBABWEAN
OF
MINING
LAW
The recent constitutional reform and
official statements from the Ministry of
Mines suggest that our future mining
law
will
have
the
characteristics:
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following
18.1 The
new
constitution
transparency,
demands
honesty,
cost
effectiveness and competitiveness
in
the
negotiation
performance
of,
inter
and
alia,
concessions of minerals and other
rights.
18.2 The
new
constitution
environmental
rights
enshrines
demanding
that every person be afforded a
right to an environment that is not
harmful to their health or well
being and to have the environment
protected for present and future
generations
through
reasonable
legislative and other measures.
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18.3 Policy
pronouncements
have
emphasized:
18.3.1 Equitable
access
by
all
Zimbabweans to the country’s
mineral resources;
18.3.2 Use of mineral resources to
achieve sustainable local and
national
growth
and
development;
18.3.3 The need for:
18.3.3.1 Local procurement;
18.3.3.2 Local beneficiation;
18.3.3.3 Technology transfer;
18.3.3.4 A relationship between
depletion and
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development of the
communities in which
depletion of mineral
resources takes place;
18.3.3.5 Increase
in
surface
rentals and royalties;
18.3.3.6 Limiting exploration to
areas that do not have
known resources;
18.3.3.7 Reserving
known
partially
resources
exploration
by
for
the
State;
18.3.3.8 Auctioning
all
known
resources;
18.3.3.9 Regulation of extraction
rates
in
respect
strategic minerals;
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of
18.3.3.10 Taxation
of
resource
rents namely, taxation
or
other
State
participation in profits in
excess of the estimated
rate of return.
18.3.4 Exploitation of resources by
indigenous Zimbabwean.
18.3.5 Elimination
of
resource
hoarding and facilitation of
small scale mining.
19.
COMMENT
ON
THESE
PRONOUNCEMENTS
It is right and proper that all these
issues should inform our future mining
law. A modern approach to extractive
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industries rightly demands that there
be a balance between the interest of
investors in extractive industries and
those of communities where extraction
and depletion take place. In particular,
modern thinking demands that there
be a relationship between the rate of
development
of
the
communities
where extraction takes place and the
rate
of
extraction
or
depletion
of
resources in such communities. To
ensure such a balance, the legislation
ought to contain a number of caveats.
The
legislation
macroeconomic
contemporary
imperatives.
must
realities
global
Its
respond
aim
to
of
investments
must
be
to
provide an enabling environment for
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mineral development and investment
by the private sector. Investment,
under
appropriate
development
mineral
agreements
will
inevitably general development and
other benefits.
20.
To succeed in creating an appropriate
balance the legislation must have the
following features:
20.1 RULES BASED LEGAL REGIME
It must create a rules based legal
regime
which
discretionary
curtails
latitude
of
the
the
government. A rules based regime
will
help
cronyism
to
and
reduce
the
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corruption,
burden
of
bureaucracy in the processing of
permits and granting and retention
of mineral rights. In particular, it
must:
20.1.1 INDEPENDENT STATUTORY
BODY
Ensure that the Minister acts
on
the
advice
independent
of
statutory
an
body
whose function shall be to
look
at
the
technical
and
economic benefits of project
proposals without any political
or partisan considerations;
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20.1.2 INTERNATIONAL
CONVENTION
ON
SETTLEMENT OF DISPUTES
It
must
ensure
that
all
settlement of disputes is done
in a manner consistent with
the International Convention
for
the
Settlement
of
Investment Disputes (ICSID);
20.1.3 STANDARD
MINING
DEVELOPMENT
AGREEMENT
It
must
provide,
as
an
appendix to the legislation for
a
standard
mining
development agreement and
enjoin both the investor and
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the
government
to
act
in
accordance with the mining
development agreement.
20.2 MARKETABLE,
TRANSFERABLE
AND MORTGABLE RIGHTS
It
must
marketable,
provide
for
easily
transferable
and
mortgageable mining rights. Such
a
regime
will
increase
the
attractiveness of the Zimbabwe
mining sector to investors and
enhance the ability of investors in
the mining sector to access both
local
and
international
finance.
Where the approval of the Minister
or
government
is
required
to
alienate mining rights, the use of
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the rights as security to raise
capital
becomes
substantially
reduced.
20.3 DEFINE AND CONFIRM ROLE
OF THE STATE
It should define and confine the
role of the State to that of a
regulator
and
creator
of
an
enabling environment for mining
investment. It should respect the
customary
distinction
operators
and
between
regulators.
Furthermore, to promote mining
development,
provide
the
geological
State
data
should
and
information. It should maintain a
laboratory, and have a library of
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information necessary to enable it
to assist potential investors into
the mining sector.
20.4 PROTECTION FROM
DISCLOSURE
It should ensure that information
contained in reports submitted by
holders
of
adequately
mining
rights
protected
is
from
disclosure without the consent of
the mining companies.
20.5 BALANCE
The
mining
development
agreement or model investment
contract
for
mining
ventures
should be strictly informed by the
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need to balance the interests of
investors
and
communities
those
where
of
the
extraction
takes place.
20.6 SECURITY OF TENURE
To ensure security of tenure, all
provisions in the Act threatening
the tenure of mining companies
which adhere to the provisions of
the
Act
and
development
the
agreement,
mining
should
be removed.
20.7 ENVIRONMENT
It should contain strict provisions
relating
to
protection
environment.
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of
the
20.8 SUSTAINABLE BENEFITS
It should provide for sovereign
fund or community development
fund
into
which
part
of
the
revenues obtained from mining are
invested
to
ensure
sustainable
benefits even after depletion.
20.9 CONTROL
It must ensure that investors do
not
lose
control
investments.
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of
their
20.10 CORRUPTION,
AND
TAX
ILLICIT
ABUSES
FINANCIAL
FLOWS
It
must
contain
elaborate
provisions to minimize corruption,
tax
abuses
and
illicit
financial
flows.
20.11 CONTROL OF THE ACTIVITIES
OF ARTISIANAL MINERS
It must have elaborate provisions
controlling
artisanal
the
miners
environmental,
safety
activities
hazards
to
health
and
of
eliminate
hazards,
lack
of
accountability in respect of taxes.
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21.
RESPOND TO MACROECONOMIC
REALITIES OF CONTEMPORARY
GLOBAL
INVESMENT
IMPERATIVES
Mining is in most cases a long term
investment
which
demands
huge
capital outlays with benefits to be
enjoyed many years after expenditure
of
money
in
exploration,
infrastructure
physical
mining.
surveys,
development
Any
legal
and
regime
which does not take this economic
reality into account, will not succeed in
helping us to reap the developmental
benefits of our resources. To achieve
the
developmental
benefits,
an
number of measures which promote
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both investment and the interest of
communities
in
which
investment
takes place are required.
22.
TO
THE
INVESTOR.
HOW
TO
PROTECT YOUR INVESTMENT
22.1
Ensure
that
your
development
provides
for
mining
agreement
an
equitable
balance between your interests
as an investor and the interests
of
Zimbabwe
and
the
communities where your mining
investments are located.
22.2
Ensure
that
your
mining
development agreement is
sufficiently comprehensive and
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that it provides for international
dispute resolution.
22.3
Ensure
that
the
constitutive
documents of your company,
particularly
the
Articles
Association,
will
afford
of
you
adequate protection from the
effect of loss of majority control
under
the
legislation
by
indigenization
managing
the
concept of majority rule within
the Articles of Association.
22.4
Understand
indigenization
that
law
the
applies
to
voting shares only and use the
mechanism
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of
share
classification
to
ensure
that
your returns are commencerate
with your investment.
22.5
Understand
that
the
indigenization legislation does
not provide for expropriation.
You are entitled to dispose of
the shares you should dispose
of at fair value.
22.6
Ensure that your indigenization
transaction
documents
are
negotiated and prepared by a
competent
corporate
investment
qualified
to
lawyer
practice
Zimbabwe.
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and
who
is
law
in
22.7
Understand that the law gives
you an entitlement to choose
your indigenous partners and
that there are only two reasons
why the Minister in entitled to
reject
your
indigenization
implementation
that
it
does
plan
not
indigenous
namely,
result
in
Zimbabweans
acquiring 51% and that it does
not
result
in
indigenous
Zimbabweans being equitably
represented on the board of
directors
of
the
entity.
END
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indigenized