Tuesday, 24 May 2011

The Challenges of Extractive Industry Transparency Initiative in Zambia

By: Alcino Moiana
On the 10th of May I had a privilege to attend to a meeting, organized by the Zambia Extractive Industries Transparency Initiative, which aimed to disseminate the EITI process and the Independent Reconciliation Report on mining payments and government receipts from the extractive industries. The report covers the year 2008, and was carried out by a very prestigious and international auditing company PricewaterhouseCoopers. The report was official launched on the 22nd February at Mulungushi conference Centre in Lusaka.
To remind that, this report is a product outcome of the EITI international’s requirements for the countries applying for membership. Zambia application to become an EITI member started early 2007, when the government of Zambia requested the World Bank, to conduct a scope study on EITI. The study made clear that Zambia needed to implement EITI in order to clear the existing perception about the Mining Sector in the country, and for EITI to contribute to Economic Development in Zambia but also as a mean to create conditions for the disclosure of what the mining companies are paying to the government agencies, but in the other hand what they have received as revenue from the mining companies.
15 May, 2009 Zambia submitted an application to EITI international to join it, as a candidate country. This process was preceded by a workshop held in July 2009 to launch the Zambia EITI and therefore, the country was required to complete the validation process by 14 May, 2011 and the probable scenario is in favour to graduate from Candidate to Compliant country taking into consideration the phases that have been undertaken by the Zambia EITI Council.
However, though the Reconciliation report has not been regarded as auditing one, however, regardless to that fact, it has shown some very good discrepancies in the information given by both side the mining companies and by the government, because the mining companies have reported excessive amounts against the one reported by the government. For instance, the report says that ZMK 247 billion which is approximately US $ 65 million is the figure of discrepancies of unresolved
1
Mozambican Social Activist based in Zambia, FK fellow with the Norwegian Church Aid and seconded to the Council of Churches in Zambia. Email: alcinomoyana@gmail.com, Mobile +260 973239356
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amount, though the first finding was showing an amount of ZMK 421 billion, approximately US$ 112 million which through combination of discrepancies resolved had fallen to the amount of ZMK 174 billion, approximately US$ 46 million. The discrepancies mostly resulted on, (i) inclusion of payment which were not applicable, (ii) timing of payment, (iii) reporting of non-cash payments, (iv) payment reported in incorrect payment stream, (v) exchange rate differences, (vi) Non-responded Extractive company and (vii) payments made to ZCCM – IH2.
Even though the reconciler stated that the remaining unresolved discrepancies may not be necessarily missing payments from the Extractive companies. However, there is a need to conduct a deep investigation to find out, the reasons behind the found discrepancies within the information reported by the 14 large scale mining companies and 2 gemstones companies and the one reported by the government agencies. The outcome of the investigation will surely give more reliance to the work of Zambia EITI, but in the other hand, will build a trust between the citizens and the government in regarding to what Zambia gains out of its natural resources.
The discrepancies, however, create a certain suspicion on the process and can therefore contribute for misinterpretation of the whole information on the payments and receipts. However, to my own opinion, I think the government of Zambia, through its agencies need to be more careful when deal with cash payment issues, because an failure to supply accurate information can put down the efforts that have been made for transparency and accountability in dealing with the public issues.
Apart from the reconciliation report, there is a need to reformulate the mandate of the Civil Society organizations that are represented in the Z-EITI council, since there is a feeling that though the process was transparent, it was not fair enough, since the CSOs that are part of the three part stakeholders of the ZEITI council, do not carry any legitimate mandate of Zambian CSOs, but also there were not appointed by the whole structure of CSOs working under EI, the reason why there is no a CSOs platform of consultation to deliberate on the issues to be taken to the table of the ZEITI council meetings and from there get a due feedback of outcomes. However, with the existence of Zambia Coalition of PWYP, there is a need to find way on how to make use of this important and recognised structure to channel the information to and from.
Importantly, there is a need of a ZEITI legal framework, bound by a due legislation from the parliament, to enable the broader monitoring of what ZEITI is doing and assess the results of its activities, in a legal point of view which can encompass all the stakeholders and interested citizens.
2 Zambia Consolidates Copper Mines – Investment Holdings plc.
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Also there is a need from the government to be more transparent not only when deal with public funds but also when deals with the mining contracts, by making the process transparent, public and well advertised, because by so doing will enable the stakeholders and general public to understand the whole process that binds the contracts, but also to monitor with informed mind the agreements of payments made by the mining companies and the revenues received by the government. It will also open a space to monitor the activities in terms of the CRS of the mining companies at large.
Zambia needs somehow to renegotiate or review the contracts with the mining companies in order to recover the huge amount of money is losing every year, in the name of fiscal incentives. The incentives are welcome because they attract the foreign investors but due the current status of the price of copper in the international market, the contract are far outdated and need to be reviewed. The country can’t open up to the extreme, whereby it loses in the game and therefore the gains can’t contribute effectively for macroeconomic stability which will lead to poverty reduction. To my understanding, the issue of incentives is to enhance the win-win process and not opposite of the actual scenario, where the country is in the losing position. There is a good example coming from Mozambique, where the government have announced in the house of parliament over the last two weeks, the renegotiation of the contract with the mega- projects such as MOZAL, SASOL, etc. This is an outcome of the CSOs advocacy to see any change and find the best ways to maximize the gains from the natural resources in the country.
Given the position that Zambia holds in the world human development ranking, still faces big problems of poverty and by signing contracts with foreigner investors, the main goal is to boost the economic growth and reduce the poverty. Then if the whole process only benefit the foreign companies and leave Zambia with little what is the reason of having Foreign Direct Investments in the country? Therefore, it is time for Zambia to think critically on the Mining companies activities and the gains that get out of it, and catch up the time before it is too late, because Zambia in not for sale and can’t be looted in the eyes of the people.

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