Policy brief on Double Taxation Agreements: the case of Zimbabwe

Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each. Double Taxation Agreements were therefore instituted as an international tax instrument for avoiding double taxation of the same income or capital to the same taxpayer in the same period in two jurisdictions and promoting international tax compliance and information sharing. However, in recent years, there has been increasing global debate regarding the effectiveness of double taxation agreements.

This policy brief provides an overview of DTAs within the international taxation framework with a particular focus on those signed by Zimbabwe and partner countries. It therefore interrogates the implications of DTAs on social and economic rights of citizens of Zimbabwe in particular and developing countries in general as well as key recommendations for Zimbabwe.

How Zimbabweans persuaded diamond companies and government to listen

A diamond panner attempts to sell a diamond behind the backs of the military and police who demand all sales go through them. The Marange diamond fields in the east of Zimbabwe are under the direct control of the police and army, who use violence and intimidation to force local people to dig for diamonds on their behalf. The horrific conditions endured by the diggers appear to undermine the Kimberley Process, the international system meant to put a stop to the global trade in 'blood diamonds'.

Chiadzwa, Mutare West, Zimbabwe.Credit Robin Hammond / Panos

A diamond panner attempts to sell a diamond behind the backs of the military and police who demand all sales go through them.

Communities around the diamond fields of eastern Zimbabwe have bolstered their arguments for tax justice by putting data front and centre.

In the predawn hours of 18 July this year, some 200 people breached the fence of the Zimbabwe Consolidated Diamond Company (ZCDC) and descended upon the main diamond sorting room. They wielded wrenches and machetes “while singing threatening songs,” according to the state-run Herald newspaper. The security guards warned them to leave, then fired warning shots, then fired directly into the mob. By the time they dispersed, at least two people were injured and one man lay on the ground bleeding to death.

The Herald, a staunchly pro-government outlet, relied mainly upon a single source for its report, and other details are murky. But the shooting is consistent with years of violent confrontations involving illegal miners, private mine security and government forces in the resource-rich, impoverished eastern province of Manicaland.

In one 2008 massacre, a military helicopter swooped over the heads of hundreds of panners mining without permits, scattering them with machine gun fire as barking attack dogs hunted them. “There was a man next to me, he had been digging near me, and the bullet went right through his head,” one miner told The Guardian. “A dog ran for me but there was this woman, she was slower than me and it attacked her.” At least 214 people were killed in a series of such raids, Human Rights Watch reported.

Zimbabwean civil society urgently began monitoring and reporting human rights violations around the Marange diamond fields near the Mozambique border. Amid domestic and international pressure, violent conflict declined, but systemic problems persisted: environmental degradation, economic inequality and, at the root of it all, virtually zero accountability. (The Zimbabwean government, sceptical of international initiatives, has refused to sign up to standards like the Extractive Industries Transparency Initiative.)

Mukasiri Sibanda and his colleagues at the Zimbabwe Environmental Law Association (ZELA) — a member of PWYP Zimbabwe — realised broad, non-specific appeals to decency and good governance would not persuade corporations and politicians to change. But hard data might.

“The potential for a windfall revenue from diamond extraction did not commensurately reflect in the coffers of both national and local government,” Sibanda wrote recently on his blog, which has become a clearinghouse for information about minerals extraction transparency in Zimbabwe. “Opaqueness has been the main challenge,” he added.

That challenge garnered international headlines in February 2016, when President Robert Mugabe complained that diamond mining companies had failed to pay $15 billion in revenue taxes. “Lots of smuggling and swindling has taken place and the companies that have been mining, I want to say, robbed us of our wealth,” Mugabe said. As president, Mugabe presided over a financial system so murky that neither he nor his finance minister seemed to have any idea where the money had gone.

Advocacy backed by data

In November, Sibanda traveled to Jakarta to join the inaugural ranks of our “Data Extractors” — individual members trained in the technical art of identifying, obtaining and analysing financial information from governments and extractive companies. “I realised that it is important to empower communities with data literacy skills to enable them to drive the change process in the governance of mineral resources,” he said.

He brought this knowledge back to Manicaland Province, where PWYP Zimbabwe began working with existing community organisations, like schools and health centre committees, and instilled them with a powerful new mission. For all the diamonds in their soil, there was no reason their classrooms should lack books and their clinics lack medicines. Cyanide runoff shouldn’t pollute their rivers and kill their cattle. And with all the economic activity mines create, local residents shouldn’t be jobless or forced to illegally pan for diamonds, drawing the wrath of air force helicopters.

Credit: Zimbabwe Environmental Law Association (ZELA)

Credit: Zimbabwe Environmental Law Association (ZELA)
By backing residents’ concerns with data, Sibanda said, “we are simply trying to level the playing field.” Ill-informed, angry people are easy for companies and politicians to ignore; a united front of community leaders bearing spreadsheets are far more persuasive. The community organisations have bought into the idea, gathering in mining towns across Zimbabwe to learn about budgets, taxes and corporate social responsibility.

“Normally data is used by civil society and rarely by the communities themselves,” said Darlington Farai Muyambwa, who is the PWYP Zimbabwe’s national coordinator. “For Zimbabwe, this programme has been unique in how it managed to create interest for data at the grassroots level.”

One of those community groups is the Marange Development Trust, which lobbies public officials and companies on behalf of the residents of the diamond-producing region. “Data really helps us to do exactly what we are supposed to do on our own instead of relying on other organisations on our behalf,” said Malvern Mudiwa, the group’s chairman.
Recently, for instance, the Trust persuaded local authorities at the Mutare rural district council to share two years of financial reports. The documents were extremely vague: In a district where mining is the principal economic activity, there was no line item for revenue from mineral taxes. PWYP Zimbabwe and the Trust were forced to deduce mining company contributions themselves, revealing that the local government has “never received a cent of tax revenue from the mining companies,” Mudiwa said.

‘A huge inequality gap’

Mudiwa, a small business owner in Mutare, began rallying his local community in 2006, when diamonds were first discovered in the province. The government raced to issue permits to mining companies and cordoned off the diamond fields. But the companies failed to consult with residents on issues ranging from environmental protections to relocation compensation and employment, Mudiwa said. They also hired non-local employees and contractors based, apparently, on political criteria.

In other words, the diamonds of Manicaland weren’t enriching the residents of Manicaland. And in a country where unemployment may be as high as 95 percent, illicit mining presented one of the few sources of income for Zimbabweans in and around the region. But alongside the black market smuggling operations came drugs and crime, putting further strain on the communities.
“What we are trying to advocate for is to stop the illicit financial flows of illegal mining, and we also encourage mining companies to give employment preference to the local community because those are the people living with the effects of the mining,” Mudiwa said.

Using data, PWYP Zimbabwe has made inroads at the national level, earning ZELA a seat at the table during the upcoming national budget consultation in September. Their work, and that of other CSOs, has reached the attention of the cabinet, particularly after they pointed out that a particular export incentive was costing the government more than the income it derived from mineral royalties, a key source of national income. Finance Minister Patrick Chinamasa, who traveled to Europe last year seeking an IMF loan to cover civil servants’ salaries, “is keen to hear what we are saying,” Sibanda said. “And the ministry of mines is interested in driving investment to that sector.”

“For Zimbabwe, the greatest success is how we have made data issues relevant to communities in organising their own advocacy initiatives at the grassroots level,” Muyambwa said. “By demystifying data extraction, we’ve made it an issue beyond just NGOs but also the work of community-based organisations and community members.”
But incidents like July’s standoff at the ZCDC show how far the country still has to go.

“Mining is a huge economic activity, normally occurring in areas that are marginalised with low development,” Sibanda said. “It obviously creates a huge inequality gap which fosters illegal activities within the community. Mining companies can be proactive to make sure the benefits from mining are shared fairly with the community.”

Empowering the citizens of Zimbabwe to use data is just another way of empowering them to participate in the political life of the country. As Muyambwa put it, the government often listens to what communities have to say; after all, “they are their electorate.”

Community data literacy for demand driven change

The need for this pilot stemmed from the realisation that calls by CSOs and CBOs for improved transparency and accountability in the management of mineral wealth tends to generally overshadow the use of available data to demand accountability. There was also the realisation that publicly available data from local sources, such as local government budgets and financial statements, has so far not been used to its full extent to empower citizen participation in local public financial management systems. The data from the EU, UK and Canada mandatory disclosure of payments made to governments by Multinational Corporations (MNCs) in the extractives also needs to be used more thoroughly.

The communities involved were equipped with skills to assess local mining tax revenue so that they could use data to ask for LESD finance to come from mineral wealth extraction. The data that was used included local government budget statements, financial statements and mandatory disclosure of payments made to the government by AngloAmerican’s Unki Mine project in Zimbabwe.

This case study is part of Publish What You Pay’s Data Extractors programme, a global initiative which trains PWYP members and activists from across our network to use extractives data.

Towards a transparent and accountable mineral resources governance framework

PWYP Zimbabwe have published a compendium of research papers on key mining related matters in Zimbabwe.

Rampant corruption in the mineral sector threatens to erode the potential the sector has been contributing to economic recovery and drive socio-economic development in Zimbabwe. This compendium presents abridged versions of research papers from Publish What You Pay Zimbabwe coalition members in their effort towards contributing to a more transparent and accountable mining sector.

Transparency International Zimbabwe (TI-Z) argues that rampant corruption in the mining sector threatens to erode the potential the sector has to contribute to economic recovery. The Zimbabwe Coalition on Debt and Development (ZIMCODD) presents an analysis of the Auditor General’s reports from 2013 to 2015 to assess progress in the implementation of the Auditor General’s recommendations. The Institute for Sustainability Africa (Insaf) presents findings on the extent of compliance with stock exchange requirements on sustainability reporting by public listed mining companies operating in Zimbabwe. The Zimbabwe Environmental Law Association (ZELA) explores the opportunities and pitfalls of the 2016 Mines and Minerals Amendment Act. The compendium closes with an argument over the search for alternatives to mining by the Centre for Natural Resources Governance (CNRG).

Digging for the missing $15 billion of diamond revenue in Zimbabwe

When President Mugabe announced on his 92nd birthday, 21st February 2016, that $15 billion worth of revenues generated by the diamond industry had gone missing, the majority of Zimbabweans believed him. Zimbabwe is among the world’s ten largest producers of diamonds. It is also one of the world’s poorest countries, ranked 156 in the 2014 Human Development Index. Every year, it extracts 4,7 million carats of diamonds, enough to produce millions of engagement rings for enamoured couples around the world. But do people in Zimbabwe benefit from this natural wealth? The answer is a resounding no.

Zimbabwe is not an isolated anomaly. Revenues generated by mining around the world have gone missing for years, the results of a vast and complex web made of illicit financial flows, tax evasion and disrespect for the rule of law. The first to bear the brunt of corruption are citizens of resources-rich countries, especially local communities who often derive little benefit from mining yet suffer its environmental and social impacts. In Zimbabwe’s community of Marange in the Manicaland province, possibly home to one of the world’s richest diamond deposits, schools, clinics and paved roads are scarce.

I just came back from Harare, where I met with outstanding anti-corruption activists, who work to promote transparency and accountability in the diamond and gold mining sectors. Contrary to Western perception, there is a vibrant civil society sector in Zimbabwe promoting good governance as well as social, economic and environmental rights. They are hard at work to track these missing $15 billion. One of them, Darlington Farai Muyambwa, one of President Obama’s Young African Leaders Initiative (YALI) fellows, and Publish What You Pay’s national coordinator in Zimbabwe is working closely with colleagues at the renowned Zimbabwe Environmental Law Association (ZELA) to train activists in following the money from mining sites to the state’s coffer. It is no easy task. Last week, fifteen other activists from France, Indonesia, Mozambique, the Philippines, UK, US and Zambia came to lend a hand to Darlington. These “data extractors“ spent three days in Harare digging into and analysing financial data in publicly available reports that detail the payments made by mining companies to governments (such as royalties, taxes, fees, etc.). They are finding discrepancies between what companies report they are paying and what governments report they are receiving. The difference amounts to vast sums of money going missing and ending up in tax havens, robbing countries of much needed revenues for development and poverty alleviation (Panama Papers anyone?). Meanwhile, Zimbabwe, which adopted the US$ as its currency in 2009, is running out of cash. Most ATMs in Harare last week were empty.

The extractive sector (oil, gas, mining) is one of the industrial sectors most prone to corruption. It comes ahead of construction and transportation according to a recent OECD report on corruption. While many governments, companies and civil society organisations are increasingly coming together to increase transparency in the sector, with the Extractive Industries Transparency Initiative and the EU Directives on Accounting and Transparency as steps in the right direction, Zimbabwe has not kept pace with other governments in disclosing mining contracts and revenues. It showed interest in developing its own domestic version of the EITI the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) in 2011. But that initiative was abandoned shortly after. The government is party to the Kimberley process but there remains conflict between the position of government and that of civil society, creating a rift in opinions on how diamond mining affects communities in Zimbabwe.

The coming few months present a rare window of opportunity to make minerals exploration more transparent, accountable and sustainable: the Parliament is currently conducting a participatory revision of the 1961 Mines and Mineral Act, with a new draft bill under consideration. Civil society organisations have already noted that the new draft bill fails to ensure mining contract transparency, disaggregation of revenues by companies and gender equity and are asking for further amendments.

This is an interesting time in Zimbabwe. Besides the flurry of activities around this new draft bill, digital activism seems to have reached a peak in the past couple of weeks. #Thisflag hashtag is being used by hundreds of Zimbabweans to demand accountability by the government to citizens. The campaign has gone viral on social media, with people voicing their concern on issues ranging from the lack of social services to institutionalised corruption.

Citizens of Zimbabwe have the right to know the terms under which their natural resources are being exploited. They also have the right to benefit from their exploitation. More people are now demanding accountability from and asking questions to their government officials. Watch that space!

Follow Elisa Peter on Twitter: www.twitter.com/ElisaPeter

This blog was originally posted on the Huffington Post, find it by clicking here.

Zimbabwe Diamond (1)

The Panama Papers: Zimbabwe must not waste this opportunity

Zimbabwe, like many other mineral rich developing countries, isn’t seeing many benefits from the extraction of its mineral wealth. In fact, in 2015, Zimbabwe lost $500 million according to the Reserve Bank of Zimbabwe (RBZ). Moreover, Africa is losing as much as $50 billion per annum to illicit financial flows. These dramatic numbers show that there is wrong with the current system. But the recent Panama Papers have presented additional vital, albeit piecemeal, evidence that further expose how the flow of mineral revenue is skewed in favour of private interests. This rigged system hinders much needed investment for the improvement of the living standards of many citizens of Zimbabwe and of those of other poor but resource rich countries.

The fact that allegedly dirty dealings by Zimplats, one of the country’s largest mines, were exposed through the recent Panama leaks does not mean that other mining companies operating in Zimbabwe are in the clear. Rather, the Zimplats saga shows just how high the risk of tax evasion is in the entire mining sector, particularly when Multi-National Corporations (MNCs) are involved. It is important to point out that Zimplats has refuted the allegations by distancing itself from HR Consultancy, the firm behind the illegal payment of Zimplats’ senior employees.

Zimplats supposedly dodged payroll related taxes by using an offshore company to pay millions of dollars to its senior employees over a number of years. Payroll related taxes, commonly referred to as Pay As You Earn (PAYE), dominate the Individual tax head which is one of the lead revenue streams to the treasury as highlighted by the chart below.


A peek at the Zimbabwe Revenue Authority’s (ZIMRA) 2015 PAYE tax table below shows a progressive payroll scheme in which those that earn more are supposed to pay more. However, when income is shifted from the countries where resources are extracted to tax havens like Panama, progressive tax rules become essentially regressive. The poor end up shouldering an unfair share of the tax burden whilst the rich find ways to avoid paying their fair share.

Source : ZIMRA http://sp.zimra.co.zw/Tax%20Tables/2015%20tax%20tables.pdf

Source : ZIMRA http://sp.zimra.co.zw/Tax%20Tables/2015%20tax%20tables.pdf
In this case payroll related taxes were affected but beyond this other crucial tax heads, like corporate income tax, also perform poorly as a result of profit shifting practices, mainly tax evasion or tax avoidance. What’s noteworthy is that tax evasion is illegal whilst tax avoidance is legal. Tax avoidance often entails taking advantage of legal and institutional loopholes, which ultimately creates potholes in the development road of a country. Even though tax avoidance is legal, that does not make it morally right and good corporate citizenship still needs to be practiced.
Illicit Financial Flows (IFFs) are not limited to loss of tax revenue. IFFs also deflate export revenue which contribute to the liquidity crisis currently affecting Zimbabwe. With the mining sector accounting for over 50% of Zimbabwe’s total exports earnings, the impact of IFFs cannot be overemphasised.

Apart from tax evasion and tax avoidance, harmful tax incentives from secretive and weak mining agreements are undermining the mining sector’s contribution to the state coffers. The Zimplats payroll story as revealed by the Panama leaks comes at the backdrop of Zimbabwe’s negative 113.30% mineral royalty performance in 2015 in which Zimplats was also involved. From the initial national annual royalty target of approximately $146 million, there was instead a negative balance of $19.4 million.

If developed countries with reputably strong institutions are affected by tax evasion as shown by the Panama Papers, the impact on countries with weak institutions such as Zimbabwe is very concerning. The Panama Papers have partly perforated the veil of secrecy that camouflages global financial transactions through tax havens, consequently exacerbating income inequality. They strengthen the case for the international financial architecture to be reformed in order to yield greater transparency. This will arm resource-rich countries with data to plug leakages and allow them to track lost revenue.

The Panama Papers present an opportunity which Zimbabwe must not waste. Lost revenue must be tracked and recovered and the culprits must be accountable so that a heavy blow is dealt to IFFs. The Panama Papers leaks come as a stark reminder that Zimbabwe must not be left behind in critical mineral transparency reforms including beneficial ownership which is an important piece to the puzzle of solving corruption. It is sad to note that the country lacks institutionalised revenue transparency which could help boost the role of mineral wealth in development as intentioned by the country’s year economic blue print. That is, the Zimbabwe Agenda for Sustainable Socio Economic Transformation (Zim-Asset 2013-2018).

New breed of artisanal diamond data miners is born

The need for skills in gathering diamond data has always been a great necessity for poor, relocated and disinherited communities in Manicaland Province in Zimbabwe, a border province about 400 kilometres from the capital Harare. Manicaland is the country’s wealthiest province in term of diamond revenue. On Friday 26 February 30 community members who have been greatly affected by the emergence of the mining industry in their region, and being under the auspices of the Marange Community Development Trust (MDT) and the Arda Transau Relocation Development Trust (ATDRT), participated in a practical data extraction training workshop conducted in collaboration with the Zimbabwe Environmental Law Association (ZELA), a public interest law organisation that is affiliated to Publish What You Pay. The exercise was carried out in an internet café in Mutare, the Manicaland provincial capital. This exercise occurred despite the tension in the region as a result of an announcement by the Zimbabwe government that all diamond mining companies in the area, save for Marange Resources were to stop mining, a commendable but security-tense move towards nationalisation.

MDT and ATDRT are community trusts, registered by ZELA. The former operates in the diamond mining regions of Marange, advocating for the rights of the community in whose area diamonds are being extracted. The later represents those communities who were relocated from their original homes after diamonds extraction began in 2006-7 and they were moved to state-land managed by the Agricultural Rural Development Agency’s (ATRDT) at Transau. In addition to the participants from community development trusts, there were also members of school development committees, health centre committees and ward development committees from the same areas. There involvement was crucial since these committees are strategic for gaining data on the extent of extractive-industries contribution to service delivery for the communities impacted by mining.
The data-extraction workshop was carried out under the Transparency, Responsive, Accountable Citizen Engagement (TRACE) project. In the course of the workshop, each of the community members went through the process of accessing diamond related information on the internet. They went through the Kimberly Process website and sourced information on the years 2009-2012 from the Kimberly Process Annual Reports . The information centred on diamond production levels during these years, measured in carats as well as the production value based in United States dollars; information in US dollars was easier for the community members to grasp because the green back has been one of Zimbabwe’s official currencies since 2008.This data was extracted into excel tables by the community members through the guidance of ZELA staff and other community members. With the information, the communities then went through a comparative process, this time with data extracted from the Minerals Marketing Corporation of Zimbabwe (MMCZ) website .

The participants highlighted renewed awareness on the discrepancies that exist between information being provided by government agencies like MMCZ and the information with international monitoring bodies like the Kimberly process, for instance. In the analysis during the training it was found that there were great differences between the diamond export value on the KP website and the same item (export value) for the same years in the MMCZ annual report. The training and practical data -extraction exercise managed to arm the directly affected community members with the knowledge to embark on data-driven advocacy as well as being factual in their campaigns and activism. Furthermore, the training was an important and strategic event in light of recent developments in the Manicaland diamonds region, where moves towards nationalisation of the diamond mines being spearheaded by Zimbabwe’s Ministry of Mines and Mining Development.

The data extraction exercise will continue to be carried out. In social media this will be done through a social media hashtag #OpenDataZim as well as joint campaigns with other institutions, journalists and community based organisations. ZELA has already sought the collaborations of other Manicaland-based extractives organisations such as the Manicaland Small Sale Miners Association, the Centre for Natural Resource Governance (CNRG), Centre for Research and development (CRD) as well as the Natural Resources Dialogue Forum and Members of parliament from the area.

What I extracted from the PWYP data extraction workshop

In my quest to play a role in improved mineral revenue transparency in Zimbabwe, I applied to become a PWYP Data Extractor, a new project by Publish What You Pay’s (PWYP) International. To kick the programme off, I joined the first data extraction workshop in Jakarta, Indonesia in November 2015. It gave me an in-depth appreciation of the opportunities for digging for data beyond borders to enable citizens of resource rich countries to hold their governments to account. The workshop also equipped me with key skills to use various tools for data extraction, cleaning, wrangling and visualisation.

Opportunities were created to interact and learn from different country specific contexts. It was invaluable to learn how PWYP Indonesia uses drones for monitoring mining impact on environment and how PWYP Philippines uses infographics to share data in a simple, concise and understandable format. The development of simple messages by PWYP Niger, making statistics ridiculously simple and easy to understand, was also a key learning point. These examples are powerful tips on using extractives data for effective advocacy.

Below are some critical learning lessons from the PWYP organised data extraction workshop;

Extracting data beyond borders

It was quite helpful that the data extraction workshop shared key transparency and accounting regulatory developments on the international front meant for the extractive sector. The European Union (EU), United Kingdom (UK), Canada and United States of America (USA) have come up with raft of mandatory disclosure rules and measures. The mandatory disclosure rules offer some respite to citizens of resource rich countries starved of information to hold their governments accountable.

The Natural Resource Governance Institute (NRGI), PWYP UK and PWYP USA were on hand to share in depth knowledge on how such opportunities can be harnessed for improving data access on extractives. More so, the aforementioned organisations offered to partner with interested organisations on data extraction beyond borders. I had a brief discussion with PWYP UK on exploring prospects for extracting data relating to mining companies listed in the UK and operating in Zimbabwe.

As a test case, we explored Pickstone Peerless Gold mine which is owned by Vast Resources. Unfortunately, the company is listed in the Alternative Investment Market (AIM) which isn’t covered by the UK transparency and accounting directives. However, this presented an opportunity for PWYP Zimbabwe to partner with PWYP UK to push for the inclusion of AIM listed extractive companies under the UK accounting and transparency directive.

It was PWYP Canada that played a critical role in generating our initial interest in mining data. In 2012, they introduced us to the idea of extracting data on SEDAR related to Zimbabwe mine projects owned by companies listed in Canada such as Blanket Gold Mine which is owned by Caledonia.

Data Advocacy Tips

“Be careful how to handle an avalanche of data on extractives. Prioritisation becomes critical given the host of disclosures in the extractives”

This was one of my major learning points from the data extraction workshop. That is, the necessity of planning and prioritising data that can be analysed and tapped for effective transparency and accountability advocacy on mineral resource governance. I have been involved in various analysis of data for advocacy purposes, among others the audited financial statements from the Auditor General’s reports on Zimbabwe Mining Development Corporation (ZMDC), a state owned mining entity , Kimberly Process Certification Scheme (KPCS) public statistics on diamonds , voluntary disclosure by mining companies and national budget statements . This work could have benefited a lot from a comprehensive scan of the various types of information and sources to prioritise impactful data that would strengthen advocacy initiatives.

Another profound tip on data advocacy was using the extracted data to come up with a Killer Fact. From PWYP Niger, the invaluable illumination was on crafting simple messages that made statistics ridiculously simple and easy to understand. For instance, “in Niger, almost 90% of the population doesn’t have access to electricity. This in a country that is the fourth largest producer of uranium and produces enough uranium to light one in every three light-bulbs in France” – Click here for more details.

Data visualisation

Learning and experience sharing on the use of data visualisation tools such Tableau, Google fusion and Canva was quite invaluable. Many a times, I have been involved in generating and disseminating critical data on mineral revenue management for impacted mining communities, legislators, media and government departments. I have also been involved in analysis of national budget statements, audited financial statements of state owned and private companies and corporate social investments.
The workshop on data extraction clearly made me realise that some data visualisation deficiencies in my work can hinder easy uptake of information by different users. For instance, policy makers have limited time to labour through voluminous documents and some community members may not be statistically astute. In such cases, data visualisations may help overcome such challenges and promote greater use of data.

It was quite interesting to see the work that PWYP Philippines is doing on data visualisations, particularly their eye-catching infographics on poor contribution of mining to the country’s economy.

Court disputes can be a vital source

The salient features of some secretive mining deals can spill into the public domain through court disputes involving mining companies and government. The Zimbabwe Environment Law Association (ZELA) has explored this through PWYP Zimbabwe by analysing court judgements as was the case with the dispute between Zimbabwe Revenue Authority (ZIMRA) and Zimbabwe Platinum Mines (Zimplats) on Additional Profit Tax (APT) and 2.5% royalty stabilisation clause for a period of 25 years .

Tweeting #PWYPOpenData

I could not resist the temptation of vigorously sharing on Twitter the proceedings of the data extraction workshop. Using the Twitter hash tag #PWYPOpenData, one can access valuable snippets such as various tools and tips that can be harnessed to promote easy data extraction, data cleaning, data wrangling, data visualisation and for improving transparency and accountability in the extractive sector.

Home country data extraction programmes work plan

Data extractors were asked to come up with participatory data extraction country programmes. The conceptual intent of my work plan was to influence improved transparency and accountability in Zimbabwe’s mining sector by promoting greater awareness, understanding and usage of various open data platforms at national, regional and international level among civil society organisations particularly PWYP Zimbabwe.

The key intervention being participatory mapping of opportunities offered by existing mandatory and voluntary disclosure data platforms for community based organisations and civil society organisations in Zimbabwe’s mineral rich provinces.

Position paper on mining reforms in Zimbabwe

That mining holds an important locus to Zimbabwe’s economic recovery is well known. Both government and the civil society in the country generally agree that if managed well, the abundant natural resources in the country have the ability to turn the economic fortunes of the country.

The current government’s economic blue print the Zimbabwe Agenda for Socio-Economic Transformation (ZIMASET) state that the judicious exploitation of natural resources will alleviate the country’s economic woes. Although there is huge potential within the mining sector and the existence of a progressive constitution, real development remains illusive. Part of the reason why there is limited economic growth and development is weak natural resources governance that is characterised by limited transparency and accountability, an impious policy and legal environment with a progressive constitution that exists besides many acts that are yet to be revoked and alligned.

Another challenge within the mining sector is the inadequate participation of communities and other stakeholders with an interest in the sector such as civil society organisations. Effective governance systems, capacity to administer and monitor the mining sector, and horizontal and vertical linkages with other sectors of the economy remain prerequisites for resource exploitation to contribute to growth and development.

As a way of outlining some of these obtaining challenges, the Publish What You Pay (PWYP) Zimbabwe Coalition has put together this position paper which outlines some of their key asks on essential reforms that should be considered in the mining sector. Given its diversity, the coalition’s membership has compiled submissions from the perspective of their institutional work and comparative advantage. Given the increasing pressure for foreign direct investments and need for increased revenue, the government needs to ensure that the operational environment allows smart investments that unlock the sector’s potential without undermining human rights and the developmental prospects of the country.

Human scars – the links between taxes and human rights

Taxes and human rights may not seem the most obvious bed fellows. Yet tax avoidance, incentives and other tax abuses, as well as poorly designed tax systems, deprive citizens of basic needs, in particular access to health care, water and sanitation services and education. This is no truer than in resource-rich developing countries where extractive activities not only have not created a steady revenue to spur development, but have also severely impacted the livelihoods of communities.

“Decision makers have to commit to increasing public financing of development and putting in place measures to ensure transparency and accountability in private financing” – PWYP Zimbabwe

Because a large part of the African economy is commodity based, this means that a low provision of basic services combined with inadequate tax collection may also have a negative impact on communities, in particular those impacted by extractive activities. We’ve looked more closely at two resource-intensive countries, Zimbabwe and Zambia, to better understand the (lack of) extractive taxes for rights-based development. In both countries, investor-friendly regulations by the government, often at the request of companies, have soured profits from mining activities at the expense of citizens. What is then the shared responsibility of governments and extractive companies to ensure that taxes are used for sustainable development?

The case of Zambia

Two of Zambia’s major mines are based in the north western part of the country where copper mining is the only industry and hence a major source of revenue for the state. According to the 2010 and 2011 EITI reports, these two mines are the top producers of copper in Zambia. Moreover the 2012 and 2013 EITI reports show that they are amongst the top five revenue contributors to the state coffers. But to allow the development of these mines, local communities have had to surrender their customary land rights as they were converted into state land. Heavily dependent on maize and cassava farming, these communities haven’t been able to farm since 2005, thus losing their source of revenue. In return, community members received very low compensation and, because no consultations took place, their livelihood needs weren’t taken into account. The system also ignored social structures in the community and women, who had been owner of lands, saw their compensations pocketed by their husbands instead, who then often misused the (already low) funds.

Displaced communities also weren’t adequately supported. In their new location, poor transport connections, despite being promised, have cut them off from other communities and makes it very difficult to earn adequately by selling farming goods at local and regional markets. Instead of housing -again promised- they received only roofing sheets, and not even enough to build a full roof for each household! Even the basic human right to access safe water hasn’t been met – the boreholes drilled by the mining company at the school and at the clinic have gone dry due to bad maintenance. The mining company did construct a school and a clinic, but in both cases the government has not yet officially opened them.

The case of Zimbabwe

As for Zimbabwe, there is evidence that mining companies are not contributing enough taxes to the national treasury. This is due not only to a poorly designed fiscal framework but also to possible tax avoidance or, worse, evasion. In 2011, mining exports were in excess of US$2 billion, the mining sector contribution to the fiscus (excluding diamonds) was only a meagre US$150 million. The potential of the massive mining revenue in Zimbabwe to address sustainable development is therefore far from realised.

Tax dodging in Zimbabwe is particularly a problem in diamond-mining. The State has equity participation in the diamond mining sector through the Zimbabwe Mining Development Corporation, making the role of the state even more litigious. In the 2014 Audit Report on the corporation, it was noted that various tax obligations had not been met. When juxtaposing these enormous tax infractions against the lived realities of mining-affected community members, it is difficult to not be discouraged by the inequity.

“When profitable mining corporations dodge paying taxes in developing countries they negate our efforts to escape poverty as they starve us of our public revenue with which to finance social service delivery and development.” PWYP Zimbabwe

The mining in this area has caused displacement of over 1000 families who have not received any compensation whilst the companies have been paying generous compensation packages to their board members and executives. The school facilities are inadequate and lack the infrastructure to actually cater for the relocated children. The displaced communities have been forced to rely on an inadequate water source that is costing them US$6 dollars, a prohibitive fee for most families, and is a major cause of death in the area, in particular through diarrhoea. The human cost related to taxation in Zimbabwe is not only evident in the case of displaced communities. Those that still reside near the mining site have also been negatively impacted. An independent study found that the water quality of their main sources of water are not safe for consumption. Despite the communities bringing this case to the High Court of Zimbabwe, no improvement by the government has been made yet.

One may question why are basic rights and services, ones necessary not just for living but for surviving, not provided by the government with the support of tax income, in particular for communities of areas generating that income?

“A just tax system with a strong legislative and policy framework to combat tax dodging (centred around transparency and accountability), will surely ensure meaningful revenue collection from taxes paid by companies within the resource rich countries. This in itself obliges governments of developing countries to account for the tax revenues in the best interest of its citizens.” PWYP Zambia

Tax should be a bridge between governments and their citizens: it should build accountability between the state and its citizens as well was with corporations. But lack of mining taxes or poorly managed taxes is instead keeping citizens from accessing their basic human rights especially for communities living close to the extraction.

Some of our key recommendations:

  • Fiscal regimes for mining need to be anchored in a Human Rights based approach, meaning that a complete overhaul of the structural orientation of mining fiscal regime need to actively promote the realisation of human rights and basic service provision
  • Mining companies must produce annual reports that capture social and environmental impacts.
  • There needs to be more transparency in relation to tax practices
  • The governments should respect the owners of the land confiscated for mining purposes. This requires genuine consultations
  • Communities need to be sensitised and better informed to empower them to claim appropriate compensation
  • Affected communities need to be involved from the beginning of any project
  • “With Africa’s population set to double by 2050, rising faster than sustainable development projects, modernizing local economies will prove vital to make the continent more competitive and increase people’s living standards, hence we cannot afford to let another dollar disappear into thin air.” PWYP Zambia

    The time to act for tax justice for the benefit of citizens is now.

    This article is based on a full report available here combined with statements from the PWYP coalitions in Zambia and Zimbabwe made to demand more transparency and accountability in extractive taxes during the financing for development summit in Addis earlier this year.