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Government getting raw deal in mining contracts

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Government is not benefiting from contracts and fiscal arrangements that it signed with mining companies in the country and need to reconsider some of those contracts, the Parliamentary Portfolio Committee on Mines and Energy has revealed.

Committee chairman Edward Chindori-Chininga said his committee was convinced government was not benefiting at all from deals it entered into with most of the country’s big mines.

“Government should take a relook at some of the mining contracts and fiscal arrangements that were initially signed between BHP and the government of Zimbabwe, that are currently benefiting Zimplats and subsequent fiscal arrangements that have benefited Mimosa, Murowa, Unki and other mines,” said Chindori-Chininga.

The arrangements could have been necessary at the time the deals were made, said Chindori- Chininga, but the Zimbabwean economic situation had since changed and those agreements needed to change too.

Chindori-Chininga said Zimbabwe’s economy could only be stimulated if mining revenue generated by the likes of Zimplats and Mimosa was banked in Zimbabwean-based banks and was available for lending to the economy.

A lot of mines in Zimbabwe are reportedly banking their profits outside the country, as a result lessening the chances of Zimbabwe benefiting from its mineral resources.

Chindori-Chininga, himself a former Mines and Mining Development minister, negotiated some of the contracts and fiscal arrangements with some of the mining conglomerates on behalf of the government.

However, he believes government should put in place measures to ensure mines purchased their production raw materials within the country.

“Measures must be put in place to require all mines to purchase all mining supplies and equipment through Zimbabwean companies, producing supplies locally or operating under franchise agreements.

This would support the stimulation of our economy and encourage industrial growth,” he said.

Chindori-Chininga said while contracts with mining giants like Murowa Diamonds and Zimplats attracted investment, the deals were not beneficial to the country except in the areas of employment creation and corporate social responsibility.

He said no quantifiable corporate social responsibility had been implemented by diamond mines in Chiadzwa.
“On diamond mining, only Rio Zimbabwe and Murowa Diamond Mines have made measurable corporate social responsibility contributions,” he said.

He said government needed to learn from the experiences of other countries like the Democratic Republic of Congo on how to draft mining contracts in good faith and improve the mining industry’s revenue contribution to the fiscus.

He said there was a shortage of financial resources in the market and yet one mining company could make a turnover of $500 million which was banked outside the country.

“Since we have a dollarised economy, mining companies should be encouraged to bank their money locally and government needs to give the necessary assurances and guarantees that the money would not be tampered with,” Chindori-Chininga said.

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