The ‘Use It or Lose It’ Policy in the mining sector
In terms of Section 2 of the Mines and Minerals Act (Chapter 21:05), the ownership, control, exploitation and disposal of all minerals, mineral oils and natural gases is vested in the President of the Republic of Zimbabwe. It is the responsibility of the President, through the Ministry of Mines and Mining Development, the Mining Affairs Board and all departments in that Ministry to ensure that the exploitation of mining locations benefits the country, beginning with the communities in which the mining operations are conducted. The Mines and Minerals Act has a framework that seeks to protect mining locations against mining houses that engage in sterilisation and monopoly activities in the guise of mining operations. Be that as it may, some communities still encounter the “resource curse”, where the community in which mining activity takes place has nothing to show for minerals extracted except remnants of mining operations, massive land degradation and negative environmental impact.
This article seeks to analyse the sufficiency of the protection framework provided for in the Mines and Minerals Act under the “Use It or Lose it Policy”. The article also makes recommendations for the amendment of the Act, so as to promote transparency, accountability, and financial benefit in the decision to issue expropriation orders, and the subsequent tender process of selling the expropriated mining locations.
BEDROCK OF THE “USE IT OR LOSE IT” POLICY
The Government, through the Ministry of Mines and Mining Development, has embarked on expanding the mining industry to US$12 billion by 2023. To achieve this target the Government has sought to rigorously implement the “Use It or Lose it Policy” (the Policy), as it is one of the key enablers. The Policy aims to free up vast tracts of mining locations that have been sterilised for speculative purposes, and to increase mining operations in these locations. Sterilisation of mining locations is the loss of access to mineral resources due to the use of land for the development of activities that prevent their exploration or exploitation.
Although this Policy is a noble idea its implementation is fraught with difficulties, as the Government is not always able to successfully expropriate unutilised mining locations. Some mining houses have held on to title of mining locations from as far back as the 1960s, more by reason of paying inspection fees and less due to real mining activity.
It is necessary to refine the provisions in the Mines and Minerals Act so as to ensure that the implementation of the “Use It or Lose it Policy” is transparent and economically beneficial.
PART XXIII: PROCEDURE FOR EXPROPRIATION OF MINING LOCATIONS NOT BEING WORKED OR DEVELOPED
Part XXIII of the Mines and Minerals Act deals exclusively with the expropriation of mining locations are unutilised. The Part begins by defining the concept of “expropriated location” to mean a mining location which has been transferred to the Minister and registered in his name, while “order” is defined as an order of expropriation.
Section 320 empowers any person who believes that a registered mining location is unutilised to submit a written report to the Mining Commissioner upon payment of the $400 filing fee. The Mining Commissioner is mandated to obtain a report from the Government Mining Engineer on the matter. The section also authorises the Mining Commissioner to seek a report from the Government Mining Engineer on his own cognisance or by reason of the initial report. Having received the report from the Government Mining Engineer, the Mining Commissioner must refer it to the Mining Affairs Board (the Board). In turn, section 321 requires the Board to inquire into the history of the mining location and investigate the mining activities being conducted there in order to ascertain if the mining location is adequately utilised or not.
Section 322 mandates the Board to give the registered holder of an unutilised mining location to show cause why such location should not be expropriated, thus observing the rules of natural justice to hear the other side, prior to making a decision.
Under section 323, the Board may recommend that the President makes an order for expropriation of the mining location after hearing the registered holder’s representations. The Section has conditions that the Board may consider in favour of the registered holder to prevent expropriation, which the courts have held that there need only exist one. This is where the bane of the Policy lies. Firstly, the failure to utilise the mining location may be due to causes beyond the control of the registered holder, and he has made every effort to overcome such causes. Next, the registered holder must intend to commence or continue utilising the mining location within six months, and the Board must be satisfied with the proposed scale of the work. The registered holder may also state that the location is essential to other mining operations that he is conducting, and will be utilised in due course. The registered holder may state that there is a reasonable basis for the delay in utilising the mining location. Lastly, the registered holder may state that the location forms part of a series of not more than ten blocks contiguous to a main block being utilised by him, and is essential to the proper working of such main block.
After the Board has completed its investigation and has satisfied itself that there is a case for an expropriation order for the unutilised mining location, it will proceed to recommend the expropriation order to the President, together with the documents setting out the grounds for its recommendations.
Once the President receives the report, he may require the Board to make further enquiries or request that the registered holder appear before him to make additional representations. If the President is satisfied that the mining location is not being utilised, he may make an order that it be expropriated. The expropriation order is then published in the Government Gazette and also sent to the registered holder of the mining location and the Mining Commissioner of the district where the mining location is situated.
Once expropriation has been successful the Mining Commissioner transfers the mining location to the Minister in terms of Section 325. The Board is empowered by Section 327 to then sell the expropriated location.
An analysis of section 327 reveals that the sale process is not transparent, and is open to abuse and manipulation. There is need to expand the provisions by including the conditions under which the sale is to be conducted, so as to provide prospective investors with clear, consistent, concise, and ascertainable guidelines.
Section 327 further compounds an already unfavourable situation by not mandating the Board to accept the highest bid, even after inviting tenders for expropriated mining locations by publication in the Government Gazette and newspaper. Section 328 also empowers the Minister to transfer the mining location to any person for no valuable consideration on recommendation of the Board.
Through sections 327 and 328, the law shoots itself in the foot by aprobating and reprobating from the spirit of the legislature in formulating these provisions. These provisions are contrary to the Government’s policy to expand the mining industry to US$12 billion by 2023, and therefore have no place in an economically justifiable society. The provisions must be amended to have criteria for selecting winning tenders that is primarily based on the financial capacity as well as technical expertise of bidders to ensure maximum utilisation and productivity of the expropriated mining location.
Section 329 provides that compensation be paid by the Board to the registered holder from the proceeds of sale of the expropriated mining location, less costs incurred relating to the sale.
The spirit of the Policy is a good one in that there is need for provisions in the law that provide for expropriation of unutilised mining locations, thereby safeguarding against sterilisation of mining locations and hogging the same for speculative purposes.
However, in its current form, the Policy does not augur well for the investment perception of the country. There has been a clarion call to refine Part XXIII to move in line with international trends and increase issues of transparency and accountability for the tender process of expropriated mining locations, the selection of winning bids as well as valuation of mining locations to ascertain not only an economical selling price, but also to determine fair compensation to be paid to the registered holder of the expropriated mining location. Expropriation underpins the principle of public interest and in exceptional circumstances this will promote an investment friendly environment if the implementation of the Policy does not amount to arbitrary deprivation of property. Ultimately, the law ought to strike a balance between various stakeholders, starting with ensuring that mining activities uplift the livelihoods of the communities where the mining locations are, ensuring that the registered holder whose mining location is expropriated receives fair compensation, and finally, that the winning tender does in fact pay an amount that reflects the true market value of the mining location, which also takes into account the future success of mining operations. The ongoing amendment of the Mines and Minerals Act should therefore be backed by adequate consultations of all stakeholders so as to cater for their various interests.