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Implications of Constitutional Amendment Bill No. 2 on Transparency and Accountability in Zimbabwe’s Mining Sector

Mining

Compiled by Shamiso Mtisi and Michelle Matsvaire (Zimbabwe Environmental Law Association)

Discussions on the amendment of the Constitution of Zimbabwe have resumed without any significant strides having been made in implementing and upholding already existing key provisions. The Constitution of Zimbabwe (Amendment) Bill No. 2 was gazetted on 17 January 2020 with the aim of amending several sections in the Constitution. Constitutional amendments are allowed and provided for in Section 328 of the Constitution, but the question of necessity and desirability arises in the present case. Many of the proposed amendments, as is apparent, will effectively result in consolidation of power in the office of the President (akin to the Lancaster House Constitution) and will have significant impacts on different sectors including the mining sector. This article seeks to highlight the impact of Clause 23 of the Bill on the mining sector in Zimbabwe.

Although all Clauses in the Amendment Bill will have some form of effect on the mining sector, Clause 23 if retained in its current form will have the biggest impact. It affects the negotiation, review, and monitoring of mining contracts in Zimbabwe. Clause 23 seeks to amend Section 327 of the Constitution which provides for the signing, conclusion, execution and approval of international conventions, treaties and agreements and their approval by Parliament.

Currently Section 327(3) states that;

‘’An agreement which is not an international treaty but which; a) has been concluded or executed by the President or under the President’s authority with one or more foreign organisations or entities, and (b) imposes fiscal obligations on Zimbabwe, does not bind Zimbabwe until it has been approved by Parliament.’’

The proposed Clause 23 provides that;

“Section 327 (“International conventions, treaties and agreements”) (3) is amended in paragraph (b) by the deletion of “foreign organisations or entities” and the substitution of “international organisations”.

Section 327(1) of the Constitution defines International organisations as “an organisation whose membership consist of two or more independent States or in which two or more independent States are represented.”

What is the effect of Clause 23?

Clause 23 has two fundamental effects. First, it means Section 327(3)(b) of the Constitution will only apply to agreements with organisations made up of States -the equivalent of the United Nations or other international organisations in which states are represented. Other examples include the International Monetary Fund, the World Bank, the African Development Bank, the European Investment Bank and the Asian Development Bank. These organisations include independent States as members. The organisation must have at least two States for the provision to apply to it.

Secondly, the deletion of the words ‘foreign organisations or entities’ means Section 327 will cease to apply to agreements with non-state entities even if the agreement imposes fiscal obligations on Zimbabwe. Examples of such entities may include international financial institutions such as Credit Suisse, other credit banks or other foreign companies. In most cases international agreements imposing fiscal obligations on a country come in the form of loan agreements, Government guarantees or other forms of credit facilities that create a debt or liability on a State.

Consequently, the proposed Amendment of Section 327(3) means Parliament will no longer have the constitutional power to approve loan agreements with such foreign non-State institutions or entities giving sole discretion to the Executive.[1] This may also apply to any Government guarantees imposing fiscal obligations on the State. The consequences are drastic. What it also means is that the Government of Zimbabwe can enter into a loan agreement with Credit Suisse, the Export-Import Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China or the African Export-Import Bank without Parliamentary approval since their membership does not include two or more independent states. Most contracts entered by Government are with non-State organisations and private entities. Such contracts include multi-million-dollar investment contracts in areas like mining, energy, trade finance, and infrastructure among others. These contracts will be protected from public scrutiny by the Executive. The question is why is Government seeking to keep these agreements secret?  What is also curious about Clause 23 is that the memorandum to the Constitutional Amendment in Clause 23 did not include a clear explanation of the mischief Government wants to cure by amending Section 327 or removing the words ‘’foreign organisations or entities’’.

VERITAS rightly observed that Clause 23 emasculates Parliament’s role and power in monitoring and overseeing expenditure by the State as enshrined in section 299 of the Constitution and its power to veto loan agreements which it may consider as imposing a great burden on the country.[2] The amendment also goes against the spirit of section 119 of the Constitution which outlines parliament’s role as being to promote democratic governance in Zimbabwe.[3] Further, it runs contrary to national objectives set in Section 9 of the Constitution on adoption and implementation of legislation that develops accountability, transparency, and financial probity at all levels of government.[4] All institutions and agencies of the State and Government must be accountable to Parliament. Essentially, the Clause goes against the doctrine of separation of powers that stipulates that government consists of 3 branches that are assigned different responsibilities and put together to form the national government.[5] The role of Parliament is to play an oversight role over executive functions and taking away agreements with foreign organisations or entities beyond the scrutiny of Parliament defeats the principle of separation of powers, public accountability, and good governance. This is unacceptable in a democracy.

Is the proposed amendment peculiar to Zimbabwe only?

Zambia proposed a similar amendment through the Constitution of Zambia (Amendment) Bill No. 10 of 2019. It was noted that the Bill would result in agreements being ‘unavailable to public scrutiny, secret and confidential.’[6] The adverse effect in this context would be that Zimbabweans as with the Zambian case, would potentially be bound to foreign debt from foreign agreements as the system would have been extensively weakened by a severe lack of checks and balances. Parliamentary approval of agreements that impose fiscal obligations on the state is one way of enhancing accountability through the oversight function of Parliament.

How does Clause 23 directly affect the mining sector in Zimbabwe?

It is now a known fact that the Government of Zimbabwe accelerated the signing of investment agreements by the executive under the ambit of the “Zimbabwe is Open for Business Mantra”. This has been more evident in the mining, energy, oil, gas, and infrastructure development sector. A lot of deals were publicly announced. Over the years, Zimbabwe has used its mineral wealth as collateral in exchange for credit lines. An example is the line of credit that was secured using gold exports as collateral in 2017 by Afreximbank.[7]

This is not surprising considering Zimbabwe has large deposits of mineral reserves which include platinum, palladium, and gold, among others. Several loan agreements signed by Government with foreign investors show that Zimbabwe has been virtually mortgaging its mineral resources. Therefore, Clause 23 appears to be meant to put beyond parliamentary scrutiny mining related financing agreements or loans between Zimbabwe and foreign credit banks or other financial entities. This trend is likely to continue given the squeeze the country is facing due to its unstable economic and political environment.

The Parliament of Zimbabwe needs to analyse whether or not the ‘mega deals’ being negotiated will actually translate into tangible benefits for the general populace. If this function is removed, this can be envisaged as free reign of the executive.  Without any parliamentary oversight and approval of agreements that impose fiscal obligations on the country, Zimbabwe might further fall into a debt trap drawn from secretive projects that may include punitive repayment terms, certain immunities, or exemptions to foreign companies. The experience of Mozambique in this respect is instructive where the Government failed to subject loan and government guarantees to Parliamentary approval as prescribed by its constitution. The country ended up contracting crippling debts from Credit Suisse and VTB.

The likely cumulative effect of the proposed amendment is that loan agreements and government guarantee in the mining sector will not be subjected to intensive public scrutiny due to the removal of parliamentary approval. It also deprives civil society and citizens an opportunity to glean and monitor proceedings related to agreements with foreign entities and organisations imposing fiscal obligations on the state. Arguably, the other ripple effect of the proposed amendment is that it will water down the role of parliament when it comes to state borrowings and state guarantees in Section 300 as well as contract performance and negotiation in Section 315(2) of the Constitution which respectively requires Parliament to pass an Act of Parliament on setting limits to debts and obligations and concessions of minerals to ensure transparency, honesty, and competitiveness.

Putting loan agreements or other agreements with fiscal obligations beyond Parliament creates a shade of grey and opportunities for the mining sector illicit financial flows, contraction of illegitimate or criminal debts that involve corruption and kickbacks to government officials or broadly odious debts. Clause 23 will be out of sync with emerging international trends in the mining sector on transparency and accountability such as the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP) among others.[8]

Considering the above, we recommend that Parliament should reject Clause 23 of Constitutional Amendment Bill No. 23 since it is taking away its powers of approving agreements that impose fiscal obligations on the state. Parliament has also set dates for public hearings for the Constitutional Amendment Bill No.2.[9]  This offers an opportunity for citizens and communities to participate and oppose the Bill in its current form and in particular provisions aimed at undermining the powers of Parliament on approval of agreements with foreign organisations and entities.

Lastly, there are key questions to be raised considering this proposed constitutional amendment. Who is to benefit from the lack of transparency? Whose cause is to be advanced in removing checks and balances by moving away from the doctrine of separation of powers? As Veritas correctly noted, amending Section 327 to remove or reduce Parliament’s powers will be utterly pernicious and will encourage a return to reckless spending by the Government.[10]

 

NB: This blog was published under the Strengthening Extractive and Natural Resources Sector Transparency and Accountability through Citizen Action and Parliamentary Oversight in Zimbabwe (STACAP). The project is being implemented by ZELA.

[1] VERITAS, Constitution Watch 1/2020

[2] VERITAS, Constitution Watch 1/2020

[3] Section 119 (1) and (3) of the Constitution of Zimbabwe

[4] Section 9(1).  

[5] Arnold I. Burns and Stephen J. Markman, Understanding Separation of Powers, 7 Pace L. Rev. 575 (1987) Available at: http://digitalcommons.pace.edu/plr/vol7/iss3/2

[6] CUTS International, The effect of the Constitution of Zambia (Amendment) Bill no. 10 of 2019 on Public Financial Management and Debt Management, December 2019, pg. 2

[7] Bloomberg, Ryan Ndlovu and Loni Prinsloo, ‘To Borrow $500 Million, Zimbabwe Pledges Undeveloped Mine’ May 22, 2019, 3:29 PM GMT+2 Updated on May 23, 2019, 1:57 PM GMT+2

[10] VERITAS, Constitution Watch 1/2020

About the author

Byron Adonis Mutingwende