Community Share Ownership Trusts, an Economic hope for mineral rich communities

Worldwide, the communities around mining areas have cried foul as they bear the brunt of mining activities such as land and environmental degradation, water and air pollution, exposure to dangerous mining chemicals, loss of human and livestock lives due to uncovered mining pits, among other challenges caused by mining. Yet most state governments worldwide have been weak in protecting these communities from the mining companies’ environmental malpractices. In our case in Zimbabwe, the Environmental Management Agency (EMA) has been very weak in enforcing regulations governing implementation of Environment Impact Assessment (EIA) recommendations for each mining company.

In recent decades, the international and regional bodies have come up with economic
frameworks to bolster community benefit from mineral resources around them. The
International Council on Mining and Metals (ICMM) and African Union (AU) Mining Vision (AMV) of 2009 are some of the mechanisms put in place. They stipulate that mining firms should contribute to the social, economic, and institutional development of the communities in which they operate. Following such initiatives, Zimbabwe is one of the countries that came up with a community-benefit scheme, in the form of Community Share Ownership Trusts (CSOTs). Initiated in 2012, CSOTs are meant to act as vehicles of community development using proceeds from mining activities within each district. Unfortunately, those districts without mining activities have had white elephants CSOTs.

The aim of this document is to give an overview of the Community Share Ownership Trusts (CSOTs) in Zimbabwe from their formation in 2011/12 to 2020. The document builds up on what already existed on CSOTs and provides an update on the post November 2017 situation of CSOTs. The document’s specific objectives are:
● To give the background to the formation, mandate, and composition of CSOTs.
● To provide an overview of Silveira House’s work with the CSOTs.
● To document CSOTs achievements from their formation up to 2020.
● To document challenges confronting CSOTs in the post 2018 Finance Act situation.
● To explore the CSOTs opportunities and possible options in the post 2018 Finance Act situation.

The CSOTs were established under the Indigenisation and Economic Empowerment Act (IEE Act), 2007 (Act 14/2007) and the Subsidiary Legislation on the same. Under this legislation, the qualifying companies (mostly mines) were to give at least 10% of their shareholding to CSOTs as representatives of communities surrounding their areas of operations. By 2013, a total of 61 CSOTs had been registered across the country, comprising sixty (60) in rural areas and one (1) in the urban area (Harare) (see Appendix 1).

Although every rural district in Zimbabwe has a legally registered CSOT, only 26 CSOTs have been capitalised and operational since 2012. The composition of CSOT Board of Trustees is as follows in terms of the SI 21/2010: Traditional Chiefs (who chair the CSOTs on an annual rotational basis), the District Administrator (now District Development Coordinator) is the deputy chair, the Chief Executive Officer (CEO) of the RDC is the Secretary of the Trust, and the following are Trustees; the chairperson of the Rural District iv
Council (RDC), the district head of the Ministry of Youth, a representative from qualifying
businesses, a representative of local business community, a legal practitioner, a qualified
Accountant, representatives of special interest groups – the youth, women, people with
disabilities, and war veterans.
Using proceeds from mining companies, CSOTs serve as vehicles for socio-economic
empowerment of their respective communities. By June 2018, a total disbursement of US$
44.5 million had been made to the 26 CSOTs out of a total pledged amount of US$128
million, representing only 34.3% of pledged funds. The CSOTs contribution to community
development has been varying from one district to another but generally the capitalised
CSOTs made immense contributions towards infrastructural development in the areas of
education, health, transport, agriculture/food security, livelihoods, water, and sanitation.
About 23 out of the 26 active CSOTs were reached out by Silveira House in this survey. Out
of 23 CSOTs, Silveira House failed to get information from 8 due to communication
challenges during the COVID 19 lockdown period. The information gathered revealed that
the 15 CSOTs contributed by building 144 new classroom blocks, 34 teachers houses, wholly
furnished 77 schools in different parts of the country, built a totally new Nakiwa Vocational
Training Centre – in Uzumba Maramba Pfungwe (UMP) district and built a total of 10
laboratories in different schools. In the health sector the 15 CSOTs equally contributed
immensely. Five (5) new clinics were built while 19 clinics were renovated. In water
provision, the 15 CSOTs drilled 227 new boreholes while rehabilitated 45 boreholes. In the
Food Security sector, 6 irrigation schemes were rehabilitated.
Roads also received support from the 15 CSOTs as renovation of road infrastructure such as
rehabilitation of roads and bridges was undertaken by CSOTs. Some CSOTs (eg. Bindura,
Zimplats-Mhondoro-Ngezi-Chegutu-Zvimba) went further to purchase graders to ensure they
do road maintenance regularly in their areas. The Food security sector also received CSOT
attention as six irrigation schemes and other agriculture related projects (funding the
rehabilitation of irrigations schemes, dip tanks) were undertaken by CSOTs.
The legal and policy framework governing the operations of the CSOTs before March 2018
comprised the national Constitution provisions (Section 13(4) and a series of legislation on
indigenisation and economic empowerment, viewed as controversial from certain quarters.
One common gap identified within the indigenisation and economic empowerment policy
and legal framework was lack of provisions compelling mining companies to dispose of their
shares to communities or honour their pledges. This weak legal framework compromised the
capitalisation of many CSOTs.
Some of the challenges bedevilling CSOTs in the pre-2018 era were as follows; lack of
representatives from the special interest groups in some CSOTs Boards, weak financial
control systems in some of the CSOTs, limited community involvement in some of the
CSOTs, and institutional capacity gaps in most of the CSOTs.
Silveira House’s first phase project with the CSOTs (2015 – 2019) aimed at generally
enhancing the CSOTs’ capacity to implement development interventions in the communities.
The project was three pronged as follows:
v
● Firstly, it focussed on strengthening the institutional capacity of CSOTs so that they
improve their corporate governance systems, transparency, and accountability as they
deliver social development to the communities.
● Secondly, it worked with CSOTs to advocate for legislation that does not only compels
qualifying businesses to cede shares to the CSOTs/communities but also improves
CSOTs operations.
● Thirdly, it capacitated the CSOTs with entrepreneurship and business development and
management skills to encourage diversification in sources of revenue and promote
CSOTs sustainability.
The results of Silveira House’s Phase One Project intervention were as follows:
● Improvement in CSOTs corporate governance systems, especially internal control
mechanisms / policies.
● Improvement of communities’ involvement in the development processes of CSOTs
project identification, implementation, monitoring and evaluation.
● Improved knowledge and appreciation of laws and policies governing CSOTs by CSOT
Boards and the Secretariat.
● Successfully advocated for the amendment of the Indigenisation and Economic
Empowerment related Statutory Instrument leading to the production of the 2017 Draft
Statutory Instrument (SI) for CSOTs. However, there was a change of government in
November 2017 before the new SI governing CSOTs was finalised.
● CSOTs acquired Entrepreneurship and Business Development skills that enabled some of
the CSOTs to pursue Business Units as sources of revenue even today.
● Establishment of the national Association of Community Share Ownership Trusts in
Zimbabwe (ACSOTZ) for better coordination of CSOTs.
The new dispensation after November 2017 had its own policy thrust. This variation in policy
thrust towards the indigenisation policy led to the 2018 Finance Act which had its own legal
ramifications on the CSOTs. Some of the implications were as follows:
● In March 2018, the amendment to the Finance Act clouded the continued capitalisation of
the CSOTs. The provisions of the new Act directed mining companies to work with
CSOTs at their own discretion. Thus, the new law somehow reversed the socio-economic
developmental gains enjoyed by communities through the CSOTs scheme.
● The responses of mining companies towards the 2018 Finance Act varied. Some of the
qualifying businesses (mining companies) ceased funding CSOTs although others
continued to support CSOTs at their own discretion (especially in Mutoko, Zvishavane,
Gwanda, Shurugwi, Mutare, among others).
● Some of the CSOTs that were relatively capitalised before the 2018 Finance Act, had
diversified their sources of revenue through business units and enterprise development to
enhance their survival sustainability.
Despite the implications of the March 2018 Finance Act, there are still opportunities for
CSOTs beyond 2018 of which some are as follows:
vi
● With the formation of the ACSOTZ, CSOTs are now more organised, united and speak
with one voice and have been able to engage the government and other stakeholders as
one entity.
● The ACSOTZ is spearheading the entrepreneurship development of CSOTs (Business
Units), linking CSOTs with potential investors.
● CSOTs could venture into Public-Private Partnerships in business ventures.
● Shared Value Concept – CSOTs could pursue the Shared Value Concept in creating their
business Units. A shared value concept is a management strategy in which companies
find business opportunities in social problems thereby turning social problems into
opportunities.
● Exploit the formation of the new law – the Economic Empowerment Act – to advocate for
the rebranding of CSOTs so that their existence balances the interests of the government,
the CSOTs and the mining companies/investments partners.
Silveira House’s Role in the CSOTs’ new trajectory – beyond 2018 – remains crucial despite
the challenges that the CSOTs face. Silveira House and the ACSOTZ believe that the CSOTs
still need its support for the following reasons:
● To consolidate Corporate Social Responsibility frameworks and mechanisms that
could be the alternative route for continued community benefiting from natural
resources in view of the 2018 Finance Act.
● To assist CSOTs achieve legal and policy reforms that bring about transparency and
accountability in the natural resource sector especially with the hope of a new
Economic and Empowerment law that is being put together by the government.
● To consolidate the transparency and accountability mechanisms in CSOTs and RDCs
● To consolidate communities’ driven demand mechanisms for transparency and
accountability from CSOTs/RDCs
● To assist CSOTs consolidate their entrepreneurship and business initiatives.
● To assist ACSOTZ exploit and maximise on emerging opportunities in the country.

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