By Calvin Manika
Mandlenkosi Shoko (43) of Lukosi ward, Hwange in the South West of Zimbabwe feels betrayed by the local leadership and companies mining coal and producing coke in his area. He says the future is bleak and Hwange seems to have been privatised as company operations have left villagers breathing dust and fighting airborne diseases while enterprise enjoys the profits in the leafy suburbs of the capital, Harare and overseas.
“It is pathetic. These companies should develop our communities and the way we live but alas they have capitalised on labour – hard labour and no tangible development has been put in place. This is a story of over a decade of operations. Instead, our gravel roads are destroyed, fields filled with fine dust and becoming unproductive,” says Shoko.
The biggest coal mining town in Zimbabwe, Hwange is fast becoming a haven of investment. Both, local and foreign companies have invested millions of United States dollars in the mining of the black rock. The majority of these companies are Chinese owned. The coal and its by-products are sold in foreign currency, mostly the United States dollars in local and regional markets.
A research on the Implications of Illicit Financial Flows (IFFs) on Zimbabwe’s Development found that for Zimbabwe’s growth, IFFs pose a significant obstacle. They directly affect a nation’s capacity to raise, hold onto, and mobilize its own resources to support long-term economic growth. According to the study, Zimbabwe lost more than $32.179 billion between 2000 and 2020.
“The issues with IFFs are that they are both illegal and have an impact that is felt well beyond the immediate area in which they occur. The illicit financial flows have caused irreversible harm to Zimbabwe. The primary motivations behind IFFs are the desire to conceal money and evade taxes,” noted the study.
In some cases where foreign investment interests are part of the company’s operating model, concerns have been raised about the mining sector’s vulnerability to illicit financial flows, illegal movements of money or capital from one country to another.
During his contribution to debate in parliament, former Minister of Finance Tendai Biti said Zimbabwe was losing more than US$2 billion a year through illicit financial flows and certain mining companies were the “major culprits” through being “guilty of transfer pricing, thin capitalization, under-invoicing and over-invoicing.
“Our people are suffering; 79% of our people are living in extreme poverty, 95% are unemployed, yet on paper we are a very rich country. So I urge that the authorities come up with legislation on illicit financial flow and push the UN to come up with an international convention that deals with illicit financial flows,” he concluded.
According to the 2022 Population and Housing Census Preliminary Report on Population Figures, Hwange has 109 598 people. Zimbabwe Statistical Agency (ZIMSTATS) first-quarter report said the Food Poverty Line (FPL) for one person in April 2023 was ZWL$ 2 5,170 .00 while the Total Consumption Poverty Line (TCPL) for one person was $ 33,044 .00 in April 2023.
In the past decade Hwange has been riled with water challenges and poor infrastructure. Children are the most affected due to shortage of resourced schools and poor ICT infrastructure. The district has 104 primary schools and 36 secondary schools with about 90% of them in the rural areas underdeveloped.
According to locals and various studies dozens of these mining companies have been alleged to be polluting the environment affecting both humans and animals. Villagers’ livestock and fishes of the river have been dying en-masse. Without support from mining investors, the community feels neglected and now questions the use of profits.
Hwange is known for its rich coal deposits estimated to last for 1000 years. More than a dozen companies are operating in Hwange with half a dozen involved in the extraction of the black rock while the other half is into coke production. The investigation traced the Hwange Colliery Company, and South Mining. The price of coal per tonnes ranges from US$125 to $450 while coke fetches US$365 to US$600.
All the two companies and other small players have their head offices in the capital, Harare. South Mining operating two plants in Hwange in Madumabisa and Chaba has its headquarters at 2nd Floor East Wing, Block 6 Celestial Park, Borrowdale Rd, Harare. Hwange Colliery which owns the biggest colliery in the country and vast private property in Hwange is headquartered at Coal House in the Central Business District of Harare.
Takesure Ncube (37) a villager in Diki remembers the time when the companies like Zhing Zhong Coking Company (ZZCC) started their operations, but today Ncube says the hope has long faded due to challenges rather than the opportunities the Chinese companies have brought.
“The reason on why the government is failing to hold these companies accountable is clear – they are Chinese. Our government has shown us a cold shoulder to intervene and cause the companies to build meaningful infrastructure in our community and the district as a whole,” says Ncube.
A villager who requested anonymity said the biggest achievement and improvement the companies have done is to build traditional Chiefs leafy homes, drilling them boreholes and fuel their service vehicles every time. Villagers speaking to this publication said Chiefs and government officials are muzzled by such gifts.
“Building beautiful homes surrounded by poor peasants, the gifts are purely corrupt and muzzles the authorities to execute their mandate in terms of transparency, accountability and community development.”
Private players in the coal mining business were granted mining licenses by the government in 2010. South Mining (Private) Limited is a coke-producing firm that was established in Hwange in January 2007. Its primary activities include the manufacture of metallurgical coke and its by-products, as well as the sale of a variety of coal products to markets in Zimbabwe, Zambia, the Democratic Republic of the Congo, Mauritius, Botswana, and South Africa. With more than 610 employees South Mining has become one of the leading Coke producers in Zimbabwe. With an approximate of 610 employees South Mining has become one of the leading Coke producers in Zimbabwe.
Shoko says the support to the community by South Mining Company though appreciated is not enough.
“Painting a school is good but we need real development. World Vision is a not-for-profit organisation but it came and built an e-school. The first one in Zimbabwe. We expect more from profit-making companies. They cannot just take all the profits to Harare without improving our lives,” says Shoko.
When this publication reached to the company’s Public Relations Manager Charles Muchabaiwa he could not answer the calls neither responded to messages sent to him. However, speaking to a state paper ‘The Chronicle’ on 22 July 2023, Muchabaiwa said for the residents of Hwange, the impact has been tangible and life-changing. Employment opportunities have soared, and social well-being has improved significantly.
“To address the pressing issue of water access in rural areas, South Mining has drilled six boreholes, providing safe, clean drinking water for both humans and livestock. These boreholes have also facilitated the establishment of nutritional gardens, promoting food security and self-sustainability within the communities,” Muchabaiwa told the Chronicle.
“Company has contributed towards building a community hall. Company has fixed the roads for the local community, and we periodically rehabilitate the main Victoria Falls Road after each rainy season, as it becomes very muddy. This makes it easier for people and motor vehicles to move around,” added Muchabaiwa.
Driving the Bulawayo – Victoria Falls has become a death trap as the road has been destroyed by potholes and lack of maintenance. Contra to the claims of South Mining, the Victoria Falls road is worse in the Hwange area. Though maintenance of roads is the responsibility of the government and councils many accidents have been reported on that stretch.
South Mining constructed a community library in Empumalanga, Hwange which it alleges to be have been built at a cost of US$600 000. A follow up by this publication shows that library which takes 700m2 of the 2500m2 was donated by the Hwange Local Board (HLB) while South Mining overseen its construction. The Besana Mail found that the land clearance was done early in 2019 under the coordination of known ruling political party sympathisers with a history of facilitating Chinese investments in Hwange. The ground breaking ceremony was done in November 2021. The library was officially opened on 27 July 2023, at an occasion which was graced by the first lady and the ruling ZANU-PF party officials.
Zimbabwe is currently in the election mode with harmonised elections set for next month on 23 August. Residents around Empumalanga said the construction of a community library is a good thing but its handover timing and guest list is more political than a Corporate Social Responsibility gesture.
Speaking to this publication, the Centre for Natural Resources Governance (CNRG) Director Farai Maguwu said the conditions in the mining-affected communities paint a gory picture, showing that there is no CSR taking place in Zimbabwe, with very few exceptions like ZIMPLATS & MIMOSA.
“The rest have tokenistic CSR projects. Some of companies say they are barred from carrying out CSR projects by the government which demands that the funds be channelled to the government which has a constitutional mandate to develop the communities. It is not clear whether the companies comply with this directive. What is evident is resource-rich communities are receding backwards compared to those without natural resources,” said Maguwu.
Villagers said with decades of companies operating in Hwange, the community should have been upgraded with tap waters, good schools and infrastructure. To the contra, despite Hwange being known for coal production and generation of the thermal power, the villagers still live in darkness.
In an interview, Great Whange Residents Trust Coordinator Fidelis Chima said there is increased investment in coal projects in Hwange mainly in coal extraction, coke processing and thermal power projects by foreign investors with majority from China.
“But unfortunately these investments are not mitigating levels of poverty and infrastructure development such as health facilities, schools’ and road network. The investors should invest in social amenities. The Mines and Minerals Act should have provisions that promotes investors to invest in infrastructure development in areas they operate from,” said Chima.
Hwange Colliery Company Limited (HCCL) explores, mines, processes and markets coal, coke and associated by-products. The company wants to increase annual coal production in order to meet the needs of its domestic and international clients. In accordance with Section 4 of the Reconstruction of State-Indebted Insolvent Companies Act (Chapter 24:27), Hwange Colliery Company was placed under reconstruction in October 2018 to get the business out of the problems it was having.
According to the 2022 interim financial statement published on 30 April 2023 Hwange Colliery Company Limited said the operating economic environment for the year under review was stable, with some price discovery challenges affecting the company’s input costs and profitability.
“Despite these challenges, the market was buoyed by a strong demand for both thermal and coking coal, which positively pushed sales. Revenue improved by 139.76% from ZWL32.42 billion in 2021 to ZWL77.73 billion in 2022 on an inflation adjusted basis. This was largely driven by the increase in sales tonnes. Gross profit increased by 226.20% from ZWL7.10 billion prior years to ZWL23.16 billion in inflation adjusted terms this year,” notes the report.
HCCL Corporate Affairs Manager Dr. Beauty Mutombe was not available to comment and respond on the company’s CSR in the communities around Hwange.
In March 2022 in its report titled: Nudging Parliament to Tighten Screws on Curbing Illicit Financial Flows, Zimbabwe Environmental Lawyers Association (ZELA), an environmental watchdog said in order to ensure transparency and accountable management of public resources, as well as to help the country’s sustainable development compass point in the right direction, a functional Parliament is a crucial piece of the jigsaw puzzle.
“Precisely, this is what gives the pulse to the African Parliamentary Network on Illicit Financial Flows and Taxation (APNIFFT) hosted by the Tax Justice Network Africa. As a cascading move at the country level, TJNA joined hands with the Zimbabwe Environmental Law Association (ZELA) and the Stop the Bleeding Campaign to re-energise Zimbabwe’s APNIFFT chapter.”
ZELA pointed out that the manifestations of IFFs are unequal, and some of these include covert mining agreements that are skewed in favour of investors, dishonest transfer pricing techniques used by multinational corporations that allow corporations to evade taxes in countries where their primary economic activities are located, excessively generous tax incentives, smuggling, and corruption.
“Gold smuggling costs Zimbabwe more than US$1.2 billion annually. One significant platinum miner’s tax incentives cost the country $100 million,” reported ZELA.
Local mining communities have been heavily burdened by mining’s expenditures and experienced very few advantages. Given the perception that mining has always operated as an enclave industry, residents in Hwange are advocating for Community Ownership Schemes, which require businesses to account for their activities to the communities in which they are based.
The late former president Robert Mugabe introduced Community Share Ownership Trusts (CSOT) in Hwange in 2012. The two Hwange and Lupane initiatives, which were unveiled at the Hwange Colliery Stadium, cost US$14.5 million total and were funded by foreign-owned mining companies that operate in the two regions.
A visit to the community shows that since the launch of the schemes, communities have never received any benefit.
Richard Moyo, Minister of State for Matabeleland Provincial Affairs and Devolution, urged businesses to incorporate sustainability and CSR into their business strategies during his speech at the 5th Business Summit, which CSR Network Zimbabwe
is hosted on October 2, 2021 in Victoria Falls.
“There are many companies in Hwange but we have no schools, roads or clinic, and communities complain about social amenities. So we should make this a law in the constitution for companies to know that when they come to invest the community should benefit,” said Minister Moyo.
Asked on the brief overview of these companies and the Zimbabwean political elite, Muguwu described Zimbabwe as a “fully fledged resource cursed country” where abundance of natural resources is contributing to corruption, rent seeking behaviour, impunity, environmental crimes and general non-responsiveness and ineffectiveness of government.
“Their failure to bank money locally is political problem – it speaks to a purely extractivist mining model; an enclave economy that generates profits and revenues far away from the source of those resources,” said Muguwu.
In accordance with Section 315 (2) of the Zimbabwean Constitution, all government contracts must be subject to performance monitoring and negotiation. Mining contracts included, “…to ensure transparency, honesty, cost-effectiveness, and competitiveness.”
“Corruption and involvement of senior government officials in these criminal enterprises protects the mine executives from compliance with the law.” said Muguwu.
“This story was produced by Calvin Manika. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.”