HARARE – A 2024 parliamentary report reveals a critical crisis within Zimbabwe’s Community Share Ownership Trusts (CSOTs), with the majority of these initiatives collapsing due to funding changes introduced in 2018.
The report, compiled by the Thematic Committee on Indigenisation and Empowerment, details the devastating impact of amendments to the Indigenisation and Economic Empowerment Act, which effectively removed the mandatory contributions from companies operating in local communities, primarily mining firms.
This shift in policy has left communities, initially intended to benefit directly from resource extraction in their areas, largely disempowered and their development projects stalled.
The committee’s investigation, which included fact-finding visits to eight CSOTs across the country between June 17th and 23rd, 2024, found that of the approximately 60 CSOTs initially established, most are now dormant.
The eight trusts visited were Mhondoro-Ngezi, Gwanda, Tongogara, Bubi, Zvishavane, Bikita, Marange-Zimunya, and Bindura. The report highlights a stark contrast between the initial promise of these trusts and their current reality.
Prior to the 2018 Finance Act amendments, mining companies were mandated to contribute to CSOTs, providing seed capital for community projects.
For example, Mhondoro-Ngezi CSOT received US$10 million from Zimplats, Gwanda CSOT received US$6.9 million from Blanket Mine, and Zvishavane CSOT received US$7.3 million from Mimosa Mine.
Other CSOTs, like Bikita (US$193,000 from Bikita Minerals), Tongogara (US$10 million from Unki Mine), Bubi (US$200,000 from Thathile Investments), Bindura (US$2.2 million from Freda Rebecca), and Zimunya-Marange (US$550,000 received of a pledged US$50 million from Mbada Diamonds, Anjin, and ZCDC), also received initial funding.
However, the 2018 amendments, aimed at attracting foreign direct investment, removed this obligation, effectively cutting off the primary funding source for most CSOTs.
The report found that only three of the eight CSOTs visited, Mhondoro-Ngezi, Gwanda, and Zvishavane, were still operational and even these were functioning at a reduced capacity.
The three trusts continued to receive funding from their respective mining companies through Corporate Social Responsibility initiatives, demonstrating the crucial role of consistent financial support.
The remaining CSOTs visited were plagued by a lack of funds, with many having no remaining assets or ongoing projects.
The report also uncovered serious issues of mismanagement and a lack of transparency within the CSOTs.
Problems included inadequate record-keeping, a lack of board meetings and audits, and interference from Rural District Councils. In Bindura, for example, the Rural District Council reportedly took control of CSOT assets without any formal agreement, contributing to their decline.
The report further, noted a shift in focus in the few functioning CSOTs, with a move away from community projects towards business ventures, often without community involvement.
The parliamentary committee made several key recommendations, including the reinstatement of mandatory funding for CSOTs by companies operating in local communities, the development of robust monitoring mechanisms, and the clarification of the legal framework governing CSOT operations.
The committee stressed the urgent need to address the funding crisis and governance issues to ensure that communities can truly benefit from the resources extracted from their areas, as enshrined in Section 14(1) of the Constitution, which guarantees the right to empowerment through fair and transparent affirmative action. The report concludes that the 2018 amendments have severely hampered community empowerment and calls for immediate action to rectify the situation.
“The policy guiding indigenisation and empowerment was stripped of provisional tools to implementing indigenisation and empowerment, one of which was the establishment of CSOTS.
“As such, the fact-finding visits by the Committee on the status of CSOTs established that these trusts were an integral tool to transforming lives of citizens in their respective communities in areas such as health, education, infrastructure development, water and sanitation and income generating projects.
“The provisions in the Finance Act of 2018, amending the Indigenisation and Economic Empowerment Act, resulted in communities failing to enjoy the right to empowerment, through appropriate, transparent, fair and just affirmative action as provided for in Section 14 (1) of the Constitution.
“There is need for local communities to benefit from the proceeds of resource extraction within their environments. While marginalized groups should benefit from the extraction of local resources through mechanisms such as Corporate Social Responsibility (CSR) funding, this responsibility has been left to the discretion of qualifying companies, a seemingly unfair practice to the communities within which extraction of resources is taking place.
“The previous mandate requiring these companies to contribute 10% of their profits to community development yielded immediate positive results. In contrast, the current provisions carry the risk of excluding communities from possible economic benefits fostered by resource extraction,” the report noted.
