CSOTs: The good, the bad and the ugly
Zimbabwe’s efforts at redistributing wealth through community empowerment schemes have registered various levels of success in recent years.
ANEW chapter in the national economy was opened in 2012 when Government launched community share ownership trust schemes (CSOTs) to empower indigenous Zimbabweans.
Guided by the Indigenisation and Economic Empowerment Act, the focal point was the mining sector where companies were supposed to fund development schemes to the tune of millions of US dollars.
Large miners like Mimosa, Zimbabwe Platinum Holdings, Unki Mine and Marange Diamonds quickly got in on the act, pledging to fund establishment of CSTOs that would see communities benefit from extraction of minerals in their locales.
Zimplats availed US$10 million, which was largely invested on money markets and has to date realised a return on investment of more than US$2 million that has funded various projects.
Also noteworthy is the Gwanda CSOT, which was created by support from Blanket and Gaths mines, and cement firm PPC.
The firms pledged US$6,8 million to the trust and to date, the CSOT has spent over US$2,5 million on income-generating and developmental projects.
Unki paid US$10 million into the Tongogara CSOT, with 24 administrative wards getting US$25 000 each for socio-economic development.
The scheme has built a school, dam, mortuary and waiting home for expectant mothers at Zvamabhande Hospital.
Lafarge rebranded its CSOT to Lafarge Empowerment Trust. So far its three CSOTs - namely Mabvuku-Tafara, Uzumba-Maramba-Pfungwe and Goromonzi - have benefited to the tune of over US$1 million.
National Indigenisation and Economic Empowerment Board (NIEEB) compliance manager in charge of CSOTs, Mr Sibanengi Mahobele, said some schemes were not fully functional “because the CSOTs aren’t resourced mainly due to the fact that their respective qualifying businesses are reluctant to comply”.
“The communities in CSOTs that have taken the lead in implementing the thrust are thrilled with the development as it’s aimed at furthering their business scope and widen their horizontal entrepreneurial space,” he said.
As of 2015, US$134 million had been pledged to CSOTs but only US$38,3 million had been deposited.
Of this, US$14,7 million was channelled towards development projects, while the remaining US$23 million remains banked.
In Zvishavane, Mimosa paid US$10 million to the Zvishavane CSOT, which has been used mostly for education infrastructure.
However, NIEEB ordered the trust to cede half of the US$10 million to the Mberengwa CSOT, since the mine has operations in both districts.
But the trust argued that Mimosa’s operations were mostly in Zvishavane and hence splitting the pie evenly with Mberengwa would be unfair to the former.
The Zimbabwe Environmental Law Association has hinted that a reason why some CSOTs have failed to live up to expectations is that they are not run on strict financial management, accounting, business ethics and principles.
“Once they were established, interested parties that included chiefs, headmen, youths, politicians, employees and administrators saw them as cash cows,” said Zela in a report titled “The Legal and Economic Framework for Natural Resource-Related Statutory Funds in Zimbabwe (2016)”.
“In the melee that ensued, mechanisms to promote accountability and transparency were forgotten.”
The Marange-Zimunya CSOT quickly comes to mind as an example of a scheme that underwhelmed.
Five diamond mining firms were said to have pledged US$10 million each to the CSOT but later claimed no such pledges were ever made. This saw then Indigenisation Minister Saviour Kasukuwere facing uncomfortable questions as to how he presided over a ceremony at which President Mugabe was handed a dummy cheque that was a dummy in all senses of the word as the money was not there.
The trust only got US$400 000 from the diamond miners.
The Hwange CSOT got zilch as companies in the area were under-performing while others simply did not want to comply.
Since the establishment of CSOTs, only 21 of the envisaged 61 are operational.
There have also been claims in some parts of the country that trustees are diverting money to their own use.
CSOTs are commonplace across the globe.
In South Africa, the Broad-based Black-Economic Empowerment initiative has been bearing fruits for years now.
Experts say Government needs to revisit CSOTs and ensure companies not only support them, but also improve their structures for sustainability purposes.
They should, some pundits say, become real tools for empowerment and not mere corporate social responsibility initiatives.