Mining Revenue Streams and their Development Impact on Communities Affected by Mining
A bridge to Kardu community linking several other communities from the capital Koidu, Kono, built with DACDF funds
Study Commissioned by:
Network Movement for Justice and Development (NMJD)
Sponsored by: IBIS
Produced by John Kanu (Lead Research Consultant)
November 2010
Table of Contents
Acronyms 2
Acknowledgement 3
Executive summary...... 4
Research methodology 6
Limitations 7
Introduction 7
Main research findings...... 8
Community utilization of ceded revenues...... 10
Diamond Area Community Development Fund (DACDF)...... 10
The Community Development Fund (CDF)...... 13
Administrative frameworks, management and disbursement...... 14
Recommendations...... 15
Annexes...... 16
References...... 26
Acronyms
ADF Agricultural Development Fund
CF Chiefdom Fund
CMP Core Mineral Policy
CSO Civil Society Organization
CDF Community Development Fund
DACDF Diamond Area Community Development Fund
EITI Extractive Industries Transparency Initiative
GoSL Government of Sierra Leone
GDD Government Diamond Department
Ibis Ibis
KPCS Kimberly Process Certification Scheme
MMRPA Ministry of Mineral Resources and Political Affairs
MMA Mines and Mineral Act
MMO Mines Monitoring Officer
NMJD Network Movement for Justice and Development
SLCB Sierra Leone Commercial Bank
Acknowledgement
Research on mining related revenues and their impact on mining communities is often a contentious issue everywhere. Not least because accurate data on the world’s extractive sector is difficult to come by, but also because the competing interests of the vast multitude of stakeholders is often a cause for socio-political discord in many of the world’s mining communities. It is therefore important to note that a study of this nature is only possible with the good will and support of such stakeholders. For this purpose, it would be fitting to place on record the contribution of some of such stakeholders.
Firstly, the Director and staff (Mines Monitoring Officers (MMOs)) of the Ministry of Mineral Resources & Political Affairs (MMRPA) provided crucial information on beneficiation data, disproving the view that government institutions are overtly bureaucratic. Discussions with Diamond Traders and the Government Diamond Department (GDD) also provided useful information on data related to mineral trade and statistics.
Although mostly on conditions of anonymity, the contribution of representatives of mining companies provided ‘insider perspectives’ regarding sector taxation and other fiscal regimes some of which contribute to revenues ceded to mining communities.
Similarly, the infectious enthusiasm of NMJD’s Executive Director and his team on extractive sector related issues was a major factor in getting this work done. The support and encouragement of Mrs. Aminata Kelly Lamin and Mohamed Sheik Turay is particularly noted.
The participation of numerous district and chiefdom level stakeholders (councils, Paramount Chiefs, youth, CSOs, affected communities, the elderly and miners, etc) provided varied perspectives and thus, enriched the findings of this research.
The contribution and views of the donor (Ibis) were very enlightening, frank and a clear demonstration to strengthen governance in Sierra Leone’s extractive sector.
Finally, the contributions of a dedicated team of 20 Research Assistants is invaluable. Their passion, patience and commitment are some assets that enabled the completion of this work. The challenges they faced in reaching remote communities is admirable and I feel indebted to all of them.
1. Executive summary
This report presents the findings of a participatory research on mining revenue streams and their impact on communities affected by artisanal and large-scale mining operations. Sponsored by IBIS, the study was commissioned in November 2010 by the Network Movement for Justice and Development (NMJD). The study was conducted in twenty mineral rich chiefdoms in five districts including Kono, Kenema, Tonkolili, Port Loko and Moyamba. A total of 464 stakeholders were consulted (see annex 4).
At national level, interviews with key Ministry of Mineral Resources & Political Affairs (MMRPA) personnel and the Government Diamond Department (GDD) provided useful information on mineral marketing data and the various mining related beneficiation schemes. At sub-national level, interviews with district councils, miners, Diamond Dealing Associations, Paramount Chiefs and representatives of mining companies provided varied and deep insights regarding the dynamics of Sierra Leone’s extractive sector. Focus group discussions involving youth, women and vulnerable groups in mining communities enriched the outcomes of this study. Their varied views regarding revenue disbursements, management and whether or not mining related revenues are making any difference in their communities represent the main impetus of this study.
Preceded by an introductory section and in line with the study Terms of Reference (ToR-see annex 2), the findings of this study are categorized into four parts:
1. A review of extractive sector policy regimes and implications for development in mining communities
2. Community utilization and impact of ceded mining revenues
3. Administrative frameworks, management, disbursements
4. Recommendations
Based on analysis of stakeholder interviews and available data, the study indentified the Diamond Area Community Development Fund (DACDF) as the most significant revenue stream ceded to communities affected by mining activities. Ushered in by the Mines and Minerals Act (2009), the Community (Agreement) Development Fund (CDF) represents similar potential to support development in mining communities. No data could be obtained in relation to other revenue streams such as the Agricultural Development Fund (ADF,) the Chiefdom Fund (CF), Surface rents and other Socio-economic benefits) all of which, limits the scope this study. The focus of this study is therefore cantered around the legislative frameworks and outcomes on communities of the DACDF and CDF.
The study noted that legislation on current revenue streams were promulgated at various stages of Sierra Leone’s mining history. Because of this, there is no common framework to generate and re-distribute mineral sector related wealth to communities affected by mining. Their purpose as such, is differently understood at community level and their impact varies from community to community.
There is evidence however to suggest that the majority of mining communities have at one time or the other benefited from and implemented basic community development projects in the form of court barriers, local markets development, roads improvement, schools rehabilitation, agriculture, scholarships and support to chiefdom administration. While there are some exemptions in which some communities have made impressive gains in utilizing ceded mining revenues, the overall impact of these funds is generally minimal. The majority of these projects are poorly implemented with limited capacity to meet wider community needs including the needs of special interest groups (the elderly and the disabled). In some communities, vital socio-economic projects previously initiated have been abandoned half way in their development. Concerns regarding the effective utilization of ceded mining revenues continue to dominate discussions both at community and national level. Findings indicate that the failure of mining revenues to positively influence development in affected communities is due to the following factors:
1. Weak policy coordination and limited transparency in the administration of community mining beneficiation schemes
2. Lack of a comprehensive monitoring and oversight mechanisms including enforceable sanctions for misuse of revenues
3. The absence of comprehensive guidelines and systematic frameworks for generating, management and disbursement of mining related revenues
4. Delays in the disbursement of funds
5. Limited community knowledge and participatory practice to undertake development projects
In addition to the above issues, the study also identified specific challenges that further inhibit the impact and effective utilization of revenues ceded to mining communities as follows:
1. The size of funds in some communities is relatively small to undertake meaningful projects
2. International economic instability and/or disruption in world market prices for mineral resources
3. Limited civil society and government collaboration in the implementation of beneficiation schemes derived from the country’s vast natural resources
In order to fully capture the development potential inherent in ceded mining revenues and enhance socio-economic development in mining communities, the report makes nine recommendations for informed policy decision-making including advocacy action by interested civil society actors. The first five recommendations are aimed at policy level while recommendation 6 is for community level stakeholders. Recommendations 7 &8 are meant for civil society organizations interested in working with mining communities and recommendation 9 is suggested to forge collaboration between government, CSOs and the private sector.
Recommendations:
1. The government (MMR) to review and harmonize the various strands of policies dealing with ceded mining resources: The various mining beneficiation schemes (DACDF, CDF and others) were developed with the passing into law of numerous aspects of the country’s mineral sector. It is now necessary to review and harmonize them to ensure impact and common understanding at community level.
2. Develop a comprehensive paper trail framework and guidelines for calculating and redistributing mining revenues: Guidelines for calculating, redistributing and reporting on ceded mining revenues is strongly recommended. The simplification, adaptation and re-introduction of the DfID sponsored tool is a good starting place. The tool is a comprehensive monitoring paper trail mechanism with potential to reduce misappropriation of ceded resources.
3. In line with EITI principles, there is need for the MMR to publish mining related revenues and payments: A major issue related with mining beneficiation schemes is limited community knowledge of the value of ceded revenues due to non-disclosure of payments. In line with EITI principles, publication of payments at both national and community level will enhance transparent handling of beneficiation schemes and ultimately enhance community development.
4. Institute under the auspices of the Office of the President an independent Monitoring Unit to provide oversight over ceded mining related revenues: In view of the substantial size of ceded revenues to mining communities, a monitoring unit, independent of the MMR and possibly under the Office of the President should be considered. This unit should track use and development impact of ceded resources on mining communities.
5. Ensure regular and timely disbursements of due revenues to affected mining communities: Delays in disbursement of due revenues to communities is not only expensive in terms of the effects of inflation building/construction material, but also affect community momentum and quality of community projects.
6. Support community participation at local level: To ensure participation and the creation of project that meet wider community needs including the needs of special interest groups (women, elderly and disabled groups), it is important to support the development of community project committees (CPCs). CPCs should compose of ordinary citizens, representing various social groups and from various sections of their communities and independent of the current chiefdom development committees (CDCs). CPS should be charged with responsibilities of project identification, implementation and end-use reporting of projects progress and utilization of funds.
7. CSOs to provide capacity building support: CSOs interested in promoting development in mining communities should community capacity building on methodologies such as participatory development practices, knowledge of project cycles, planning (CAPs), financial management and project administration.
8. Advocacy action: As the adverse effects of mining mostly impact the health and safety including the environmental wellbeing of communities in mining areas, there is need for CSOs to enhance advocacy at all levels, targeting companies, local and central governments as well as local authority on their mandate to be transparent to communities on major decisions related to mining and ensure maximum benefits to affected communities.
9. Multi-stakeholder (government, civil society and companies themselves) collaboration: For advocacy to be effective there is need to create forums where mining policy information is shared including issues related to the administration, management and implementation of mineral related beneficiation schemes.
1. Research methodology
Conducted in twenty chiefdoms in five districts, the research team adopted a multi research approach and data collection techniques best suited for the purpose. This included a week-long mining policy desk review, facilitation of a participatory interview process involving 464 respondents/stakeholders at all levels in the extractive sector. A three-day pre-research training workshop was facilitated by the Lead Researcher in Kenema to validate the data gathering tool (see annex 3) and ensure commonality in research approach and evaluation of ethical and operational issues. The selection of the five districts for this study was based on purposive sampling rationale. Kono and Kenema for example are predominantly rich in diamond deposits and accounts for more than 80% of diamonds produced in Sierra Leone. Tonkolili and Port Loko on the other hand are rich in iron ore and other non-precious minerals while Moyamba is known for its blend of diamonds, bauxite and rutile deposits. For this purpose, the five districts are the current focus and of both artisanal and large-scale mining activities in Sierra Leone.
2. Limitations
Like in every research process, the study has limitations with implication to influence some aspects of its findings. Notable among these limitations were the near absence of revenue utilization data at community level. Inconsistent data recording at national level on the other hand presented enormous challenges to vet the actual volume of ceded mining revenues to communities affected by mining. Difficulty to access remote communities or project sites was also another important challenge.
3. Introduction
Sierra Leone has a diverse and rich mineral resource base, and mining is of vital importance to the country’s economy. The current mineral sector in Sierra Leone can be categorized into three sub-sectors: a) large-scale production of non-precious minerals –rutile and bauxite; b) large-scale production of precious minerals – diamonds; and c) artisanal and small-scale production of precious minerals – mainly diamonds, and to a much lesser extent gold. Oil deposits have also been recently identified and significant exploration plans are underway.
With two key divisions (Mines and Geological Department), the country’s mining industry is governed by the Ministry of Mineral Resources and Political Affairs. Prior to the war, the Sierra Rutile mine produced over 25 percent of the world’s rutile and was deemed as one of the world’s highest grade rutile deposits.[1] Interruptions due to the war led in 1995 to the closure of the mine. In 1994, the last full year of production, the rutile mine generated about US$60 million in exports, corresponding to a third of that year’s exports. To restart the mine, the Government entered into an agreement with an investor in 2001, which was modified in 2003. Production resumed in 2005.