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The Mining (Corporate Social Responsibility) Regulations, 2023
Market Insight 22 August 2023 22 August 2023
Corporate Social Responsibility
The Mining (Corporate Social Responsibility) Regulations, 2023 (the Regulations) were published on 23 June 2023 by the Minister of minerals under Government Notice Number 409 of 2023. These Regulations have been introduced to ensure the proper and timely implementation of corporate social responsibility (CSR) by mineral rights holders as provided for under section 105 of the Mining Act, Cap 123 R.E 2019 (the Mining Act). So far, the Regulations are only available in Swahili. We anticipate that an English translation will be published in due course.
The Regulations apply to mineral rights holders prescribed under Part IV of the Mining Act, these includes the following:
- prospecting licence holders;
- special mining licence holders;
- mining licence holders;
- primary mining licence holders;
- mineral processing licence holders;
- smelting licence holders; and
- refining licence holders.
In this updater, we refer to the above as the Licensee.
The following key terms have been defined in the Regulations:
- “Committee” means a committee of experts responsible for the mining CSR as prescribed under regulation 5.
- “Commission” means the mining commission formed pursuant to section 21 (1) of the Mining Act.
- “Local government authorities” means the village, small town, ward, district councils, or any other local government authority established under the Local Government (District Authorities) Act, 1982; or ward, street, urban, municipal, or city council established under the Local Government (Urban Authorities) Act, 1982; and
- “Minister” means the minister responsible for minerals.
Below, we will discuss some of the key concepts that are provided for in the Regulations:
Establishment of the Committee.
The Regulations have mandated each local government authority (LGA) of the host communities to form a Committee in its respective area that will be responsible for reviewing the plans, drawings, and timetables submitted by the Licensee for the implementation of CSR. The Committee will be tracking compliance and the effectiveness of CSR policy, among other responsibilities as provided in the Regulations.
Preparation of the CSR Plan (the Plan)
The Licensee is required to prepare a credible Plan that is jointly agreed upon with the relevant LGA of the host communities. The collaboration between the Licensee and LGA aims to promote and focus on the proper implementation of Licensee CSR in line with LGA priorities of the host community.
When preparing the Plan, it is crucial for the Licensee to consider the environmental, social, economic, and cultural activities based on the LGA priorities of the host community; measuring criteria; implementation and completion of such a plan within the prescribed timeframe; and whether it can be completed within the prescribed timeframe.
It is important to note that proposed projects to be included in the Plan will first be vetted by the Ward Development Committee before submission to the respective LGA for review and confirmation annually each October.
Approval process for the Plan
Within seven (7) days of the submission of the Plan, the LGA will review the Plan together with the expert opinion issued by the Committee and decide whether to approve or reject it. In some instances, the LGA may return the rejected Plan to the respective Licensee for amendment and resubmission.
Once the LGA has approved the Plan, they will, within thirty (30) days, submit the approved Plan to the Minister Responsible for the LGAs and the Minister of Finance (the Ministers) for their approval. Within fourteen (14) days after receiving the Plan, the Ministers will approve or reject it through their joint committee and inform the LGA accordingly. However, if the Ministers fail to issue their decision regarding the Plan in a timely manner, the LGA will presume that the Plan is approved upon the expiry of twenty-one (21) days.
The LGA must within seven (7) days from when the Ministers approve the Plan, present the final approved Plan to the Licensee. Lastly, the Licensee will submit the approved Plan to the Commission.
Please note that in the circumstances where the LGA and the Licensee have failed to reach an agreement regarding the Plan, the parties may refer the matter to the Regional Commissioner for a resolution.
Implementation of the Plan
In line with the Regulations, the Licensee is solely responsible for implementing their own Plan according to the agreed budget. In compliance with section 105 (5) of the Mining Act, the allocation of the budget set for CSR projects will be in the manner prescribed below:
- 40% of the budget will be allocated for projects in the village or street of the host community; and
- 60% of the budget must be set aside and allocated for projects of the district, town, and municipal councils of the host community.
Please note that the Licensee may opt to employ an engineer or any other qualified candidate to oversee the implementation of the CSR projects that are prescribed in their Plan.
The Licensee is required to set aside an annual budget for the implementation of the CSR projects in the host communities, as highlighted above. In addition, the Licensee, after carrying out the Plan, must inform the LGA and Commission in writing of all the payments made to the engineers, junior engineers, or other personnel who participated in the execution of the Plan.
It is important to note that the authorised budget, which is set aside by the Licensee for the implementation of the Plan, will be utilised in the prescribed financial year. In instances, where the Licensee does not utilise the budget as prescribed, it will be carried forward to the next financial year.
Furthermore, the Licensee will be responsible for informing the LGA and the Commission of the reasons they failed to utilise the budget for implementing CSR projects in the prescribed financial year.
Submission of quarterly and annual financial reports to the Commission
For transparency and proper implementation of the Plan, each Licensee must submit to the Commission a detailed financial report of all the costs and expenses spent during the project’s implementation for all projects completed for each quarter and each year. Please note that the quarterly report must be submitted to the LGAs as well.
The period for submitting the quarterly report is within fourteen (14) days after the end of each quarter and the annual report should be submitted within sixty (60) days after December 31 of each year.
Consequences for Non-Compliance
Any Licensee who fails to comply with the requirements set under the Regulations will be in violation of the Mining Act and may face suspension or cancellation of the mineral rights as prescribed under section 63 of the Mining Act.
Should the Licensee or LGA fail to comply with the requirements and obligations set under these Regulations within the prescribed time, they must make an application to the Minister requesting an extension of time and providing the reasons for their delay (the Application).
The Minister will assess the Application and decide whether to grant or refuse it. Where the Minister grants the Application, the extended time will not exceed thirty (30) days. Notably, the Licensee must implement the Plan within the extended timeframe prescribed by the Minister without any further delay or extension.
If any dispute arises between the Licensee and the relevant LGA while implementing the Plan, the parties are required to resolve the dispute amicably. Should the parties fail to do so, the aggrieved party may refer the dispute to the Commission within seven (7) days. The Commission will give its decision within fourteen (14) days.
If any party is further aggrieved by the decision of the Commission, they may appeal to the Minister within seven (7) days from the date the Commission issued its decision. Thereafter, the Minister will issue a subsequent decision within thirty (30) days.
The Regulations are silent as to whether the decision of the Minister shall be final or if there is room for an aggrieved party to seek a court adjudication for a remedy in such disputes. Since we have yet to see the implementation of these Regulations in practice, we can only rely on the recourse prescribed under the Regulations.