Mining Institutions


12. Other Government Departments (OGD)

The term, “other government departments” is a  catch-all phrase used in some countries to describe the involvement of government institutions (along with the mining regulator) in some form of regulation concerning the mining sector. The following are the principle OGDs involved in regulation of the impacts, revenue, or infrastructure required for a mining industry.

Environment

The institution responsible for environmental management of mining’s impacts can take a number of forms. Usually, it is either an Environmental Commission or Environmental Protection Agency that falls under the umbrella of an overarching institution responsible for land and natural resources.

 

The Zambian Environmental Management Agency is an example of an independent institution formed to deal with environmental impacts of all industrial sectors. It falls under the jurisdiction of the Ministry of Environment and Natural Resources.

Or the environment regulator can be a stand-alone government institution that only deals with environmental issues and has its own Minister. This is the case in Canada where there is a very powerful national environment department How a government decides to structure its environment authority depends to some extent on the value it places on its function. Quite often, the institutions that govern economically generating activities such as mining, are better resourced and have more sophisticated infrastructure than the environment department. This is not as true in more developed countries where there is more industrialisation, and therefore more revenue overall to support government institutions. In these countries, the environment institution must be strong to withstand the pressures coming from economic development values versus values around protection of the environment. Developing countries are usually most concerned with the need for revenue, employment and industrialisation. Increasingly, however, environmental issues are receiving more government attention in developing countries, as well.

The strength of the environment institution is of paramount importance to the mining industry. The strongest regulatory requirement in most jurisdictions is the Environmental (and Social) Impact Assessment. The EIA is almost always required as a condition for mining to proceed. If there is insufficient human resource capacity, a lack of systems, or poor physical assets (vehicles and equipment), the EIA cannot be evaluated or monitored throughout the mine lifecycle.

Finance

The institution that is charged with tax policy, tax collection, budget formulation and development planning is usually the best resourced in a government. These staff are usually highly qualified and receive competitive compensation. The physical infrastructure of the institution is usually very good. Sometimes there is an Agency set up for tax collection that falls under the Finance Ministry but may be separate from it. The Botswana Unified Revenue Service in Gaborone is one such institution. It has been set up to perform tax assessment and collection functions on behalf of the Government. It is mandated to counteract tax evasion and to improve service to the public. The Ministry of Finance and Development Planning coordinates national development planning, manages financial resources, formulates economic and finance policies, and manages the National Treasury.  There is a similar set-up in Zambia where the Zambian Revenue Authority is responsible for tax collection, but there is an overarching Ministry of Finance that sets policy, manages the budget and is responsible for the national Treasury.

The strength of the authority charged with financial matters is another other key area where mining companies look for institutional strength. The most likely conflicts that a mining company is going to have with government is either over financial obligations or environmental (including land) management. Companies and government are most likely to meet in Court over taxation disputes. So, it is critical that governments provide training and infrastructure support to its financial regulator so that it can be sufficiently qualified to deal with complex mining tax matters.

The finance regulator is often in charge of negotiating mineral development agreements, conventions or contracts with a mining company.  These negotiations usually include discussions about tax rates, incentives, allowances, and other fiscal arrangements.  There is often a perception that government is disadvantaged in this type of negotiation. However, the Botswana government negotiation with De Beers mining company over the years has been an example of where the government’s Finance Ministry officials have presided over very good deals for the government. The arrangements have taken different forms over the course of the relationship, but include 50-50% local equity sharing arrangements in Debswana, the transfer of the Central Selling Organisation from London to Botswana, and a government stake in the global De Beers mining company.

Botswana is a good example of where institutional strength has led to a “level playing field” for government and industry’s financial negotiations.

Water, Land, Energy, Transportation Infrastructure

The institutions responsible for the provision of services and infrastructure ensure that the mining company has what it needs to be able to operate. Mining and processing activities are dependent on sufficient water and energy. When a mining company cannot get a water permit because the institution charged with water affairs is not adequately staffed, this will delay or stop a mining project.