Legal Update – 30 June 2023

Mining CSR Regulations Published

  • Applicable to all mineral right holders
  • Duty to prepare CSR Plan articulated
  • CSR experts committees established
  • CSR Plan approval procedures stipulated
  • Financing and compliance obligations tightened
  • Auditing and reporting requirements provided
  • Dispute settlement mechanisms addressed
  • Offences punishable by suspension or cancellation of licence

In view of providing further guidance to mineral right holders in implementing the provisions of the Mining Act, 2019 (the Act) on corporate social responsibility, on 23 June 2023, the Minister for Minerals issued the Mining (Corporate Social Responsibility) Regulations, 2023 (the Regulations) vide Government Notice No. 409 of 2023.

It is worth noting that the Regulations are applicable to mineral right holders covered under Part IV of the Act, namely holders of Prospecting Licences, Special Mining Licences, Mining Licences, Primary Mining Licences, Mineral Processing Licences, and Smelting and Refining Licences.

The Regulations require mineral right holders, on annual basis, to prepare a credible corporate social responsibility plan jointly agreed by the relevant local government authorities (LGAs) of the local area in which the mining operations take place. Further, the development projects that will be identified by the relevant LGAs are required to be deliberated upon by the Ward Development Committees with the involvement of the mineral right holder and then submitted to the District/Municipal/City Council, as the case may be, for further scrutiny and verification by October each year. Furthermore, the implementation of the Corporate Social Responsibility Plan (CSR Plan) should observe the allocation of the resources at the ratio of 40% and 60% for local areas in which the mining operations take place and the District/Municipal/City Councils, respectively.

Moreover, the Regulations oblige every District/Municipal/City Council with mining operations in its area to establish Corporate Social Responsibility Experts Committee (the Committee). The said Committee is composed of the Executive Director (who is the Chairperson); the Planning Officer (who shall be the Secretary); the Mining Commission Officer in the respective area; two representatives of the mineral right holder; Engineer; State Attorney; Environment Officer; Community Development Officer; and an Officer from a specific project that will be implemented through the CSR Plan. In terms of the functions of the Committee, the Regulations empower the Committee to, among others, review plans, implementation schedules and other matters related to CSR, and submit the same to the District/Municipal/City Council; ensure that there is value for money in the projects that are implemented; ensure quality of materials and efficiency in the CSR projects; and prepare projects implementation report and submit the same to the District/Municipal/City Council.

The Regulations demand every District/Municipal/City Council to approve/disapprove the submitted CSR Plan within 7 days from the date of receipt of the same. In case the plan is disapproved, the mineral right holder is obliged to amend/improve the plan and resubmit the same for approval. Further, after the said approval, the respective Council should submit the CSR Plan to the Minister responsible for local government authorities and the Minister for Finance (Ministers) within 30 days. Upon receipt of the CSR Plan, the Ministers appoint a joint committee to advise them regarding the submitted plan. Based on the advice, the Ministers may approve/disapprove the plan and send feedback to the respective Council within 14 days. In case the Council does not receive feedback from the Ministers, the submitted plan is deemed to have been approved upon expiry of 21 days.

Further to the foregoing, the Regulations require the CSR Plan to take into account environmental, social, economic and cultural activities based on local government authority priorities of host community. Furthermore, the said plan has to be viable and capable of being implemented within the agreed timeframe.

Regarding financing of projects under the CSR Plan and related compliance matters, the Regulations make it mandatory for mineral right holders to provide funds for the implementation of all projects and submit a report to the respective Council and the Mining Commission (the Commission) in relation to all payments made to contractors, subcontractors and other persons who implemented different projects. On top of the said requirement, a mineral right holder is also duty bound to submit quarterly and annual reports to the Commission regarding the amount of money expensed and CSR projects implemented within 14 and 60 days, respectively, from the end date of the respective periods. Additionally, the Commission is mandated to conduct audits to the mineral right holders on the funds set for CSR, and in the event such funds are not fully appropriated in a certain fiscal year, the mineral right holder will be obliged to provide such funds in the subsequent years accordingly.

On the implementation of the CSR Plan, the Regulations provide that the mineral right holder should observe procurement requirements and is at liberty to engage a contractor or any other person to undertake works as per the plan. In the course of the implementation, the respective Councils are entitled to oversee the execution of the projects and may inspect any contracts, bills of quantities, or any other relevant documents.

Since there are chances of disputes to arise in the implementation of the CSR Plan, the Regulations provide that disputes between a mineral right holder and the respective Council should first be resolved amicably through negotiations. If such a dispute is not resolved by negotiations, either party may refer the said dispute to the Commission, and appeals against decisions of the Commission lie with the Minister for Minerals.

Lastly, the Regulations make it an offence for a mineral right holder to fail to comply with the provisions of the Regulations. The penalty for such an offence is as provided under section 63 of the Act, which includes suspension or cancellation of a licence.

With CSR being voluntary in nature in view of obtaining social licence, we wait to see how imposition of penalty will be perceived in the implementation.

To read the Mining (Corporate Social Responsibility) Regulations, 2023 click here.