Corruption is a horrible stain on the international business climate. This is particularly true across the African continent. Mineral exploitation in Africa sees corruption at an extraordinarily high level.
There is perhaps no industry that would benefit more from transparency requirements than international mining. The Resource Revenue Transparency Working Group, working with a number of civil society and industry stakeholders, has taken a significant step forward in the production of an international set of standards for transparency.
The participation of Canada’s two biggest industry organizations and the support of a number of prominent investors will ensure compliance and a comparatively smooth implementation. Such standards will serve African countries as well as the Canadian businesses engaged in mineral exploitation.
Four of the seven most corrupt countries in the world are in Africa, according to Transparency International’s 2013 Corruption Perceptions Index. Of these four — Libya, South Sudan, Sudan and Somalia — three get most of their revenue from mineral exploitation.
Beyond these four countries, approximately 30 percent of the world’s mineral wealth is in Africa yet the continent lags behind in most development indicators and is riddled with graft.
The connection between mineral wealth and corruption is not new. For decades scholars have discussed the “natural resource curse” or “Dutch disease” whereby mineral wealth brings corruption and enriches a few while not leading to the human development that mineral or petrodollars should. In a similar vein, the expansive wealth for an elite few and requisite corruption erode democracy and human rights. Instead, they tend to tighten the grip of authoritarian governments or enrich horrifying militias.
While attempts to remedy this unfortunate truth have seen mixed success, Canada’s two biggest mining trade associations have put their considerable weight behind a new set of transparency principles to stave off corruption. The Mining Association of Canada and the Prospectors and Developers Association of Canada announced in a report from the multi-stakeholder Resource Revenue Transparency Working Group that they would support extensive new publication and transparency initiatives into foreign mining ventures.
In addition to the support of the MAC and the PDAC, the self-proclaimed “…voice of Canada’s upstream oil, oil sands and natural gas industry,” the Canadian Association of Petroleum Producers said it supports the principle of mandatory publish-what-you-pay rules but it worries about implementation and would be more supportive of a project-based approach with considerable flexibility.
The participation of Canadian trade organizations is a significant step in the anti-corruption movement. Nearly 60 percent of the world’s mining companies, including more than 1000 operating in approximately half the world’s countries, are subject to the jurisdiction of Canada’s various securities commissions. Securities commissions in Canada are run through provincial governments.
Claire Woodside is director of the Canada chapter of Publish What You Pay, a leading anti-corruption-in-mining organization. In a prepared statement, she described the development as “…real game-changer…”
There has traditionally been a much greater success rate in fighting corruption with industry-led initiatives than when business and human rights programs are led by non-profit or government actors.
The International Council on Mining and Metals and Publish What You Pay are two significant examples of this success in mineral extraction. These organizations have created frameworks for anti-corruption and transparency worldwide that have led to significantly greater openness in African mining ventures. This underscores the importance of the support of the two biggest mining trade organizations in Canada and the potential support of another industry giant.
The proposal would force all payments of more than 100,000 Canadian dollars from publicly traded large mining companies to be disclosed to provincial securities commissions. Smaller publicly traded companies would be forced to disclose all payments above $10,000. Among the complaints from the from Canadian Association of Petroleum Producers is that the initiative only applies to publicly traded companies and not privately held or state owned corporations. Presumably, the organization believes this would give privately held and state owned companies a competitive advantage.
Pierre Gratton, president and CEO of the Mining Association of Canada said the proposal “…is consistent with existing laws in the European Union and the U.S. and moves us a big step closer to a global standard,” He added that “…a global standard is critical for this type of disclosure to create a level playing field for companies. It is also essential to ensure this data is consistently reported between countries for it to be truly useful to communities who wish to use it to hold their governments accountable for the responsible use of mineral revenues.”
Anti-corruption efforts are not merely the providence of human rights and development activists. A group of 24 Canadian investment institutions, representing more than $362 billion Canadian dollar assets, released a statement supporting the ongoing work of the group. The investment institutions, all with “…exposure to mining and oil and gas companies,” recognized that “…transparency on payments by extractive industry companies to host governments is an important contributor to good governance and sustainable development in resource-rich countries, which in turn benefits companies and their investors. Further, this transparency provides investors with useful information to effectively assess and address portfolio risks related to different jurisdictions.”
Andrew Friedman is a human rights attorney and consultant who works and writes on legal reform and constitutional law with an emphasis on Africa. He can be reached via email at afriedm2@gmail.com or via twitter @AndrewBFriedman.
