Steve Kalmin

Steve Kalmin

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An initiative aimed at increasing the transparency of mining companies’ payments to governments across the globe has been slammed as paternalistic and ineffective by representatives of the people it was claimed to help.

The extractive industries transparency initiative (EITI) was first announced by then UK prime minister Tony Blair at the world summit on sustainable development in Johannesburg in 2002. It was launched a year later, at a time when the entire developed world, led by Blair and pop stars Bono and Bob Geldof, seemed determined to save Africa from itself.

It is described as a multistakeholder initiative involving the relationships of governments with civil societies and multinational corporations.

Its aim is to increase transparency in the mining, oil and gas sectors through corporate disclosure of the money paid to the governments of the countries where mining companies operate. The critical underlying assumption is that increased transparency will lead to improved accountability by those governments. In turn, this enhanced accountability is expected to result in improved delivery and less corruption.

So much for good intentions.

David van Wyk, a researcher with community-based NGO Bench Marks Foundation, describes EITI as yet another global initiative driven by powerful corporations. "The big companies want us to believe they are being held accountable by citizens, but what’s actually happening here is that they’re pretending to be the good guys while throwing mud at African governments," says Van Wyk, who has just completed a report, soon to be published, assessing the effect of EITI.

Among Van Wyk’s damning conclusions is that the EITI, which is voluntary, offers the large oil, gas and mining companies a "safe alternative" to mandatory regulation. Also, that it fails to tackle tax avoidance and revenue distribution, and completely overlooks the frequently devastating human and environmental impact of resource extraction.

A revision of the EITI rules in 2013 has addressed only a few of the less important flaws in the system’s design, says Van Wyk. He does not entirely condemn the initiative, and commends the participants for their good intentions, noting the involvement of the socially aware Norwegian Sovereign Fund.

"Investment is driven by reducing costs and increasing yields; some fancy CSI [corporate social investment] statements and box-ticking won’t change the fundamental reality that environments and communities have to bear the priceof that."

A suspicion of double standards and paternalism may explain SA’s refusal to sign up to the EITI. Though there has been no formal statement on the matter, a series of comments by senior government officials, from the department of mineral resources to national treasury, conveys the general scepticism.

Former finance minister Trevor Manuel was particularly scathing of the initiative’s anti-African bias at an international corporate governance conference some years back.

The official SA view is that government is sufficiently transparent in accounting for its revenue and sees no compelling need to be a signatory of the EITI.

It’s a view that will be endorsed by anyone who has sat in on the very lengthy annual budget presentations in February, or the equally lengthy annual medium-term budget policy statement presentation nine months later, in October.

Further endorsement is that SA generally scores well in the open budget index.

For those still not persuaded about its high standards of transparency, government also alludes to the Promotion of Access to Information Act, which allows citizens to gain access to the type of information covered by the EITI, and lots more.

All the significant SA-based mining operations are, in EITI parlance, "supporting companies".

The list of local supporters includes African Rainbow Minerals, Anglo American, AngloGold Ashanti, Glencore, Gold Fields, Impala Platinum and Lonmin.

In its recently released annual report Glencore reveals (in terms of its EITI obligations) that it contributed US$83.5m to the SA fiscus in 2015. Its total payments to governments across the globe were almost $3bn, with Australia the single-largest recipient.

Group chief financial officer Steve Kalmin says the company is committed to the highest standards of corporate governance and transparency. "The tax and royalty payments we make in connection with our activities can be used to provide the citizens of those countries with government services and infrastructure to improve their quality of life," Kalmin says.

He believes disclosure of the payments reduces the potential for corruption by all parties.

For Van Wyk this kind of statement is little more than cynical whitewash designed to relieve companies of any responsibility.

He alludes to the investigation launched several years ago by the European Investment Bank into tax evasion allegations against Glencore’s Zambia-based subsidiary Mopani Copper Mines.

The secrecy surrounding the investigation’s report confirms Van Wyk’s view that the governments of the rich North are keen to promote the perception that the resource curse is an African government problem.

Last year, after prolonged efforts by various EU-based NGOs to get access to the report, EU ombudsman Emily O’Reilly slammed the European Investment Bank for the way it handled the request, saying it had failed to meet its obligations under its own transparency policy. Glencore has consistently denied any wrongdoing.

Reinforcing the perception that the voluntary EITI is an easier and more manageable set of standards than anything that might be imposed by regulators was the US-listed extractive companies’ aggressive opposition to section 1504 of the Dodd-Frank Act. This section required all US-listed extractive companies to publish how much they paid governments for international projects, and was due to be enacted in 2012.

For a while stiff opposition from the oil industry, led by the American Petroleum Institute, stalled the enactment. The oil industry argued that section 1504 would cost it $1bn/year to implement and would expose commercial secrets.

In an unintentionally damning indictment of the EITI, the institute and its members have urged the US Securities & Exchange Commission to allow them to opt for a voluntary system. The industry players have backed the EITI as the "more sensible" alternative to section 1504. The commission held out, and last month enacted a slightly modified version of section 1504.

It will help to up the stakes in transparency, but on the other side of the world, in Motlhabe Village in the middle of the Rustenburg mining belt, the Bench Marks Foundation community watches as its lifestyle and environment continue to deteriorate.