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sharing in governance of extractive industries

THE CAUSES OF THE GROWING CONFRONTATIONAL ATTITUDE OF INDIGENOUS COMMUNITIES AGAINST LICENSE HOLDERS

‘Indigenous people’ is used in this posting to describe all the native peoples who live side by side in a defined geographical without necessarily sharing the same culture, like hunter-gatherers and farmers have done in parts of Central Africa for centuries.

The wind of change that has been blowing across Africa since the collapse of the Soviet Union is characterised by strong democratic aspirations and the adoption of various decentralised forms of government. In multi-ethnic states such as DRC electoral cycles have allowed the indigenisation of local government particularly in remote rural jurisdictions as incumbent non-indigenous central government appointees are progressively losing their stranglehold on executive positions to more popular indigenous candidates. In lot of cases their election campaign message essentially appeal to ethnic/nationalistic ties, reminding the electorate that ‘blood is thicker than water’ and pointing out the developmental disparities between the home areas of the ruling oligarchy and the rest of the country that, more often than not, provides the resources that finance national infrastructure and other benefits.

This evidently is related to the level of dissatisfaction with laws which grant central government 100% licencing authority of all mining assets. Whereas the growing emphasis on rights of indigenous populations is a welcome development, it must be acknowledged that it has opened a Pandora box that weak governance states are particularly ill equipped to deal with. It has occasioned among other things large scale environmental degradation resulting from the chaotic ASM exploitation of natural resources that has far-reaching consequences, all in defiance of national laws and international conventions. These ASM take opportunities offered by traditional authorities whom they pay levies on the basis of their assumed historical ownership on all natural resources found in their territorial boundaries in violation of laws. ASM settlements resulting from the influx of small-scale miners become prime incubators of social and economic ills i.e. armed conflicts, child labour, gender violence, slavery, fraudulent mineral exports and diseases that have far-reaching consequences and don’t leave the rest of the world indifferent.  

Once former politically marginalised populations, which could include even larger tribal groups that have fallen out of favour with the national leadership of the day, eventually take some measure of political control of their resource-rich land via the ballot, the first thing they do is claim for themselves a fairer share of the natural resources found in their land. This is generally in line with the mining code yet previously systematically ignored by outgoing leaders. Let’s note in passing that studies have shown that there is a strong correlation between infrastructural development and the map showing the origin of national leaders and regions that give them the biggest electoral support in nearly all states plagued by poor governance. These legitimate claims suppressed by the last tyrannies of the 90’s and their few ideological offshoots of 2000’s onwards are negatively perceived by reigning oligarchies whose entrenchment in public service and in central government political institutions still enable to delay at will the implementation of reforms that may negatively affect their privileges.

This situation often leads to tensions between central and emerging indigenous leaders; the rhetoric rapidly becomes tainted with undertones of tribalism or regionalism. Pressured by their impatient supporters, the indigenous executive deploy loyalists in key positions to monitor revenues generated from ‘their’ resources. It must also be added that indigenous leaders draw increasingly support from the groundswell of global recognition of indigenous rights i.e. ICMM and international financial institutions and IFC Performance Standards recommendations. Such pressing demands for good practices to be applied and the promotion of native communities create the perception that ‘other nationalities’ are discriminated against, and the indigenous majority and allies are accused of intolerance. It must be emphasized that nation is taken in this context as a body of people united by origins, history, culture or language inhabiting a particular territory. A country such as DRC is in effect a constellation of hundreds of predominantly mono-ethnic nations some with historically divergent interests and a host of legacy issues…but all expected to fuse into as one strong modern nation.

It’s important to note the tensions that have been observed are happening against the backdrop of fundamental differences in belief systems and mind sets between traditional communities on the one hand, and western-influenced officials on the all-important question of land. For traditional communities land is sacred and their right to it is inalienable, notions such as central cadastre office are totally absurd to them. This is particularly true for green field projects among populations that have never had any industrial mining history since colonial times. The colonial system dealt with the problem by simply making a tabula rasa of local land tenure traditions and imposing their own laws in areas where they carried out their activities. As for rest of the country traditional authorities largely have continued believing as they did in pre-colonial times that natural resources found on ancestral land are for them as heirs and don’t understand how any sensible person sitting thousands of Kms away in the capital could even think of granting titles on their ground to industrial companies, and worst still, without their prior knowledge.

One of the clearest illustrations of a community’s misplaced claims of exclusive rights over natural resources ever encountered by this author working as a Community Relations consultant happened in a tiny village in South Kivu, DRC this year; community members first refused an exploration company the right to draw water for camp use from a river in their village. They later relented following much negotiation but demanded they be paid $500 monthly for 60 000mᶟ of untreated surface water running into a much polluted river! DRC law clearly states that land and what’s beneath it belong to the State (Loi Bakagika, 1966). ‘Dura lex sed lex (tough!) lets apply the law’ one would be tempted to argue but in practice it’s common knowledge that the strict application of such a law is not conducive to fostering sustainable peaceful coexistence between local communities and industrial companies…It’s made all the more complicated when those resources are part the natives’ livelihood strategies in countries where rural unemployment rates exceed 80%; the claims tend to be become more radical, unreasonable, extremely politicised and sometimes result in violent actions from Project Affected Populations (PAP) influenced by local advocacy groups and powerful mineral traders and smugglers. 

It seems in DRC that the difficulties encountered by central government authorities in sharing mining revenues with local communities as stipulated by the mining code is a key factor in the hardening of communities’ attitudes; however, there are additional issues stemming from the country’s stunted nation-building process, 132 years after its creation out of the will of foreign powers who met in Berlin ….2 secession attempts (Katanga and Empire of Kasai in the early 60’s) and the defiant attitude of indigenous members of Provincial Parliament of resource-rich of former district Ituri in 2010 demanding that their jurisdiction be immediately  granted provincial status, and administratively break away from Province Orientale to comply with the 2006 constitution speaks volumes. Iturian MP’s seemed to be eyeing the control of provincial taxes on gold, and customs revenues that were channelled through Kisangani, the Orientale’s provincial capital. They could not care less about how the implementation of such unplanned actions would financially cripple the rest of their impoverished mega province severely constrained by lack of roads and basic infrastructure. They wanted provincial revenues generated locally for Iturians, period! And seemingly the rest of the province was none of their problem.

The resentment of poverty-stricken inhabitants of resource-rich areas against those they perceive to be the main beneficiaries of revenues generated is essentially a reaction to bad governance. It’s particularly evident in historical mining regions whose floristic and faunistic resources have also been depleted because of unregulated industrial, or artisanal activities in more recent years. People become increasingly desperate as they see all their natural resources being exploited and very little benefits accruing to their region. That is that’s really the crux of the matter. However, it is doubtful if granting decentralised entities their revenue allocations as stipulated in the mining code will end of all problems; there is no guarantee that newly chosen local leaders would be good stewards of that the available financial manna they often tend to overestimate and use it for the integral development of the community. They could even be less inclined to bettering the lives of community members than their predecessors. The key issue therefore is not so much a matter of having indigenous people per se at the helm, but that these representatives are people of integrity who are committed to the principles of good governance.

Local version of resource-nationalism?

As one analyses the rationale, and arguments put forward by indigenous leaders for a fairer share of benefits for the area, one can see similarities with strategies and arguments used by resource nationalism advocates. Jessica Morris’s investigation aired by CNBS in 2014 describes resource nationalism as government efforts to gain more control of its natural resources, this can be done through expropriations i.e. Zimbabwe’s indigenisation economic policy. The best known case of expropriation in DRC was First Quantum Minerals in 2010. Government can also raise taxation and royalties to increase its stake in natural resources produced in the country. Theoretically it’s done for a good cause but the procedure is so often clumsy that some governments end up doing more harm than good to their fragile economies. The present writer thinks claims for a bigger share of mining revenues by indigenous stakeholders are bound to increase and progressively turn more violent and disruptive especially in rebellion-prone Eastern DRC unless stronger and more urgent steps are taken to fully restore government’s authority and responsible practices. Experience has already shown that the principle of a fairer share of benefits alone is no panacea. The game-changer needed is accountability, good governance from local leaders and ethical practices from industrial miners; the challenge is how to ensure bad practices are eradicated. In conclusion here are a few suggestions on what can be done to mitigate the disruptive trend:

  • Bridging the knowledge and mind set gap between local stakeholders i.e. communities and Government, and between investors and government.

  • Examining past and current natural resources models of governance that have produced some positive results i.e. Norway, Royal Bafokeng…and drawing useful learnings that can be universally applied.

  • Urge all stakeholders to greater transparency and encouraging EI to clean up its act and outlaw practices such as misinvoicing, asset flipping, over-invoicing and under-invoicing that may provoke justifiable resentment from natural resource producers whose weaker position leaves very few options. As they say, two wrongs don’t make one right.

  • Thinking more creatively on individual sanctions against leaders (official and traditional) and international investors who fall foul of good practices in governance in the mining sector.

  • Implementing more substantive upstream beneficiation strategies to ensure natural resource- endowed states boost their revenues and obtain the funds they need to invest more in social initiatives for project affected communities.

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Comment by Mulya Jules on August 16, 2017 at 11:27

Hi Rahul. Thanks for your edifying comment and stressing that 'no one has the right to consume the capital'...it's basic (common) business sense!  Many thanks for those useful references on a subject that's becoming increasingly preoccupying..i.e.

https://noticias.caracoltv.com/medellin/dos-camiones-que-transporta...

I'm far from a PhD just a Community Relations Practitioner working in most challenging environment in eastern DRC...As I write these lines I'm busy trying to address a very tricky community-related risk

Comment by Rahul Basu on August 16, 2017 at 7:29

Great post. Reminds me of "Seeing like a State" by James C Scott.

We take the position that since minerals are a shared inheritance, it is our responsibility to ensure the next generation receives either the minerals, or their full value. If we achieve that, we may consume the income. So we are recommending 3 steps are necessary for owners of minerals (a) sell the mineral for zero loss, ie, capture the full economic rent (b) invest everything in a new "non-wasting" asset - we recommend a Norway style fund, also a part of the commons, and (c) since the minerals are owned in common, so is the fund, and any real income should simply be distributed as a commons dividend. A loss is a loss the people and all future generations. 

Of course, this depends on clearly understanding who the owner is - which Dr. Jules has shown is disputed. However, it remains a dispute over the beneficiaries of the commons - no one has the right to consume the capital.

We found in Goa, India, for iron ore mining, over a 8 year period, the Goa government as the public trust owner of the minerals, lost more than 95% of the economic rent. Nor is this an outlier. We found similar results for iron ore in other parts of India (92% loss) over a decade. Fossil fuels had already exceeded 50% losses by 2005. These are all losses in step 1. Note that a loss is effectively a per head tax, imposed equally on the billionnaire and beggar, with the rent seekers benefiting. See more here: http://goxi.org/xn/detail/5786733:BlogPost:86008?xg_source=activity

Step 2 is also constantly breached. This is primarily because mineral receipts (royalty) are called revenue or taxes, and are accounted for as revenue. Revenue can be spent, and is spent in myriad wasteful ways. If we see mining as the sale of our family gold, royalty is automatically a capital receipt from the sale of an asset. See more here: http://goxi.org/xn/detail/5786733:BlogPost:100120?xg_source=activity

Our overall perspective also takes the environment into account. https://medium.com/@thefutureweneed/what-is-the-future-we-need-8ae3...

Comment by Mulya Jules on August 14, 2017 at 7:00

Thanks Antipas. I'm glad your article was translated into French

Comment by Antipas Massawe on August 13, 2017 at 22:35

Jules,

Thank you for addressing а lot more in-depth what I shared on before here

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&sou...

or here https://www.contrepoints.org/2013/08/26/136491-rendre-leurs-droits-...

I think the main cause of the problem addressed here is that the central governments of mineral rich underdeveloped countries like DRC and Tanzania dishing out the people’s heritage of non-renewable mineral deposits mostly to foreigners for taxes which are tiny fractions of the revenues generated from their exploitation, are not earning much of what they and the people deserve from their exploitation.

Simply because the highest mineral taxes we have or could be earned in the world are still tiny fractions of fractions of the mineral revenues they source from/ or the shares of mineral revenues nations deserve from the exploitation of their mineral resources.

Deploying measures which would enabled the people and/or their governments at different levels of their national societies to become one of the main shareholders of the ongoing exploitation of the non-renewable natural wealth inherent in their mineral deposits is what the central governments of mineral rich underdeveloped countries like DRC and Tanzania should have done and ensure they and the people at different levels of their national societies would earn deserved shares of the revenues generated from the exploitation of their non-renewable mineral deposits.

It is the approach which produced some the positive results i.e. Norway, Royal Bafokeng you mentioned.

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