sharing in governance of extractive industries

Contract Transparency Critical To Enable Transparency In The Mining Sector

Corporates are less resistant to the idea of disclosing payments made to governments and corporate beneficial ownership compared to the reasons why they make payments to government” Rob Pitman

Recent developments concerning mandatory disclosure of payments made to governments by mining companies listed in EU, Canada and USA in addition to Extractive Industry Transparency Initiative (EITI) reports have changed the transparency landscape. After revenue transparency, public registry of beneficial ownership is within reach. But just how significant is this dynamic to transparency and accountability in the mining sector.

Rob Pitman of Natural Resource Governance precisely explains this critical development, we may know now what mining companies are paying to government as well as who is benefiting from mining activities. But without the knowledge of the reasons why mining companies make payments to government, how can citizens better monitor if they are getting a fair share of taxes from mining companies?

To gain a fair understanding of nuances around contract transparency, Publish What You Pay mini data extractors workshop, touch based with expert in this field, Rob Pitman. The mini data extractors workshop is being held in Ghana as an aside to Africa Open Data Conference running from 17 to 21 July under the theme “Open Data for Sustainable Development in Africa.”

A mining contract is mainly a written document with setting terms and conditions that creates rights and obligations between government and a mining company on the exploration or mining of mineral wealth. Given that contract transparency is a very topical issue in the agenda of curbing corruption in the extractive sector, PWYP had several questions for Rob Pitman who keenly shared fascinating perspectives on the issue.

Mukasiri Sibanda who works with the Zimbabwe Environmental Law Association (ZELA) was keen to learn more on contract transparency under licensing regimes like Zimbabwe. South Africa’s PWYP coordinator’s interest was on contract transparency and open contract basics.

Jessie Cato, National Coordinator for Publish What You pay Australia wanted to understand how contract transparency applied in different country contexts, how it fit within the larger conversation about extractives transparency, particularly for countries like Australia where they are campaigning for a mandatory disclosure reporting regime.

Quentin Parrinello, National Coordinator for Publish What You Pay France wanted to hear more about concrete best practices around Open Contracting; which country are doing it? How much human resources are they using? How are local communities already using it?

As a key starting point, Rob explained that contract transparency is a component of open contracting. Full disclosure of data on the tendering process, the contract agreement and its implementation and performance is what constitute open contracting. Initially, open contracting was developed to make public procurement more open for citizen accountability. Standards have been developed in this field.  The trend on open contracting can also be used in the extractive sector to promote disclosure across the whole contracting process like public procurement processes.

Licensing regimes such as Zimbabwe, on paper, follow best practice on contract disclosure as there are no contracts negotiated per each project. Various pieces of legislation governing the extractive sector constitute the basic compliance requirements for corporates. That said, information like Environmental Impact Assessments (EIAs) and fiscal arrangements and payments made to government should be disclosed.

Disputes in some case have shown that licensing regimes may have some special agreements like stabilisation clauses which undermine the country tax code. It vital to point out that the section 315, subsection 2c of the Constitution in Zimbabwe provides for disclosure of negotiation and performance of mineral concession and other rights. It can be argued that open contracting in Zimbabwe is mainly a matter of the gap between the practice and the law.

Mexico is an interesting example of open contracting best practice in the extractive sector. Its online platform provides information concerning the tendering, contract and performance of the contract like revenue generated by a company and payments made to government.

Standards such as EITI have been influential to bring on board mandatory disclosure of payments made to governments by corporates listed in Canada and EU. It is now possible for citizens in resources rich countries that have not embraced best practice on company payments to government to access such information through the ESTIMA reports, Zimbabwe is a case in point. It is important to take note though that such information can be only accessed provided the company in question is listed directly or indirectly in Canada and EU.

Right now, EITI is targeting for public disclosure of beneficial ownership by .... EITI should also move with speed on open contracting to influence a broader scope on mandatory disclosure. If partial disclosure of contracts is done, Rob warned, it might give an unfair commercial advantage to companies that are not disclosing contracts.

The corruption risks in the award of extractive sector have been compiled by NRGI here. Such studies help CSOs and the citizens to have a better understanding on why open contracting is important. That said, laws on transparency are not enough. Corporates must shift their aggressive behaviour, promote ethical conduct by paying a fair share of taxes in countries where they are extracting resources. It must never be forgotten that the history of companies and exploitation of Africa’s natural resources is quite dirty.  Countries such as Zimbabwe were colonised by a company, the British South Africa Company.

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