sharing in governance of extractive industries

New Horizons in Ending Corruption in the Extractive Sectors

Policies on transparency and accountability in mining sectors have become the centrepiece of good governance in resources management. While the pressure on the end users side has produced tremendous results, people living in these resource-endowed countries have not yet enjoyed the benefits from these new regulatory schemes.  The problem is this:  the State remains the guardian of the different international regulations. Political elites in those countries are rent-seekers rather than catalysers of maximizing the social well-being. In a rent-seeking environment, measures of transparency and accountability should challenge the uncontrolled authority of the executive branch over the extractive sector.  In countries where democratic principles are non-existent and authorities, trusting a predatory government without oversight mechanisms of control remain an impediment to an effective transparency and accountability (Wang, 2015).

Activist groups who are fighting the war on conflict-free minerals succeeded somehow in reducing criminality in the mining sector. They have compelled multinational corporations with investments in highly sensitive and risky areas to engage ethical business. This is an impressive achievement we must recognize the contributions that organizations such as The Enough Project[1], Global Witness[2], Pact (iTSCi program)[3], and EITI group have made toward ethical resource management in eastern DRC.  Nonetheless, we have reached a breaking point[4] in this campaign where we should compartmentalize responsibilities among the actors. It is time to target corrupted political elites in the extractive sectors. 

The recent data (2016)[5] on responsible and ethical sourcing minerals indicate that extractive industries have slowly embraced the ethics of responsible business (Callaway, 2017). They are major players in the mining sectors, however, the complexity of the network and the back channels through which blood minerals reach the global market makes it disingenuous to opine that we are nearing a transparent and responsible mining business in which natural resources contribute to the public interest.[6]

In a conversation with Tatiana Carayannis on October 2017, Director of Understanding Violent Conflict at the Social Sciences Research Council, she mentioned the need for understanding and tracking the network behind the collapse of the Congolese political economy as means to dissect Congolese political instability. In January 2018, I had the chance to speak with Annie Callaway, the Deputy Director of Advocacy of Corporate Engagement at The Enough Project. They have launched the Sentry Project that follows the money and goes after the wallets of those responsible for mass rape, child soldier recruitment, and genocidal violence in resource-endowed countries. Exposing the criminal network is an unprecedented step towards an achieved accountability. Nevertheless, a confounding argument to track the network may fall short with attitudes such as rightfully recognizing Rwanda as the world’s single largest exporter of the tantalum mineral known as coltan (International Monetary Fund, 2013) while there is no such reserve of Coltan in Rwanda. Or if we consider the revelation by the Panama Papers[7] of the politicians, criminals and rogue industries in the extractive industries, there is an organized crimes community of individuals willing to split blood for economic advantage. How do we break that nexus of conspiracy in which corruption is the right thing to do?

In the context of the Democratic Republic of Congo, whether we go after the criminal network or not, if our future advocacy effort does not target the Congolese authorities and create a policy-action initiative to limit conflict interest in the Congolese mining code, there is a high risk that while players in the global market can comply with regulations of due diligence, the return on natural resources investment will still profit political elites rather maximizing outcomes and impact for the public interest. Our effort will just be a murky hope.  The Cash Machine Regime report of July 2017 by Global Witness shows clearly up to 750 million from the payments made by the mining companies to state bodies in the Democratic Republic of Congo was lost to the treasury between 2013 and 2015 (Global Witness , 2017). An Enough Project report stated that the Congolese government has lost 1.3 billion in revenues due to undervaluation and the opacity on the part of private and government actors (Bafilemba, Hall, & Muller, 2014, p. 13). An ad nominen report by Bloomberg revealed that President Kabila’s siblings control more than 120 permits to dig gold, diamonds, copper, cobalt and other minerals (Kavanagh, Wilson, & Wild, 2016). 

The point is that the regulations on transparency successfully pressured end-user companies rather, at the expense of providing anti-smuggling mechanisms at the State level. While non-state actors have shaped national and international agendas, it is a fact that states remain authoritative decisionmakers on issues of national and international policy. For example, analysts believe that the withdrawal of the United States weakened the EITI as an enforcement mechanism[8]. The current U.S. administration continues to challenge the Securities Exchanges Commission rules on conflict minerals. The transparency and accountability era might soon be entering its nightmare period.

Correcting prevailing governmental inefficiencies in autocratic and structured corrupted regimes is the priority to sustainability.  How do we maximize the achievements of the advocacy groups and civil society organizations?  There is no clear response.  However, for the need to control the downward pressure of corruption over sustainability through an effective good governance framework, the future of advocacy should line up an important element raised by the Natural Resource Governance Institute:  the safeguards and quality control evaluated by means of the presence and quality of checks and oversight mechanisms that encourage integrity and guard against conflicts of interest (Revenue Watch Institute , 2013). This theme should become a vital theme in the new era of meaningful advocacy.

How do we achieve this? A strong partnership between The Enough Project, Global Witness, NRGI, EITI group, OECD, and others through a global coalition that focuses on exposing crooked local authorities. We must progress by creating a sense of ownership in transferring skills to local civil society organizations to demand accountability through lawsuits against political elites, by training local media to investigate looming corruption (impunity and kleptocracy in failing democracies) in the mining sectors, and by intensely lobbying for the punishment of criminal economic actors though international tribunals.

[1] Refer to The Enough Project’s  campaigns on transparency and human rights in extractive industries :The Sentry available at https://thesentry.org/; Demand the Supply Chain available at https://enoughproject.org/reports/demand-the-supply?utm_source=repo...;   Raise Hope for Congo available at https://enoughproject.org/about/past-campaigns/rhfc; Conflict-Free Campus Initiative available at https://enoughproject.org/about/conflict-free-campus-initiative;

[2] Global Witness has launched several campaigns in freeing minerals from conflicts. Available at https://www.globalwitness.org/en/campaigns/conflict-minerals/ 

[3] Pact has set up the ITRI Tin Supply Chain Initiative (iTSCi) program to aid companies Conduct due diligence processes for their supply chain when sourcing tin, tantalum and tungsten (3Ts) from the DRC or countries in the Great Lakes Region. For more details surf on http://www.pactworld.org/itsci

[4] These campaigns have led a growing international awareness that prompted countries like the United States to adopt section 1502 of the Dodd Frank Act requiring responsible sourcing minerals, the European Union. The EU regulation passed on May 2017 to stop conflict minerals and metals from being exported to the EU global and EU smelters and refiners from using conflict minerals mine workers from being abused available at http://ec.europa.eu/trade/policy/in-focus/conflict-minerals-regulat... , accessed January 20, 2013.

[5] See for example the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas Report (2013) at  https://www.oecd.org/corporate/mne/GuidanceEdition2.pdf , accessed January 20, 2013. See The EITI Progress Report on Ending Company Anonymity-Key to Finding Corruption (January, 2017) available at https://eiti.org/document/eiti-progress-report-2017 , accessed January 20, 2013.

[6]  The Extractive Industries Transparency Initiative has proposed five steps of the value chain to strengthen Governance along with extractive industries and countries:  1) Legal framework, distribution of licenses and contracts, 2) Exploration and production, 3) Revenue collection, 4) Revenue allocation, 5) Social and economic spending. Available at  https://eiti.org/eiti-value-chain


[7] The leaked data from the International Consortium of Investigative Journalists shown that the ownership structures and associations of companies and banks trading in and refining mineral from Congo are intentionally murky, suggesting a high probability of illicit behavior and opacity in the industry. Available at https://panamapapers.investigativecenters.org/drc/ . See also the Bloomberg opinion at https://www.bloomberg.com/news/features/2016-12-15/with-his-family-....

[8] On November 2,  2017, the United States government announced that it was discontinuing EITI implementation. The withdrawal has been perceived as a move to dismantle the anti-corruption campaign to address illicit financial flows in the mining sectors.  See the United States Department of Interior Letter to the EITI Chair at https://eiti.org/sites/default/files/documents/signed_eiti_withdraw... 

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