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sharing in governance of extractive industries

Revisiting Corruption Risks in Mining Award Process: A MACRA Tool Approach

Globally, the extractive sector can be a source of livelihood for local people, supports regional development, and helps to boost national economies. However, the sector does have serious institutional and behavioural weaknesses. It is the poorest people, living in the mining areas, who are particularly vulnerable when the mining sector and their governments fail them.  

A number of organisations have grown in recent years to tackle corruption at every stage of the mining value chain. Because the risk of corruption is particularly high at the very start of the value chain – indeed the OECD has found a quarter of all corruption cases in the oil, gas and mining sectors occurred at the licensing stage [1] - Transparency International has also turned our spotlight on this process that can be so problematic.

In 2016, Transparency International (TI) launched the Mining for Sustainable Development (M4SD) programme to enhance transparency and accountability in government processes to award mining sector licences, permits and contracts. Working with 20 of our TI peers in some of the world’s most resource-rich countries, we are building a robust evidence base that highlights the weaknesses in each country’s mining awards system, but also examples of good practice. We are talking with governments, industry, civil society and communities to identify, assess and tackle corruption risks and collaboratively build a process that is more transparent, accountable and democratic.

One crucial tool we have developed to help us conduct this complex and multi-stakeholder research is the  Mining Awards Corruption Risk Assessment (MACRA) Tool (see the factsheet here.) This tool provides a step-by-step guide to help pinpoint where, why and how severely the mining licensing process is vulnerable to corruption. The tool has been tested in over 20 countries as diverse as Zimbabwe, Peru and Australia and endorsed by a wide range of prominent extractive industry and governance experts. The results showed that corruption risks exist in mining approval regimes of countries across the globe, irrespective of the country’s stage of economic development, political context or the size and maturity of their mining sectors [2].

Inspired by the successful application of the tool across 20 countries, TI has launched a new round of assessment that expands the tool’s application. In this assessment, we aim to apply the tool in five new countries:  Kyrgyzstan, Argentina, Mexico, Ghana and Madagascar. With our local Transparency International colleagues, we will soon be able to pinpoint the corruption risks present in the mining awards process of these countries and work collaboratively to fix the weaknesses in their own systems.

For a step-by-step introduction to the tool, see our factsheet here.

For tips on how to get started, read on below.

Key tips for using the Tool

 (i) Contextualise the MACRA tool

The MACRA Tool is best applied in regulated domains where activities are guided by law. We have only used the tool in the formal mining sector (i.e. mining activities are controlled by laws and regulations). The tool cannot be applied in unregulated domain like the illegal mining sector. This is because such unregulated sectors operate in absence of state permissions in the form of land rights, mining licenses, and exploration or mineral transportation permits - which constitute the key scope of the MACRA tool. The MACRA Tool can be used to assess corruption risks in other industries beside mining, however, users must be mindful of the contextual scope of its application.

 

(ii) Flexibility in using tool methods

The MACRA Tool has rigorous methods to guide users in assessing corruption risks. The tool offers users some level of flexibility particularly in applying the tool’s steps in a wide range of contexts. We advise users to clearly identify which of the steps are applicable for their project.

 

(iii) Use the ‘common risks’ as a guide

The tool contains 80 common corruption risk indicators to help users to detect, assess and find solutions to transparency gaps in the way the licensing process is set out in law and implemented in practice. We advise that users not only familiarise themselves with the common risks in the tool but also that they are aware that other corruption risks may exist in their context. They should also look out for those red flags.

 

(iv) Pathway to advocacy action

In as much as users wish to eradicate all identified risks, follow-up actions are often constrained by limited resources, stakeholder interest, and time. The tool helps users to prioritise risks in terms of urgency, feasibility and impact. The outcome of the prioritisation part of the tool informs users of which identified risks are most serious, and hence the need to develop action strategies to mitigate them.

 

The adoption of the MACRA tool generates a clear picture of the presence of real corruption risks that distort the mining award system and processes. Such findings can further inform a set of policy and legal-regulatory suggestions to guide governments, businesses and civil societies in mitigating corruption risks in mining awards.

We designed the MACRA Tool to be free, accessible and easy to use across different jurisdictions around the world. We encourage any industry, government or civil society group to use the tool to support their work to improve the mining sector, or even adapt the tool to licensing processes in other land-based sectors.

 

 

Reference List

[1] OECD, Corruption in the extractive value chain: typology of risks, mitigation measures and incentives, (Paris: OECD, 2016).

[2] Caripis, L. (2017). Combatting corruption in mining approvals: assessing the risks in 18 resource-rich countries. Transparency International Australia, Melbourne, Australia.

http://transparency.org.au/tia/wp-content/uploads/2017/11/M4SD_Comb...

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Comment by Michael Odei Erdiaw-Kwasie on March 21, 2019 at 3:40

Hello Nicolas,thanks for your questions. My response for each question is below:

1. The MACRA tool is certainly applicable in this scenario provided the ASM operator has begun the process of formalising its operation - E.g. Lets say an ASM operator put in a mining award application to acquire a title/license - then the adoption of the tool in this context is feasible and meaningful. At this stage, the tool can be used to identify and assess potential corruption risks that can distort the formalisation process [mining award process] that the ASM operator is required to go through to obtain a title.

2. The project was officially luanched in Madagascar just last week by Transparency International Madagascar (TI-M). For details, please follow this link:

https://www.transparency.mg/m4sd

I hope this (response) helps you. 

Michael

Comment by Nicolas Eslava on March 20, 2019 at 9:24

Interesting post Michael. Two questions to follow up:

1. You note that the MACRA tool is to be applied in formal domains. Then what about the obtention of titles for miners that are informal but in the process of formalisation, typically an ASM operator, is MACRA an adapted methodology in this context? 

2. You mention its deployment to Madagascar, any idea when it will be done or when the results would be made public? Or any contact point? 

Thanks for the insights!

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