Unearthing corruption risks in mining approvals

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From resource-rich West Africans nations, to the mining giants of the Pacific and North America, every time a government signs a deal to allow mining of its natural resources there are corruption risks – no matter where that country is.

These risks in mining approvals processes – decisions about when, where and under what circumstances mining can occur – can result in environmentally unsound and socially destructive mining projects being approved. They can lead to politicians or government officials taking advantage of their position to profit from their interests in the sector and local communities being excluded from decision-making processes that could cause them to lose their homes.

In 2016, for example, a grand jury in Liberia indicted top government officials on charges of bribery for conspiring to amend key laws to enable a London-listed company, Sable Mining SBLM.L, to get rights to one of the world’s richest iron ore deposits – the Wologozi Mountain Range.[1]

Leaked documents alleged that over US$950,000 was used to pay off top government officials and their relatives.[2]

On the other side of the world in the coal-rich Australian state of New South Wales, a former Mining Minister and a current government minister were charged with corruption in a 2015 case involving mining licences that involved complex and opaque company structures set up during the mining approvals process.[3]

Transparency International’s new Mining for Sustainable Development Programme (M4SD) report, Combatting corruption in mining approvals: assessing the risks in 18 resource-rich countries examines what makes mining approvals vulnerable to corruption and what roles governments, the mining industry, and communities can play in preventing corruption from occurring.

“Natural resources are too often vulnerable to corruption. We see this across the world as citizens are denied the wealth that is part of their natural heritage. We want all parties – citizens, governments and mining companies – to be able to undertake sustainable development that benefits everyone. The goal of this work is to lead to a greater understanding of corruption risks in the mining approvals process so that corruption can be countered at the very start of the process,” – Delia Ferreira Rubio, chair, Transparency International

Based on research carried out in 18 countries and drawing insight from more than 750 stakeholders from a range of sectors – plus a further 250 individuals who participated in validation and review of the risk assessments – the new report is the first of its kind to drill so deeply into mining approvals across such a broad range of countries.

Presenting a truly global picture of risks in mining approvals processes, the examples in the report are drawn from a broad range of contexts: major mining economies such as Australia, Canada and South Africa; emerging mining economies such as Cambodia and Kenya; and 11 members of the Extractive Industries Transparency Initiative (EITI).

These are a few examples of where and why corruption can occur:

Political and administrative

  • There is poor transparency around political donations and lobbying by industry
  • Controls on revolving doors between industry and government are weak

Land allocation

  • The process and criteria for opening land to mining is not clear or transparent
  • Land rights are poorly protected and not properly registered

Mining licence applications and approvals

  • Due diligence on licence applicants is inadequate
  • Decision-making criteria are unclear or decisions are vulnerable to ministerial interference

Environmental and social impact assessments (ESIAs)

  • Verification of impact assessments is inadequate
  • Criteria for environmental approval decisions are not clear or transparent

Community consultation

  • Information about the project or its potential impacts is not accessible to community members
  • Consultation only occurs with local elites

What needs to be done to combat corruption

Transparency International has framed six questions to help identify where and how an approvals regime is vulnerable to corruption. The answers to these questions can help target the underlying causes of corruption, informing key players on how to take effective preventative action before corruption occurs.

Change starts by answering these questions:

  1. Who benefits from mining approval decisions?
  2. How ethical and fair is the process for opening land to mining?
  3. How fair and transparent is the licencing process?
  4. Who gets the right to mine?
  5. How accountable are companies for their environmental and social impacts?
  6. How meaningful is community consultation?

Government, industry and civil society in any country can use these questions – and real country examples highlighted in the report – as a starting point for understanding corruption risks in their own context and to guide them in building corruption-free mining approvals regimes.

The assessing of these corruption risks is only the beginning, real change will come with the addressing of these corruption risks.

Access the full report, Combatting corruption in mining approvals: Assessing the risks in 18 resource-rich countries.

Countries involved in the research: Armenia, Australia, Cambodia, Canada, Chile, Colombia, Democratic Republic of the Congo, Guatemala, Indonesia, Kenya, Liberia, Mongolia, Peru, Papua New Guinea, Sierra Leone, South Africa, Zambia, and Zimbabwe.

This work has been funded by the BHP Billiton Foundation and the Australian Government through the Department of Foreign Affairs and Trade (DFAT).

[1] J. Harding Giahyue, “Liberia grand jury indicts Sable Mining, officials for bribery”, Reuters (web), 26 May 2016.
[2] Global Witness, “The Deceivers” (web). Available at: www.globalwitness.org/thedeceivers. Accessed 14 August 2017.
[3] U. Malone, “Eddie Obeid, Moses Obeid and Ian MacDonald committed to stand trial on conspiracy charges,” ABC News (web), 30 May 2017.