26 November 2013

South Africa: Govt Resists Joining Transparency Scheme

Photo: Anglogold Ashanti/MediaClub SA
Drilling underground in a South African gold mine.

Johannesburg — The South African government is attracting criticism by refusing to join 31 other countries in signing up to an international standard aimed at ensuring transparency in the oil, gas and mining industries.

South Africa's parliament has dismissed adopting the standard, known as the Extractive Industries Transparency Initiative (EITI), which outlines reporting requirements aimed at ensuring that resource extraction leads to economic growth and social development rather than "corruption and conflict."

The EITI was introduced ten years ago by British Prime Minister Tony Blair, but 25 of the 31 member countries are in Africa. Countries such as Ghana, Zambia, Mozambique and the Democratic Republic of the Congo are all compliant members.

They submit annual reports, disclosing what mines and other extractive companies pay to governments, and what governments in turn receive through contracts and by way of relevant tax.

The practice, says the EITI, "allows citizens to see for themselves how much their government is receiving from their country's natural resources."

Norway - often viewed as an emblem of transparency - has also committed to the initiative. The US has pledged to adopt it and British Prime Minister David Cameron recently said he was considering following suit.

It was most recently revised in May this year, with the changes aimed at improving its relevance and reliability.

But South Africa has resisted calls to come on board.

"No, South Africa has not reconsidered signing up," Ayanda Shezi, spokesperson for the Department of Mineral Resources, told the Mail & Guardian.

"South Africa has a fiscal regime that is redistributive, and has put in place adequate governance procedures and systems of accountability to sufficiently account for revenue generated and distributed."

The government's refusal to get involved has attracted the criticism of the Democratic Alliance (DA) and corporate governance interest groups.

DA spokesperson on minerals and resources James Lorimer said that South Africa's failure to sign up to the EITI would signal ill-health in the sector. "Refusing to do so would signal an unhealthy commitment to secrecy," Lorimer said.

"Transparency should serve as a vehicle for redress and job creation in an industry that has historically been exploitative."

The mining sector was the traditional backbone of the South African economy and contributed around 20% to gross domestic product in the 1970s. However, profits and production levels have waned increasingly over the decades. The sector now makes up only 6% of the country's economic production.

Over the past three years, the mines have been plagued by ongoing, often violent labour unrest, with workers' wages and living conditions being the almost universal cause for disruption.

In 2012, 2.7million working days were lost due to strikes in the mining sector, according to the Department of Labour's latest Annual Industrial Action Report. The mines lost R15 billion ($1.5 billion) in production during that time, the South African Institute for Race Relations estimates.

According to Marie-Lise du Preez, manager of the Governance of Africa's Resources Programme at the South African Institute for International Affairs, the EITI could create a much-needed platform for dialogue between the government, extractives companies and civil society. It would address the current "disconnect" between companies and the government that contributed to the unrest, she said.

But members of parliament have argued against the additional reporting burden that the EITI would place on the continent's biggest gold producer and the world's fifth-largest diamond producer. The initiative would affect all of South Africa's extractives sector, which accounts for almost 50% of its exports.

The department for mineral resource's Shezi said that South Africa complies with other laws that allow for good governance in the affected industries. "One of the key objectives of the Mineral and Petroleum Resources Development Act (MPRDA) is to give effect to the UN Resolution 1803 of 1962, that natural resources beneath the soil are a heritage of the people of South Africa, and the state must exercise its sovereignty over the development of such natural resources," she said.

Du Preez said this argument had been a steady one in the country's debate against adopting the standard. "The suggestion is that South Africa complies sufficiently to a number of [reporting standards]. Why do we need an extra hoop to jump through?"

A second explanation for the pushback, said du Preez, is that the UK-driven programme is seen as a "northern" standard being imposed onto the developed world. "There was an ideological problem with the initiative," she said.

But whether the EITI is adopted or not, the government, mining companies and civil society needed a "neutral convenor", said du Preez: "someone who is not seen as punting their own interest."

The author, a journalist at the Mail & Guardian, participated in a recent Thomson Reuters Foundation/Norad workshop in Johannesburg on Finance and Governance.

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