Mining’s golden rule: transparency – by Joseph Ingram and Karin Lissakers (Globe and Mail – September 24, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The labour strife in South Africa’s mines and the adoption of new disclosure rules for U.S. mining companies by the U.S. Securities and Exchange Commission have cast renewed light on a global industry that affects the Canadian economy.

Every year, Canadian mining operations generate billions of dollars of revenue overseas. In fact, Canadian companies are some of the most globally active. More than 1,000 Canadian exploration companies work in more than 100 countries, from Mongolia to Peru to Tanzania. Canada’s mining investments in Africa alone have grown from $2.8-billion in 2001 to $30-billion in 2012.

The taxes and royalties that Canadian companies pay to countries that play host to them have the potential to transform economies. As we’ve seen in resource-rich countries such as Botswana, Chile and Malaysia, natural resource revenues paid to governments can be invested in roads, health care and education as well as business development and social services, leading to massive reductions in poverty. What’s more, Canadian operations can spur local economic development by creating jobs and financing community projects.

Yet, too often, these revenues are either not collected or not transformed into tangible benefits, leaving countries with more violent conflict and weaker growth than expected. In many instances, environmental destruction and loss of livelihoods, coupled with inadequate compensation, have left regions worse off than before.

And communities’ expectations, sometimes driven by prospectors’ and developers’ false promises of prosperity, are often unmet. This problem is sometimes referred to as the “paradox of plenty” or the “resource curse.” In fact, countries considered to be “rich” in non-renewable natural resources are home to 1.5 billion people living on less than $2 a day.

One key reason for this failure to turn domestic resources into well-being is the lack of transparency surrounding payments and other benefits. In many countries, monitoring of mining, oil revenues and contracts is nearly impossible because these flows and agreements are secret. Citizens don’t know how much is owed to their governments, how much is collected or what the local effects of extraction should be. In many cases, this gap has resulted in the mismanagement, loss and outright theft of the resource revenues critically necessary for development.

In one 2009 audit conducted through the Extractive Industries Transparency Initiative, a voluntary global transparency standard, $560-million (U.S.) in tax and royalty payments due from oil companies was discovered missing from public coffers in Nigeria. This money would have covered tuition fees, uniforms and books for more than four million primary students. In today’s era of shrinking foreign-aid budgets, it’s even more imperative that these huge sources of domestic revenue are transformed into public investments.

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