The slaves of Eritrea – by Matthew McClearn (Canadian Business Magazine – May 9, 2014)

Canadian mining company Nevsun has been accused of using forced labour to build a mine in Eritrea. How could something like that happen in the modern business world?

The news was grim, but not surprising. Yannick Lamonde, an official within Canada’s Department of Foreign Affairs and International Trade (DFAIT), received word in January last year of an impending report by a prominent non-governmental organization. Its contents were explosive: Human Rights Watch claimed a Canadian-owned mine in Eritrea had been built partly by de facto slaves.

Department officials were already well-acquainted with the mine’s majority owner, Vancouver-based Nevsun Resources, and certainly its mine, Bisha, located in the dusty interior of the North African nation. They had even heard similar rumours at least a year earlier. But with those unproven allegations now receiving widespread publicity, remaining silent was no longer an option.

The first order of business was to prepare for the inevitable questions from reporters. According to documents obtained by Canadian Business under the federal Access to Information Act, the DFAIT’s media relations team was given a series of stock responses to deliver.

Corporate Canada “leads the world in responsible mining practices,” the officers told reporters from the CBC, La Presse and elsewhere when they called. But as for claims about people forced to build a mine in distant lands, those were the responsibility of local authorities. Headlines followed, but the furor quickly passed.

Among the allegations commonly lobbed at Canadian mining companies, permitting forced labour at one’s mine surely ranks among the most outrageous. But if DFAIT’s response seems somehow inadequate, in reality Lamonde and his colleagues were simply doing their jobs. For years, the federal government has encouraged Canadian companies to subscribe to voluntary measures collectively known as “corporate social responsibility,” or CSR.

Like other nations, however, Canada has steadfastly resisted pressure to directly regulate companies’ behaviour abroad, even when they’re operating in jurisdictions with abysmal human rights records. The controversy surrounding what happened at Bisha reveals, however, that Canada’s laissez-faire approach comes with unexpected consequences that affect every taxpaying Canadian citizen.

The 150 kilometres that separate the Bisha mine from Eritrea’s capital take four hours to drive. But whereas Asmara is a bustling city of 650,000 filled with 1930s colonial Italian architecture, Bisha lies amid an expansive desert of rolling, ochre-tinged sand and scrub. Nevsun acquired its licence to explore for minerals in Eritrea’s semi-arid lowlands during the 1990s.

There the company found significant deposits of gold, silver, zinc and copper just under the sun-baked surface. These riches were at least as important to the Eritrean government as they were to Nevsun: by various estimates Bisha would provide about US$1 billion in royalties and revenues over its life, and raise the country’s annual GDP by several percentage points.

The compromises necessary to build Eritrea’s first modern mine drew both parties into unfamiliar territory. The Eritrean government, which fiercely espoused national independence and self-reliance, would own just 40% of the joint venture, known as the Bisha Mining Share Co. (BMSC)—Nevsun would hold the rest.

BMSC, meanwhile, would be required to employ a subcontractor owned by Eritrea’s ruling party, called Segen Construction, to build roads, staff housing and earthworks. Nevsun, for its part, would rather not have hired Segen as its price was “significantly higher” than what could otherwise have been negotiated.

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