1410 Transparency versus political will in Africa and Europe

Partners for Democratic Change

The behaviour of extractive European companies (mining and oil) working in Africa is often criticized for the many abuses committed while exploiting the natural resources. These abuses range from secret negotiations between the companies and the African governments to violations of fundamental rights of workers and the affected populations. They also include the lack of control of minerals exported, limited taxes paid to host countries and the lack of accountability of the companies for environmental damage caused by the extractive industry. This article aims to show how transparency is important for the correct exploitation of mineral resources in Africa but not enough for a positive impact for the African population in general.   

The position of the European Union

The new president of the European Commission Jean-Claude Juncker has made ethics and transparency a central element of its new mandate and the new Trade Commissioner Cecilia Malmström has repeated the same idea at the European Parliament. In this sense, at EU level, two initiatives have been approved regarding transparency of large companies involved in the extractive sector. In June 2013 a Directive on the annual financial statements 2013/34/EU[1] (called “Country by Country Reporting”) was approved whereby the big extractive companies have to report the payments they make to each country in which they operate, with information on profits, taxes on profits and public subsidies received. Most recently, in September 2014, the EU adopted the Non-Financial Reporting[2] a directive for the disclosure of non-financial information by certain large companies relating to environmental, social and employee-related matters, respect for human rights and bribery matters. These two EU Directives are a first step to achieve more transparency in the extractive industry sector. But these initiatives risk being stillborn through lack of political will since the politicians are more worried about assuring access to natural resources in Africa than about promoting transparency within the extractive sector.

“Country by Country Reporting” is a way to address the need to end secret payments from the extractive industry to the governments where these big companies are operating, many of them in Africa. This Directive establishes disclosure of all payments made to governments on projects worth more than 100,000 euro, including taxes, royalties and license fees in any country where they operate. However, such a high amount is rarely paid in Africa so extractive companies can still evade transparency and continue to act with impunity. This unrealistic amount has been denounced by the civil society involved in the legislative process of the Directive, but once again it has been ignored in favour of the big companies.  

Something similar happens with the Directive for the disclosure of non-financial information where only big companies are obliged to disclose the required information. There is always the risk that they will split up or outsource activities to smaller companies to avoid legislation.  So this initiative has been created for a much smaller group of companies. Moreover, the Directive does not have a specific chapter for the extractive companies. The companies will choose freely which disclosure guidelines to adopt and there are no sanctions for those companies who fail to comply. The companies will be able to put their economic interest before the requirements of the legislation.

Lack of Political Will

Therefore, what could have been an opportunity to improve transparency and reinforce the democratic process of the affected countries remains as a set of weak legislation and voluntary guidelines irrelevant to the big companies operating in Africa. The impact of the extractive sector among African population is increasingly out of control and the consequences not only relate to the plundering of African natural resources but also limit economic development and degrade the environment.

There may be no direct link between transparency and the living conditions of the affected population for the extractive companies, but transparency in the extractive sector could help to raise awareness in affected communities, achieve greater democratic stability and economic development in African countries and enhance environmental protection in the mining areas.  

For this reason, I consider that the new rules of the EU for the extractive sector are not enough. Transparency measures are welcome but a lack of political commitment on the part of the EU makes them inadequate. Transparency is the responsibility of all stakeholders in the process of extractive industries: the mineral-exporting countries, the home countries of extractive companies in the EU and the extractive companies themselves.

The EU has the responsibility to establish coherent legislation for the extractive sector operating abroad, especially in Africa where many countries depend on their natural resources and export earnings. The extractive sector cannot work with impunity and be guided by only voluntary guidelines. If the EU maintains these directives, it will be an accomplice in the impoverishment of developing countries and will develop a system of neo-colonialism, taking advantage of the raw materials of the African countries without any concern for the fate of their populations.

José Luis Gutiérrez Aranda

AEFJN Policy Officer