What’s Good for the Goose is Good for the Gander: Why Transparency Matters

 

The key findings of a recent World Bank report are not new: Africa's abundant mineral wealth is failing to dent poverty levels, and political elites (sometimes in close association with military men) are benefitting at the expense of ordinary Africans.

The paradox of plenty would appear to be alive and well. But lost in some of the media coverage however, was the Bank’s support for revenue transparency and institution building, two critical ingredients of good natural resource governance that lie at the heart of the work PAC does.

As the report correctly notes:

“The standard dimensions of governance are well-known: rule of law, transparency, lack of corruption, accountability, voice and participation, and effective government. Governance has implications for policymaking. Weak governance environments will likely lead to suboptimal policies for resource extraction and for collection and allocation of resource rents… Transparency and accountability—two key pillars of governance—are hugely important in resource-rich countries. With large resource windfalls, limited technical capacity, and weak checks and balances, the scope for inefficiency, corruption and elite capture of rents is likely to be rampant. Transparency provides information on important aspects of resource management—from exploration to extraction to collection of rents and to distribution of these rents.

Availability of such information raises citizens’ awareness of size of resource wealth and who is benefiting from it. It also allows citizens to monitor the actions and performance of their public officials, and it facilitates debate and consensus-building on how to manage resource wealth.”

Transparency and accountability, the report further notes,

are the foundation upon which citizens’ confidence and trust in their government is built. It singles out the Extractive Industries Transparency Initiative (EITI) as one way in which better governance can be brought to Africa’s resource sector. (The EITI requires the public disclosure by extractive companies and governments of what they pay and what they earn respectively from natural resource projects).

While calls for EITI and other transparency initiatives are welcomed, the Bank’s report misses the mark in one key way—it stops short of actively encouraging foreign companies that operate in Africa to sign onto such initiatives. Similarly it does not ask Western governments to follow advice they give their African counterparts and make EITI the law of the land. This omission is especially apparent in the case of Canada, whose two stock exchanges are home to almost 60% of the world’s publicly listed mining companies.

Africa has long been a point of economic pillage and unbalanced trade relations—from Colonialism to the modern day. All too often high value minerals linked to popular Western consumer products have been the cause of costly and destructive wars that undermine African economic development.

But fostering local institutions and laws in African countries with weak governance structures is not just to the benefit of countries in which foreign extractive countries operate. What is good for African governments is ultimately good for foreign investors. Better governance, more transparency, paying local taxes, all help foreign companies to secure a more stable and predictable investment climate for themselves and their shareholders.

It’s a point sadly lost on the American Petroleum Institute (API) and the US Chamber of Commerce.

In October API launched a lawsuit in the United States in an effort to repeal section 1504 of the Dodd-Frank Act—a law that will see them report the payments they make to foreign governments. This comes despite the fact that many API members, such as Talisman, Statoil, and ExxonMobil are so-called supporters of transparency through their participation in the EITI. Through this lawsuit, these companies have demonstrated that when push comes to shove, they are not yet prepared to walk the talk.  

Thinking like that will do little to change next year’s findings by the World Bank.