May 13, 2020

The right to mine - and under what conditions?

Who gets the right to mine and under what conditions? The process for awarding mining permits can be complex and opaque.

In this interview with Michael Odei Erdiaw-Kwasie, the Research and Policy Coordinator for Transparency International’s Accountable Mining Program, he explains how TI’s global network is collaborating to prevent corruption in the mining sector.

What is Transparency International’s global mining programme?

Michael Odei Erdiaw Kwasie, Research Coordinator, Accountable Mining programme

Transparency International’s global mining programme shines a spotlight on the corruption risks affecting how mining and exploration permits are granted across 20 countries.

We work with governments, companies, civil society organisations and communities to build a fairer, clearer and cleaner licensing process to prevent corruption before ground is even broken.

This work has been made possible with the support of the BHP Foundation and the Australian Government.

Why have you focused your work on the mining sector and the awarding of licenses?

Renewable energy technologies like batteries, wind turbines and solar panels depend on certain minerals. Mining of these minerals needs to be done responsibly, respecting human rights and the environment. But when corruption affects decisions about which land can be mined, who is allowed to mine and under what conditions, it puts communities and the environment at risk.

We are focusing on the licensing process because it is very prone to corruption. This is a time when business stakes are high and there is frequent interaction with government.

If corruption affects the very beginning of a mining operation, it can affect the rest of the entire operation – impairing how operations are monitored and regulated, undermining the collection of taxes and royalties, and damaging the relationship between the company and the community.

Establishing a fairer, cleaner, more transparent and more accountable process from the very start will prevent corruption and mean fairer deals, more legitimate operators, safer projects and better outcomes for the community and the environment.

What is the Mining Awards Corruption Risk Assessment (MACRA) tool?

Transparency International developed the Mining Awards Corruption Risk Assessment or MACRA Tool to help pinpoint the weaknesses in the licensing process that open the door to corruption.

The tool has been tested in over 20 resource-rich countries and involved experts from the mining industry, government and civil society.

The MACRA tool sets out 80 common corruption risks and helps determine which risks are relevant to assess and how to assess them. These include risks in the rules for awarding a mining permit, the implementation of Environmental and Social Impact Assessments, and consultation with communities.

The MACRA tool is freely available online on our website in multiple languages and can be used by government, civil society, mining companies and investors.

It has been endorsed by the International Council on Mining and Metals, academics and experts at the World Bank.

In 2020, with the assistance of a gender expert, Transparency International will put out additional guidance on how to incorporate gender considerations and impacts in the assessment of corruption risks.

Following these risk assessments, are there any common red flags, trends or hotspots?

In all the countries that we studied in Africa, Latin America, Asia, Australia, and Canada, the licensing process was vulnerable to corruption in some way. Even mature mining jurisdictions like Australia and Canada had corruption risks.

I’ll mention three red flags:

One: Inadequate or no background checks on licence applicants. This includes a lack of checks on their ultimate beneficial owners or their integrity and corruption track record. This allows companies with a questionable operating history or political connections to obtain lucrative exploration or mining rights.

Two: No controls or weak regulation on revolving doors between government and the mining industry and lobby groups – this creates opportunities for industry to unfairly influence political decisions and design rules and policies that suit them.

Three: Unclear rules or requirements for community consultation and engagement – this enables companies to side-step community interests and enables local elites to manipulate any negotiations with companies for their own benefit.

Our global report provides plenty of examples from different countries. Individual country assessments are also available on our website.

Can the MACRA tool be used for other phases in the mining sector or for the oil/gas?

What makes the MACRA Tool unique is its focus on the licensing stage. It could be adapted to assess the licensing process in other sectors, like oil and gas, as long as the specific features of those sectors are taken into account.

For example, it is more common in the oil sector to award licenses through auctions or bidding rounds. The types of actors in the oil and gas sector are also different – we see more state-owned companies playing a key role in oil and gas. The offshore location of many oil projects means different issues need be taken into consideration at the licensing stage compared to mining.

That said, the general principles and steps in the MACRA Tool will provide useful guidance for the oil and gas sector, even if some of the common corruption risks are not so relevant.

The right to mine - and under what conditions?

Who gets the right to mine and under what conditions? The process for awarding mining permits can be complex and opaque.

What is Transparency International’s global mining programme?

Why have you focused your work on the mining sector and the awarding of licenses?

What is the Mining Awards Corruption Risk Assessment (MACRA) tool?

Following these risk assessments, are there any common red flags, trends or hotspots?

Can the MACRA tool be used for other phases in the mining sector or for the oil/gas?

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