There is a global consensus on the need to fight corruption in the extractive sector. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

The scale of the problems in the minerals sector is immense. How does it evolve into good governance policies and practices and begin to tackle corrupt behavior, rather than helping selfish political interests?

David Lewis is the Executive Director and Mashudu Masutha is a legal researcher specializing in extractive resources at Corruption Watch.

If South Africa is ever to achieve its goal of a sustainable and transparent extractive sector that benefits all stakeholders, it has no choice but to implement the policies of the Transparency Initiative. extractive industries. The sector is in urgent need of a major overhaul, and the recently announced review of Samrad – South Africa’s system of mineral resource administration – is a good place to start.

There is a global consensus on the need to fight corruption in the extractive sector. Not only are decisions about who can extract resources, under what conditions, and how income is distributed, all inherently sensitive political issues, but they are fertile ground for corruption. Relying exclusively on government action to effectively fight corruption in a mineral-rich economy is particularly illusory in situations where rents and natural resource policies are the primary means of exerting and perpetuating influence. Politics.

One of the many reasons why international financial institutions and international standard-setting bodies in the extractive sector, such as the Extractive Industries Transparency Initiative (EITI), are developing multi-stakeholder frameworks and agencies that improve transparency and Responsibility, is mainly because the illicit interests and political systemic dynamics that underpin governance in the extractive industries thrive in opaque and irresponsible environments, to the detriment of economies and sustainable development of communities. National laws and local institutions simply cannot adequately ensure the transparency and good governance required in the management of natural resources.

South Africa is no different. For more than a century, the country’s mining industry has been one of the main engines and remains a cornerstone of the economy, one of the richest in Africa. This is attributable to a number of factors, including extraordinary mineral wealth, relatively good access to infrastructure, and a well-developed financial sector.

In recent years, the South African mining industry has come under pressure. Political instability and the systematic vulnerabilities of corruption have caused rampant regulatory uncertainty and a shortage of electricity. Reduced spending on infrastructure maintenance and development reduced productivity, and land use and massive looting of mining royalties generated tensions with impoverished mining communities.

Samrad examines a good starting point for reform

The scale of the problems within the sector is immense. The question is: how is the sector moving towards good governance policies and practices and starting to tackle corrupt behavior, rather than helping selfish political interests? A good place to start is a review of South Africa’s system of mineral resource administration. Minister Gwede Mantashe’s recent announcement that his ministry would conduct a review of Samrad – the online mining rights application system – will be welcomed by all but the most venal stakeholders.

The Samrad system was originally introduced to fight corruption by providing an online electronic system that creates a real-time database of locality applications, rights and permits granted or held under the Development Act. Mineral and Petroleum Resources (MPRDA), and where such requests can be submitted electronically.

The system has never kept its promises. According to Corruption Watch’s research study on Corruption Risks in Mineral Application Processes, Samrad is administratively inefficient and extremely vulnerable to corruption. The lack of transparency and non-functionality of the system has led to double licensing, unequal access and local knowledge of applications and rights, among a host of other shortcomings.

The system has also created a corrupt industry of public officials exchanging obviously valuable information in regional offices of the Department of Mineral Resources and Energy (DMRE). Samrad is and always has been an effective denial of the government’s frequently stated claim that the mining sector is “open for business” and that investments in the sector are to be welcomed. Even more so in the field, where the failure to implement appropriate management processes, and very clear administrative corruption at the critical first stage of the mining value chain, has led to tensions between the stakeholders involved.

However, it can be argued that the common thread among all key stakeholders is the reality that natural resources are limited. The Samrad review intervention must therefore be approached from a perspective based on ensuring that resources are used for good and that all stakeholders must have a legitimate place at the table. While the South African government has had divergent attitudes towards the EITI, this period of review in the context of the deterioration of corruption management by the DMRE, offers an opportune moment to review the implementation of the EITI. EITI standard and what it might mean for the country. extractive sector.

EITI transparency standard is essential for sustainability

The EITI framework is a good governance standard that promotes a multi-stakeholder approach, including civil society, industry and government, to the management of natural resources. A key element of this standard is transparency – throughout the entire mining lifecycle value chain, from the award of contracts and licenses to production and revenue collection, to the allocation of income and socio-economic expenditure. The EITI Standard is widely recognized as the global standard for transparency, with 55 resource-rich countries committing to an open and accountable extractive sector.

From a macro perspective, South Africa is a notable absentee from the EITI. Transparency must surely be a priority issue for the DMRE to ensure the sustainability of the sector. The EITI Transparency Standard will enable mine-affected communities to determine the socio-economic spending of mining rights holders and government.

For the government, greater transparency will provide the means to develop evidence-based policies and promote investment. For industry, to operate in an open, transparent and competitive sector. Gains for the industry by joining the EITI also include reduced tensions with government and communities affected by mining. Given the EITI’s success in promoting transparency, anti-corruption measures and sustainable development, there is no credible argument for South Africa – still one of the major mining economies in the world. world – stay away. It must commit to becoming a country of implementation.

South Africa’s membership in the EITI is not a silver bullet to address fundamental vulnerabilities in licensing processes, or to rectify the online mineral application system or cadastral system. However, while there is a vital need to implement a globally competitive digital and transparent cadastre, the interest in delaying, sabotaging or preventing the implementation of such a cadastre cannot be ignored.

Unlawful interests will undoubtedly fit into the review. The risk is that irregularities in the management of the backlog of over 60% of transfer rights and over 2,400 permit applications will have a tangible and serious negative impact on mine-affected communities. For the Minister to implement a transparent, easy-to-use and corruption-proof mining cadastral system, global best practice standards and credible and trustworthy processes and institutions based on the principles of accountability and transparency will be needed.

The government must implement EITI policies

The reality is that the South African government cannot afford not to implement the EITI and rely solely on the local and international disclosure frameworks adopted. We need look no further than the corruption scandals and conflicts of interest that plagued senior officials with interests in mining companies.

In addition, lessons can be learned from various sectors that the general standard of transparency, such as the framework of the Promotion of Access to Information Act, is not sufficient. License fees and contractual arrangements in the extractive industries have particular elements and vulnerabilities that require special attention through the establishment of additional frameworks and the inclusion of particular stakeholders.

As a result, lessons learned from neighboring countries implementing the EITI show that a one-dimensional approach to tackling corruption in the extractive industries is unlikely to achieve results. The success of the EITI Standard stems from the multi-stakeholder approach to ensure effective oversight, focused transparency and the integration of practices that mitigate value leakage and stowaways, to ensure optimal benefit from resources for all. The DMRE should therefore consider implementing EITI policies to gradually transform the sector, and the Samrad review provides a solid opening for the government to make the long overdue commitment.

The extractive sector is exceptionally sensitive to corruption. Therefore, the debate on South Africa’s accession to the EITI should not revolve around ideological and diplomatic arguments, but rather should focus on practical ways to use the initiative as a first step towards ensuring transparency and accountability in the extractive sector. SM / MC

David Lewis is the Executive Director and Mashudu Masutha is a legal researcher specializing in extractive resources at Corruption Watch.

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