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Making mining more transparent: Senegal and Ukraine

When countries are rich in natural resources too often the wealth generated by these resources is not managed transparently. Ordinary people in these countries remain mired in poverty while a handful of officials line their pockets with the proceeds of corruption.

The Extractive Industries Transparency Initiative (EITI) was launched in 2003 with the goal of asking countries and companies to publicly disclose information of all financial payments in the mining, gas and oil industries to enable citizens to see how much money is generated and what that money is spent on.

In October Senegal and Ukraine joined 39 other countries as EITI candidates. Under EITI countries commit to greater transparency in the extractives sector, but also to include civil society in monitoring how this is done. Both Forum Civil in Senegal and Transparency International Ukraine, our local chapters in these countries, are committed to ensuring their governments live up to these commitments.

Senegal: How to avoid the resource curse

Today 20 per cent of Senegal’s exports come from mining, but with new reserves coming on stream it is on the verge of a mining boom. The decision to join the EITI is an important step for the country to help avoid the resource trap.

Many low-income resource-rich countries tend to be less developed despite their natural wealth because instead of investing revenues from resources on basic services, education, infrastructure and other development objectives, the government and the elite skim off the proceeds.

As part of the EITI process, the government of President Macky Sall has committed to publish all mining contracts and all revenues generated by the mining sector , as well as all payments made by companies. This information will be independently verified and there will be public discussion so that citizens can hold the government to account more effectively when it comes to resource revenues.

Civil society organisations should push for effective EITI implementation and ensure that the government is held to account for the use of revenue and for tackling graft.”

– Moussa Felix Sow, Forum Civil, Transparency International's chapter in Senegal

Cautious optimism

The EITI process could bring much-needed scrutiny to mining extraction in Senegal after years of chaotic and opaque management, which is why civil society has welcomed the move with cautious optimism. So far, mining has not been a success story in Senegal. The gold rush in the Eastern province brought many investors, including Australian and Canadian companies, and an influx of cash, but the government lost €600 million (US$810 million) between 2005 and 2012 in generous tax exemptions for foreign companies.

Now for the first time government, industry and civil society organisations will come together to discuss the problems of the mining and extractives industries and agree on transparency measures. Local civil society organisations should now be able to find out how much the government gets for gold extraction in Kédougou, phosphates in Matam and titaniferous sands in Thiès, and how these revenues are used.

But this is not only about revenues from natural resources. Mining areas are attracting numerous informal workers and giving rise to sex trafficking and environmental problems. Villagers in Sabodala are anxious about displacement, and losing their customary rights over land.

Challenges ahead

Transparency alone will not be helpful enough. A 2011 study from our local chapter Forum Civil shows that Senegal is lacking appropriate legislation and oversight mechanisms to strengthen governance in mining. The study recommends a complete overhaul of the mining code to ensure stronger governance measures and respect for community rights.

Civil society can play a key role in ensuring that mining wealth benefits all Senegalese now that the government has committed to publishing information about the sector using EITI guidelines. Forum Civil can now monitor the ongoing mining contract review and shape the work of the EITI multi-stakeholder group where it sits alongside other representatives of civil society, government and companies to ensure that transparency leads to greater accountability in Senegal.

Promoting participatory governance in the extractive sector

Transparency International local chapters elsewhere in Africa are actively involved in efforts to improve governance in the extractive sector, contributing to policy discussions under the umbrella of the Extractives Industry Transparency Initiative:

  • In Mozambique, Centro de Integridade Pública helps local organisations monitor the economic, social and environmental impacts of the extractive industries.
  • L’Association nigérienne de lutte contre la corruption, our national chapter in Niger, educates deprived communities about the government’s obligation to disclose revenues under EITI, and their right to receive 15 per cent of all mining revenues paid to the government.
  • Transparency International Liberia has been working with community members in Bong, Nimba and Grand Bassa counties to increase their understanding of resource extraction, and how much revenue the state and local governments are receiving.

The Liberian chapter just launched a project to strengthen citizens’ participation in the utilisation of the County Social Development Fund.

The project gives communities a space to engage with companies and local authorities, and empowers them to follow the money and hold local authorities to account for the use of mining revenues. The fund was established by the Liberian government to ensure that extractive companies contribute to local development in counties most affected by mining. However, the fund has suffered blatant mismanagement, including being used as a cash cow by the local political elite.

Ukraine: cleaning up the mining sector

Ukraine holds five per cent of the world’s reserves in natural resources including oil, gas, biomass, coal and hydrocarbons. It is also an important transit country for Russian natural gas to the rest of Europe. But its energy sector is inefficient and has been dogged by claims of corruption over the past decade. As part of the Open Government Partnership plan, Ukraine finally submitted its application to become part of EITI, a process that started in 2009.

Ukraine sees the benefits of adopting greater transparency in this important sector as a way to ensure more money from mining makes it into government coffers and to give more confidence to foreign investors.

EITI is starting to make a difference in the countries which implement it. A study published in January by Germany’s University of Heidelberg reviewed foreign direct investment in 81 countries and found that joining the EITI increases the ratio of investment inflows to countries’ gross domestic products by an average of two percentage points.

EITI gives Ukraine the possibility to decrease the corruption level in the mining sphere, improve the investment climate, and increase the level of energy security by creating a more transparent and competitive environment.”

– Oleksii Khmara, Executive Director, Transparency International Ukraine

According to Olena Pavlenko, an expert in energy at Ukrainian think-tank DiXi Group, the standard will allow Ukrainian citizens to monitor how much funding the government receives from the mining industry in the country – with payment breakdowns. They will also be able see how much money flows into the local budget from the companies involved in mining activities. This is particularly important given the increase in mining activities across Ukraine.

It will now be for civil society to follow up and ensure that Ukraine fulfills its commitments to EITI and both the local and national administrations are held to account.

Countries

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