During a panel discussion at the 2024 Investing in Africa Mining Indaba, held in Cape Town in the week of 5 February, panellists engaged on the main corruption risks in mineral supply chains, the steps companies should take to adequately address bribery and corruption risks, challenges and opportunities for law enforcement and the role of strategic partnerships.
Bribery and corruption has long been back-of-mind in the mining industry, but often not talked about. The industry remains vulnerable to risks, particularly due to government interaction and administrative procedures. The high influx of capital and fast-paced nature of the industry, coupled with weak local governance exacerbates the issue.
As the industry transitions towards renewable energy and a low carbon economy, it is imperative that the topic be placed at the forefront of government and company agendas.
Risk in the value chain
We discuss some of the key takeaways from the panel – and our experience in the industry – below.
- Contract negotiation - Negotiations are usually conducted behind closed doors. From a social licence to mine perspective, the interest of all stakeholders, including host-communities, are not always adequately aired in the negotiation process.
- Licencing, permits and environmental assessments - With the rise in capital influx and increasing participation in the mineral market, mining licence applications will increase. The resultant risks of facilitation payments and bribes to speed up and secure licences exist.
- Political exposure and connections - Participants in the industry often have close connections to government, which may be abused for advantages across the value chain. It is not uncommon for shareholders to incorporate and operate companies in countries where beneficial ownership information is not publicly available.
- Community engagement - Consultations with host-communities ought to be meaningful and transparent. Consultations only with leaders or purported leaders of communities may heighten bribery and corruption risks.
- Inadequate governance and regulatory frameworks - A lack of a strong and focused regulatory regime in mineral rich countries has long contributed to the increase in bribery and corruption. The absence of the rule of law contributes to weak accountability, and corruption becomes an unfortunate natural consequence.
- Third party agents – Companies appoint agents to investigate opportunities in target countries, liaise with government and communities, secure licences, enable logistics, compile reports and sell their products. It is not uncommon for these third-party agents to have local government connections – and their own subcontractors - with resultant risks. Companies ought to be mindful of these risk factors – and the consequent reputational, civil and criminal liability risks caused by third parties acting for them, or on their behalf.
Mitigating the risks
Panellists emphasised the need for public-private collaboration – involving business, government, and civil society – to effectively promote and advance essential risk-mitigating factors, transparency, accountability, and disclosure.
It is essential that companies develop and implement adequate policies and procedures within their organisation to reinforce a culture of right and wrong, and to combine that with effective whistleblowing mechanisms. A company’s zero-tolerance approach to bribery and corruption ought to be clear and non-negotiable. Risk appropriate due diligence should be put in place for the appointment of third-party agents.
A clear and well-implemented regulatory framework will provide an effective foundation to mitigate risks. Governments should direct their attention to improving laws, regulations and governance, and ensure competitive and transparent licensing and award processes. This ought to also include disclosure of sufficient information and access to critical data on bidding requirements, processes, and the recipients of contract awards and licenses.
Ultimate beneficial ownership information remains opaque in numerous jurisdictions. Improved disclosure requirements are necessary to ensure sufficient oversight, and to protect against the risk of unlawful awards to politically exposed and connected persons.
Panellists included:
- Louis Maréchal, Senior Advisor, OECD
- Andrew Irvine, Legal and Corporate Engagement Director, EITI
- Maybel Acquaye, Senior Policy Analyst, Africa Centre for Energy Policy
- Richard Morgan, Head of International Political Risk and Government Relations, Anglo American
- Ben Aryree, Advisor to the Minister for Lands and Natural Resources, Ghana
