The spotlight is again on South Africa’s mining sector, this time with corruption in the sector under discussion, in the context of the country’s tardiness in prosecuting foreign corruption cases.
This lack of action was pointed out in a March 2014 report released by the Organisation for Economic Co-operation and Development (OECD). The document, Phase 3 Report on Implementing the OECD Anti-bribery Convention in South Africa, criticised the nation for not enforcing the OECD’s anti-bribery convention – although South Africa has been a signatory since 2007.
In those seven years not one case has been successfully prosecuted, and only 10 have even been pursued. South Africa must act urgently to step up enforcement, urged the OECD. One of the areas of focus is likely to be mining. Experts have warned that this state of affairs could allow corruption to thrive in the sector – an area in which there is significant foreign participation in South Africa.
South Africa has in place the Prevention and Combating of Corrupt Activities Act of 2001, which also has extraterritorial jurisdiction, meaning that it can apply to corrupt acts carried out overseas – but as an OECD signatory it is obliged to adhere to that organisation’s convention too. South Africa is one of seven non-member countries that has adopted the OECD convention, and full membership might well hinge on this issue of enforcement.
Mining is vulnerable to corruption
Because of the sheer scale of mining, gas and petroleum operations, as well as the large sums of money involved, keeping track of the movement of funds and the various requisite interactions with government officials is not easy, according to Casie Neitzke, from Canadian risk mitigation firm CKR Global.
This makes the sector particularly vulnerable to corruption, she says. That mining operations are often located in developing countries with a weak regulatory environment and rule of law increases this vulnerability. The impact of corruption in these poorer nations, therefore, will be significant.
Dealing with government officials can be an avenue to corruption, Neitzke adds, as can the use of third parties or joint venture partners, which help with logistics such as moving equipment in and out of countries.
Corruption Watch has received a few reports that allege corrupt activities in mining, involving officials: “The Department of mineral resources is repsponsible for issuing mining and prospecting licenses and also to approve merger and acquicisition of companies that owned licenses in tems of Section 16, 20 and 11 of the MPRDA [Minerals and Petroleum Resources Development Act],” writes a reporter.
“The regional office manager XXX has been taking bribes in order for him to speedily push applications for both licenses, YYY had to give him 15% shares for his mining license to be issued, he is getting R250 000.00 on a monthly basis for that stake in an coal operation in the province. Section 11 for buddiies gets approved within weeks and yet for those who dont barge approved after a year or so,” the reporter continues.
In a video interview for the Global Petroleum Show 2014, which took place in June in Calgary, Canada, Neitzke mentions that South America, Africa, and some Asian countries with inattentive regulators are areas of high risk for CKR Global.
In 2011, the OECD singled out Canada as a country whose level of enforcement also needed beefing up. The country rose to the challenge and within two years the Royal Canadian Mounted Police had secured three convictions for foreign bribery, and was busy with more than 35 investigations.
By contrast, South Africa has had more than that length of time to act since a phase one OECD review in 2008 and a phase two review in 2010, which evaluated the effectiveness of the implementation and made recommendations. South Africa needed to do much more to detect, investigate and prosecute foreign acts of bribery, concluded the phase three report. “In general, the number of foreign bribery allegations appears low, given South Africa’s economic links to a number of countries with corruption risks,” it noted. Angola was named as one of these high-risk countries.
The OECD inspection team cited a “lack of independence and susceptibility to political interference, as well as a need for better co-ordination and specialised expertise” as the perceived reasons for the delay. It also drew attention to “risks that political or economic considerations are affecting law enforcement efforts”.