Multinational miners: magnanimous or malevolent?

Eritrea is one of the world’s poorest countries. The International Monetary Fund considers it a potential ‘Heavily Indebted Poor Country’, notwithstanding its natural resources endowment, which includes gold, silver, copper, zinc and potash.

Human Rights Watch recently released a report ‘Hear No Evil – Forced Labour and Corporate Responsibility in Eritrea’s Mining Sector’ which outlines Eritrea’s government’s abusive program of indefinite forced labour. It calls on governments, including Australia’s, to develop mechanisms that pay close attention to the human rights records of their companies when they operate in Eritrea.

Should the recommendations made by Human Rights Watch be limited to Eritrea?

It refers to Australia’s South Boulder Mines as “actively moving ahead with plans to develop new mines in Eritrea” and says that the head of South Boulder, David Hughes, expressed no awareness of the human rights risks involved in his company’s Eritrea operations and indicated that the company had not yet taken any measures to avoid the risks highlighted by Human Rights Watch.

Human Rights Watch recommends implementing legal frameworks, such as a local independent ombudsman, that allow government institutions to monitor the human rights performance of domestic companies when they operate abroad in areas that carry serious human rights risks; to take steps to regulate the human rights conduct of domestic companies operating abroad in complex environments, such as requiring companies to carry out human rights due diligence activity; and to communicate an expectation to the government of Eritrea that companies investing in the mining sector there should be able to implement the outlined recommendations.

How is Australia’s track record in other African countries?

‘Africa Down Under’, last year’s speech by Foreign Minister Bob Carr, confirms that Australia has about 200 Australian companies involved in 650 projects in 37 countries, including Malawi, Mozambique, Mali, Guinea, Democratic Republic of Congo, Botswana, Niger, Burkina Faso, Liberia and Namibia.

Many of these countries ranked poorly in Transparency International’s Corruption Perceptions Index last year and most, despite their vast mineral wealth, find themselves a part of the International Monetary Fund’s Heavily Indebted Poor Countries program which, according to U.S. embassy cables published by news organisation WikiLeaks, requires them to devalue their currencies and free their economic markets and foreign exchange rates.

It’s hardly coincidental that policies like these give multi-national corporations more bang for their buck if they are in the market for precious minerals and resources.

Rather than being a source of self-congratulatory braggadocio, the nature and locations of Australian companies’ operations should invite scrutiny to ensure that they are not complicit in corrupt conduct, environmental despoliation or human rights abuses.

That is why the recommendations made by Human Rights Watch come at a critical time. With rising mineral and commodity prices, high levels of corruption and low levels of accountability and transparency, internal displacement of people, climate change, water scarcity and deficient local mining and environmental legislation, efforts must be made by the Australian Government to protect the human rights, the environment and social conditions.

Malawi

In his speech Minister Carr praised the work of Australian mining company Paladin, referring to its strong corporate social responsibility. Paladin operates Malawi’s biggest uranium mine, the Kayelekera.

In June 2008, The Bench Marks Foundation released a report ‘Corporate Social Responsibility and the Mining Sector in Southern Africa’ which suggested that when Paladin struck its deal with the Malawi government to mine uranium, it was agreed that it would get a 100 per cent capital write off, a reduction in corporate tax from 30 per cent to 27.5 per cent and a scrapping of the 10 per cent resource rent tax. Paladin was also to be exempt from the standard 17.5 per cent import VAT or duty and a royalty rate reduced from 5 per cent to 1.5 per cent in the first three years and 3 per cent thereafter.

Now Malawi’s opposition party, the People’s Transformation Movement (PETRA), have given the Malawi Government a 14-day ultimatum to explain why the Kayelekera deal cannot be renegotiated. However, there are reports that the agreement with the previous government (of late President Mutharika, a former World Bank economist) includes a clause that the government will not take any action that will seriously change the financial aspects of the project for the period of 10 years. Residents are also concerned that the Malawi Government retains only a 15 per cent equity in Paladin (Africa) Limited (PAL) a subsidiary of Paladin and has given “breathing space” on taxes for 10 years.

A 2009 U.S. embassy cable reports Paladin (Africa) Managing Director Neville Huxham telling the Ambassador that ‘Paladin plans to ramp up to full production by the end of 2009. At full production the mine will produce 3.3 million pounds of uranium yellow-cake per year. At USD 40 to 70 dollars per pound this translates to at least USD 132 million per year. With Malawi’s exports in 2007…equal to USD 693 million, this represents an increase of roughly 20 per cent in total value. Paladin expects to break even on its USD 200 million investment in three years. The Government of Malawi stands to generate nearly USD4 million per year in royalties alone, plus corporate taxes and revenue from its 15 per cent stake in Paladin..’

No doubt the Malawi Economic Justice Network has compared this cable with Paladin Africa’s General Manager, Greg Walker’s comment late last year that “the project [Kayelekera Mine in Koronga] has never made money”.

Robert Chasowa, student activist and critic of the late Malawian president Mutharika, raised serious allegations in a newsletter including reference to Paladin Africa banking money into the late President Mutharika’s Australian bank account.  Chasowa was later murdered.

In 2011 it was reported that Malawians made contact with Australia’s Petitions Committee Secretariat calling on the House to require Paladin to open its books.  They were told to take the matter up with the Australian Federal Police.

All allegations of bribery in this case, and in a more recent case, have been denied by Paladin.

PETRA also included in their ultimatum a review of the health and environmental risks posed by the operations at the mine. They want to know which health facility workers are being taken to for treatment when they are exposed to radiation, and confirmation that the treatment is adequate.  They also want to know what measures have been put in place to stop pollution seeping into Lake Malawi. Others have referred to the serious issues raised in ‘Yellowcake Rising’, the documentary by Assistant Professor Marty Otanez of the University of Colorado, Denver, about the mine.

Environmental concerns were raised in 2007 on the ABC’s Lateline program, particularly in relation to the rehabilitation of above ground uranium tailing stamps and their potential to contaminate local drinking water supplies.

There’s little help to be expected for problems like these from the big international financial institutions. Although Malawi desperately needs financial aid, former president Bingu wa Mutharika did at least resist calls by the International Monetary Fund to devalue the Malawian Kwacha. That resulted in the loss of “donor support”. But since Malawi’s new president, Joyce Banda, agreed to devalue the currency by nearly 50 per cent and untied it from the US dollar, prices of basic items have gone up by as much as 50 per cent, including a significant spike in food prices. This has occurred in a resource rich country where over 65 per cent of the population live below the poverty line and 74 per cent live on less than $1.25 a day.

Cameroon  

Minister Carr also refers to Rio Tinto’s Alucam smelter in Cameroon. Rio Tinto Alcan is working with the government to accelerate the construction of the huge Lom-Pangar Dam, a project that reportedly will displace 28,000 people. The government apparently is backing the dam because the country is in desperate need of new energy supplies, but the Bank Information Centre is concerned that the dam would have significant environmental and social impacts, and appears to respond to the energy demands of the expanding aluminium sector rather than the energy needs of the majority of the country’s population lacking access to electricity.

A June 2009 U.S. embassy cable, ‘Cameroon’s Lom Pangar is World Bank’s Dam Problem’, sums up the problem: ‘Lom Pangar is a prerequisite for the construction of new facilities along the Sanaga, including power plants at Natchtigal and Song Mbengue that Anglo-Australian mining giant Rio Tinto needs for the planned expansion of its refinery in Cameroon….The Lom Pangar project, and in particular the World Bank’s involvement, has invited controversy and criticism, especially from civil society organisations that argue the project would largely benefit Rio Tinto’s aluminium operations while exacting an unknown social and environmental toll. Although the proposed reservoir zone is relatively unpopulated, it abuts sensitive ecological zones, including the Deng Deng reserve that shelters protected species like gorillas. Additionally, the proposed reservoir would flood roughly one million cubic meters of wood in the catchment area. The government of Cameroon plans to harvest the wood, a task complicated by the expedited timeline and the difficulty of evacuating the timber….As we have seen elsewhere the, the Government of Cameroon’s inclination to rush project planning and disregard international standards has ended up delaying and further complicating the project….As the World Bank expert explained, the Bank also faces competing pressures. On the one hand, its senior management is increasingly scrutinising adherence to its own internal policies, so the Bank will be hard-pressed to give the Government of Cameroon a pass on its tough criteria.  On the other hand, as the World Bank expert explained, “if we walk away from Lom Pangar, we will be cut out of any future role in Cameroon’s power sector.” We will encourage the World Bank to remain engaged with the Government of Cameroon, but stand firm on its demands that the project adhere to international standards.’

To make way for the logging the indigenous Baka, who have been living in the forests of southern Cameroon for thousands of years, are being evicted from the forests which are of critical social, economic and cultural importance to them.

A July 2009 U.S. embassy cable confirms that: ‘The challenges of Cameroon’s power sector is largely that decision-making is all so interlinked and complicated, especially by political considerations. Most of the pressure to increase domestic power production, and do so quickly, comes from the narrow economic interests of Alucam. Certainly the development of Cameroon’s hydro-potential, said to be the second largest on the continent after DR Congo, is important for economic growth, but the pace and nature of the decisions are driven more by Alucam’s narrow economic interest than the dictates of proper planning and implementation.

This seems to contradict the World Bank’s claims that Cameroon’s Lom Pangar project will provide power to millions. Alucam consumes about 40 per cent of the national production, but pays 14 times less than the average consumer.

A 2008 U.S. embassy cable ‘Visas Donkey: Celestin Ndonga Corruption 212(f) Sao Request’ confirms that: Celestin Ndonga [public servant] requested a facilitation payment from Sundance Resources, an Australian iron ore project. Feeling uncomfortable with the request (which they perceived as inappropriate), Sundance officials initially pushed back, but finally agreed to a payment of about $600,000 to a “task force” established by the Prime Minister’s office that, they say, was structured in such a way so as to comply with Australian and American corruption regulations. Nonetheless, one Sundance official expressed discomfort with the deal, arguing that, although it was technically legal, he had no doubts that the funds are being used to line the pockets of Ndonga, members of the “task force” and the Government of Cameroon and their friends, hired as consultants….Post has received a series of allegations that Ndonga has used his official position…to steer business towards companies in which he has a personal stake….Ndonga’s rise has been meteoric recently, largely due to his willingness to use his official position to steward the business interests of Rio Tinto-owned Alucam.

Any payments that are being made to the Government of Cameroon by Australian companies should concern the Australian government, particularly now that Amnesty International has released its report confirming that people in Cameroon are being subjected to unlawful killings and torture as the authorities seek to use the criminal justice system to clamp down on political opponents, human rights defenders and journalists, and as a weapon to attack minority groups.

As an oil producer, the world’s fifth-largest cocoa grower and a place of significant international “investment”, one wonders why poverty in Cameroon has increased in its poorest areas and why the Cameroon government allocates only 0.2 per cent of its GDP to social safety nets. Then again, Cameroon is the 14th most corrupt country in Africa.

Namibia

Minister Carr revealed that 26 Australian companies operate in Namibia including Rio Tinto and Paladin. Namibia provides around seven percent of the world’s uranium oxide production and in 2009 was the fourth largest uranium producer in the world. Yet according to the United Nations Development Program ‘…the poorest 10 per cent of households command just one percent of the country's total income whereas the wealthiest 10 percent control more than half.’

Rio Tinto’s Rossing uranium project produces and exports uranium oxide to nuclear power utilities around the world. Did Minister Carr mention that the government of Iran holds a 15.01 per cent share in Rossing and has, according to U.S. embassy cables, refused all offers to buy its stake?

But what is more disturbing is revelations in a June 2009 U.S. embassy cable that there is a general paucity of environmental regulation governing uranium mining in Namibia, that there is no overall radiological or environmental baseline data for the Erongo region, that the government has failed to put in place regulations to govern the health and environmental effects of uranium mining and that if the supply of water and energy is not expanded in line with the rapid pace of the uranium boom, the mines and average Namibians may find themselves battling for the same scarce resources.

It is little wonder that last year the Commission for Independent Research and Information about Radiation and EARTHLIFE Namibia raised concerns about uranium concentrates found in underground water sources and sediments in areas where Rossing and the Langer Heinrich mines are found. Concerns included radioactive tailings of the mines not being covered, dust particles from the tailings accumulating on bushes and slopes, and preliminary monitoring showing high readings of Radon gas, a heavy gaseous radioactive chemical which causes lung cancer.

In 2009 Uranium workers in Namibia expressed fear for their health and lifestyle due to the environmental impact of uranium mining to the authors of the report ‘Uranium mining in Namibia – the mystery behind low-level radiation’ published by the Namibian research Institute LaRRI.

What have interested Australian companies, or the Australian government, done to address these concerns?

Conclusion

The Australian government has often come under fire for using aid funds to support the expansion of Australian mining interests overseas, its justification being that our overseas development program must be in line with national interests. The Gillard Government’s $127 million Mining for Development Initiative allegedly was designed to help developing countries use their natural resources to improve their economies in a sustainable manner, but where is any evidence of that objective being achieved?

The OECD’s Phase 3 Report on Implementing the OECD Anti-Bribery Convention in Australia highlighted its serious concerns that Australia’s overall enforcement of the foreign bribery offence to date was extremely low, that the Australian Federal Police require more training and resources, that the facilitation payments defence is problematic and that there is a need to protect whistleblowers.

Late last year Foreign Minister Carr announced that Australia would join ‘The Voluntary Principles on Security and Human Rights’, an organisation which provides practical guidance to mining, oil and gas companies on managing security while respecting human rights and preventing conflict. But the Government can only encourage, rather than ensure, compliance with the voluntary framework, and its effectiveness must be questionable.

Rio Tinto has participated in the Voluntary Principles since the initial drafting stage, which commenced in March 2000. The process was aimed at developing specific guidelines for companies on ways they should handle their security arrangements that would be consistent with international standards on human rights. The non-binding principles were to be voluntary and would address the criteria that companies take into account: the risk to human rights in their security arrangements, their relationships with state security forces, both military and police, and company relations with private security forces.

Perhaps the allegation that Rio Tinto provided vehicles and helicopters to transport troops and played a role in instituting a military blockade at the Panguna Mine, Bougainville, Papua New Guinea resulting in the deaths of 10,000 people between 1990 and 1997 prompted its interest in the development of the Voluntary Principles?

And what should we make of Australian Defence Force chief General David Hurley’s alarming indication that there might be a role for the ADF in protecting “Australian interests” in Africa?

To the extent that the miners’ commercial interests or Australia’s ‘national interests’ may in reality be inconsistent with our international humanitarian, environmental and anti-corruption obligations, it’s pretty obvious which are likely to prevail.