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  • The importance of transparency in building trust in the extractives sector

    27 June, 2023

    This month in Dakar, Senegal, supporters of the Extractive Industries Transparency Initiative (EITI) gathered to mark the twentieth anniversary of the initiative and to chart a course for the coming years. Wearing another hat, I was involved at the beginning and now, representing the World Gold Council, it was rewarding to witness the progress that has been made. 

    The EITI started life as a means of comparing payments made by mining and oil and gas companies to host country governments with those governments’ declared receipts. In each implementing country the process is led by government but overseen by a multistakeholder group of companies and civil society groups. The publication of payments – in some mineral-dependent countries the most significant tax revenue flows - helped to stimulate debate about how to avoid adverse impacts from the mismanagement of resource revenues and, from the industry’s point of view, made clear the very significant scale of their tax contributions. The process has also stimulated greater accountability for how resource revenues are used so as to support intergenerational equity and to balance the depletion of natural resources by the building of social, human and manufactured capital.

    Today, 57 countries are implementing the EITI Standard including over twenty where World Gold Council companies have operations and where many are involved in the multistakeholder processes. In Dakar, Chile announced that it would like to become an implementer. What is significant is not only that the number of participating countries continues to grow but also that the issues covered has broadened significantly to cover wider governance and anti-corruption measures. Thus EITI now covers the publication of contractual terms; tracking sub-national revenue flow; disclosure of the beneficial ownership of mining licences; and greater transparency around the finances of state-owned extractive companies. In the new edition launched in Dakar, amongst other things, there will be greater access to information relating to socio-economic impacts and about the energy transition.

    The Responsible Gold Mining Principles, the sustainability framework for leading gold mining companies, adopted in 2019, requires implementing companies to support the EITI and to publish their tax and royalty payments annually by country and by project, including those made in non-EITI companies. It also flags issues like contract transparency, beneficial ownership and adherence to good tax practices in areas such as transfer pricing. The World Gold Council also produces an annual aggregation of  the socio-economic contributions of its member companies. In 2021, for example, this amounted to over US$10 billion in payments to governments, $35 billion to in-country suppliers and £11.7 billion to their workforces.  

    In contributing to a panel at the conference on transparency in mineral supply chains, I was also able to welcome new provisions in the EITI Standard on accounting for artisanal and small-scale mining (ASM).  Some countries, such as Ghana and Ethiopia, have piloted approaches, but all to often policy towards the small-scale mining sector has escaped scrutiny and debate. The sector can help to reduce poverty but all too often, because of limited progress with formalisation, organised crime groups and predatory middlemen have flourished and disastrous environmental practices have been allowed to continue unchecked. The WGC hopes that the new provisions on ASM will help to: galvanise progress with formalisation; combat illicit financial flows; deliver a tax contribution from the small-scale sector and motivate reforms that maximise the developmental potential of responsible ASM.  National EITI groups can be a key driver of progress in this area.