Canada recently stepped up its game in the fight against corruption in resource-rich countries that produce minerals but may not share the resulting wealth
with their citizens.
In late October, the federal government introduced the Extractive Sector Transparency Measures Act, which brings Canada in line with other jurisdictions
like the United States and the European Union. As host to the largest number of publicly traded mining companies, Canada has a role to play in assuring
mining activity creates positive economic outcomes for the citizens of host countries where the industry operates. This is why the Canadian mining industry
pushed for such a measure and was pleased to see the legislation come to fruition.
For the past two years, Canada’s largest mining associations – the Mining Association of Canada and the Prospectors and Developers Association of Canada –
have worked with Publish What You Pay-Canada and the Natural Resources Governance Institute as part of the Resource Revenue Transparency Working Group
(RRTWG). They jointly developed recommendations for Canada to adopt such legislation. The majority of the bill aligns well with RRTWG recommendations, but
there are some concerns with certain aspects of the act. The most prominent concern for industry relates to equivalency: the practice of allowing companies
to submit a report to a Canadian regulator that was prepared and filed in another jurisdiction, such as in the United States, so long as they are deemed
When it comes to curbing corruption, knowledge is power. Through the legislation, mining companies will be required to disclose payments made to host
governments, resulting in a credible source of data that citizens can use to hold their governments accountable. The goal is to ensure local communities
are fully benefitting from the extractive activities taking place in their region. The legislation will fall short of its aims, however, if the data is not
easy to understand.
As currently written, the act does not provide enough assurance that equivalency will be incorporated. The RRTWG felt strongly that equivalency must be a
core principal of Canada’s transparency regime. It would not only help ease the reporting burden for mining companies, but it would also ensure that
reporting is consistent across various countries. This would be a direct benefit for those consuming the data, including citizens, investors and other
stakeholders, as it would make it easy for them to compare information from companies that are required to report in multiple jurisdictions. Similar to the
concern over equivalency, the act also fails to provide enough assurance that reporting will be required at the project level. This is problematic as
project-level reporting would provide the degree of detail necessary to enable communities to use the data most effectively.
Canada’s commitment to transparency is timely. The past decade has witnessed a dramatic increase in resource development, particularly in the developing
world. In Africa, Canadian mining investment grew to $31.6 billion in 2011 from $6 billion in 2005. Turning mounting resource revenues into solid
development outcomes is not just important, it is essential.
For governments worldwide, mining investment holds a significant promise of change. It provides much-needed revenue to fund infrastructure and social
investments, creates opportunities to establish broad-based economic growth, and generates jobs. There is immense opportunity for mining investment to
achieve these goals when you consider that revenues from natural resources account for at least 20 per cent of total government revenues in 41 countries
globally, including 21 low- and lower-middle income countries, according to the International Monetary Fund. Yet in many cases, the economic potential of
natural resource abundance is being squandered by government mismanagement.
Although not a silver bullet in ending all instances of corruption, the transparency legislation is an important step towards it. Corruption can exist when
citizens, elected officials, and municipal and state governments are in the dark about the natural resource revenues received by their national governments
from mining activity. This environment breeds corruption, mismanagement and sometimes conflict.
The Canadian mining industry has committed to transparency not only because it is the right thing to do, but because companies have recognized that it is
an integral part of upholding the industry’s reputation as a responsible actor. Moreover, companies will benefit by clearly demonstrating the economic
contributions of their projects and from the stability that is generated when citizens are truly benefitting from their natural resource wealth.
But Canada needs to get the new act right in order for it to work for all parties involved, especially companies filing their reports and the citizens
using that information to hold their governments accountable for the management of revenues from the mining sector.
The global nature of the mining industry demands a global effort. As such, equivalency and project-level reporting will play an important role in
integrating individual countries’ efforts as well as providing a consistent view of results for those who will benefit most from the information.
Pierre Gratton is president and CEO of the Mining Association of Canada (MAC).