Of rare earths and referenda – A stark tale of corruption contrasts

Ferdinand Balfoort
Director
Topics: Anti-Corruption Pledges, Fundraising, Governance

Ferdinand Balfoort
TINZ Director

Two articles recently caught my eye, both with a direct relevance to my experience in audit and investigations, as well as to Transparency International’s anti-corruption efforts.

The first reported an investigation by the Swiss authorities into alleged corruption by Glencore in the Democratic Republic of Congo (DRC). See Swiss prosecutors launch Glencore criminal probe over Congo. Shortly after the Global Financial Crisis hit last in 2008, I was approached by Glencore in Switzerland to take the role of Chief Internal Auditor at their DRC mines. The requirements were around testing of controls over mine operations and involved staying in Katanga for lengthy periods of time.

Due diligence revealed that the Katanga mine was losing revenues caused through artisanal mining by local villagers on Glencore property. It became clear that the Glencore audit mandate was quite narrowly focussed. It appeared to be essentially to protect the interests of Glencore against those of local villagers.

In the Democratic Republic of the Congo (DRC), mines operate in harsh work environments for the nearly 150,000 workers, supplemented by mining operations by the backbreaking work of an estimated 40,000 child labourers, according to Amnesty International.

Julien Harneis from Goma, Democratic Republic of Congo / CC BY-SA (https://creativecommons.org/licenses/by-sa/2.0)

 

Villagers in DRC “survive” on around $ 1/day to feed their families. The country is ranked one of the poorest in the world. At the same time the DRC supplies substantial quantities of strategic materials to our modern society, such as copper and cobalt. There are strong allegations that the workers extracting this resource include children. It is not illogical to conclude that the villagers are acting to ensure their families survival.

I did not accept the proposed role, for obvious reasons. I knew that many extractive companies in Africa will engage in corruption – paying political elites to secure access to mining rights – causing a starkly contrasted redistribution of wealth between the villagers and the ruling elite. Where such corruption causes material wealth inequality, national governance is bound to fail, as we see again and again globally.

Accordingly, I was well pleased to see the latest referendum in Switzerland aimed to giving Swiss voters the final say on whether Swiss-based companies should be liable for human rights abuses and environmental violations outside Switzerland, See Swiss to vote on companies’ global liability for rights abuses

Consumers are increasingly concerned about the environmental damage caused by the products they use and the use of child labour to produce them.

I have personal evidence of Swiss companies engaging in corrupt practices in Africa.

It is time that consumers start to make themselves heard to root out such problems to safeguard their fellow men.

Courtesy Alexander Andrews, Unsplash

Incidentally, if we considered using our mobile devices longer instead of purchasing new ones, we might assist in reducing such supply side corruption in Africa and equally address the growing landfill problem in New Zealand. This includes many of the personal devices we throw out to buy new ones.

It suggests that New Zealand and other OECD countries could in future have some of the richest repositories of rare earth and other strategic materials locked up in landfills.

We have a long way to go to redress the imbalance of importing rare earths in return for exporting corruption. New Zealand should consider a similar law to that being introduced in Switzerland. Applying NZ’s relatively high standards externally, could go a long way towards helping New Zealand move to a small but influential role in the import and export of corruption. (See Transparency International – Exporting Corruption Report.)

Remember next time you use your mobile device, that it likely includes materials and components obtained through corrupt practices.

Transparency International New Zealand, PO Box 10123, The Terrace Wellington, 6143 New Zealand admin@transparency.org.nz. Copyright © Transparency International New Zealand 2009 - 2019.
Website design and marketing from effectiveemarketing.com