South Africa hasn’t signed up to new extractive sector transparency initiative

The Extractive Industries Transparency Initiative (EITI), which aims to promote financial accountability in the historically graft-prone hydrocarbon and mining sectors, has launched a new project. “Opening Extractives” will provide support to 13 countries to effect reforms to disclose the beneficial ownership of extractive companies.

South Africa has notably not signed up to either initiative, which is a pity, as the disclosure of beneficial ownership in companies is a key tool in the fight against corruption, tax avoidance, capital flight, environmental mismanagement and other ills linked to the sector. Ultimately, such initiatives can help lift the spell of the “resource curse” – the paradox of widespread poverty amid abundant natural resource wealth. Think of DRC, Angola, Nigeria and even South Africa.

EITI, citing UN figures, says Africa loses “£88.6-billion in illicit capital flight every year, according to the United Nations. At a time when the continent faces costs of more than $200-billion to deal with the Covid-19 crisis, citizens and governments can ill afford to see such wealth sent abroad.”

South Africans can certainly relate to money stolen and squandered that could have been used to address the mounting costs of the pandemic, and that does not include the “extractive” sector in the orthodox sense of the term.

“If we succeed, the prize is large,” Helen Clark, former prime minister of New Zealand and EITI chairperson, said in a statement. “Billions of dollars should be going into infrastructure and investment to make life better for many millions of people, rather than into the pockets of corrupt officials or businessmen. Managed responsibly, the extractive sector can be a source of wealth. Making the ownership of companies transparent and promoting the use of beneficial ownership data can help make this a reality.”

In parallel, major publicly listed extractive companies – BHP, Rio Tinto, Anglo American, Newmont, Glencore and Repsol – have signed a commitment to support the project’s goals. The ownership of listed

Managed responsibly, the extractive sector can be a source of wealth. Making the ownership of companies transparent ... can help make this a reality

companies is generally fairly transparent, but EITI said it will disclose information on “subsidiaries, and assess data on company ownership as they undertake due diligence on partners and suppliers”.

One rule of thumb: if you can’t find a warm body at the apex of the ownership structure, chances are it is buried in some tax haven and there is a reason why the beating heart at the top does not want to be detected.

For the record, the participating countries include Mexico, Argentina, Zambia, Mongolia, Ghana and Indonesia. South Africa – which has a fondness for multilateral initiatives, regardless of their utility – remains a glaring omission. That raises some obvious questions.