EITI in the Mining Industry

From Oil4All
Jump to: navigation, search
Want to teach yourself about the EITI? "Teach Yourself Oil" Governance

Overview

Much of the press attention in the early days of the Extractive Industries Transparency Initiative (EITI), established in 2002, focused on revenue transparency in the oil and gas industry. However in recent years there have been efforts to tailor the EITI approach to the specific characteristics of the mining sector, such as a focus on transparency at a more local level.

Unique challenges in the mining sector

Partly because the most infamous examples of large-scale embezzlement of resource revenues have been in the oil and gas sector, much of the media and political commentary around the launch of the Extractive Industries Transparency Initiative (EITI) focused solely on this sector.

In 2009, 14 of the 24 EITI Candidate Countries were mining companies. However, the implementation of EITI criteria in the mining context presents a different set of challenges compared to the oil industry, given the following characteristics:

  • According to EITI Board Member Edward Wickham, mining is distinct from oil and gas in that local impacts, for good or ill, tend to be more concentrated and thus stakeholders have a greater interest in transparency at a sub-national level.[1]
  • In the mining sector, revenue transparency is not the major issue, but contributing to sustainable development ie. how funds from mining are being spent.
  • Revenue funds from mining are significantly less than from the oil and gas industry (average oil and gas revenues as a percentage of total fiscal revenues are 52.7%, while averaging only 12.7% in the mining sector).
  • The mining sector is more diverse in ownership and more varied in product, but easier to report. This varies by mineral, however for example the top ten global gold producers produce only 40% of total gold production.
  • State-owned mining companies are generally less important players in the mining sector.[2]

Progress and limitations

In 2006, in recognition of the above challenges, the EITI International Advisory Group committed to paying greater attention to the specific context of the mining sector. Following on from this, the mining context was included in the EITI International Secretariat's 2008 Work Plan.[1]

The stakeholder research report on the EITI and the mining industry commissioned by the EITI suggests that EITI implementation in the mining sector has not been rapid enough and that 'there is not a good business case for mining companies to proactively encourage EITI in most countries where they operate'.

The report made the following recommendations:

  • The creation of a separate mining sub-group with specific mining expertise, that focuses on implementing EITI in mineral dependent countries.
  • Greater links with the broader good governance agenda, to provide a convincing business case for supporting the EITI.
  • Leadership taken on the part of international mining companies, following the example of BP in the Azerbaijani oil industry.[2]


However, further EITI reports claim that despite slow progress in the early years, the picture has now changed and there is now proportionally much greater adherence to the EITI in mineral-rich countries than in oil and gas rich countries.[1]

References

  1. 1.0 1.1 1.2 Advancing the EITI in the Mining Sector: A consultation with stakeholders”. EITI, 2009.
  2. 2.0 2.1 EITI and the Mining Sector: Stakeholder research report”. EITI, undated.