Having elected the Liberal Party of Canada and Prime Minister Justin Trudeau as an overwhelming majority government, Canadian businesses and citizens alike are turning their thoughts towards the future of international financial relations and how the policies of this newly formed government may affect their ability to operate overseas. Canadian mining companies have a long history of creating both wealth and controversy domestically and internationally, though Canadian interaction in African mining has been a relatively recent development and one that comes with its own share of massive profits and potential risks.
In addition to investment, Canada emphasizes its partnership with many of these countries through continuous foreign aid initiatives to increase mining education programs, “…expand Canada’s involvement in areas of high development impact in the extractive sector…”, and funding charity programs designed to increase corporate social responsibility (CSR). Many Canadian corporations have also made overtures in the realm of CSR, particularly in the form of reports published annually describing their interactions with the surrounding communities and environment.
In countries like Madagascar, Zambia, and Eritrea (among so many others), Canada is exerting its ‘economic diplomacy’in increasingly penetrative ways, to the condemnation of concerned international environmentalists and human rights activists. Through support for these multinational mining corporations, Canada continues its investment in the continent, with over $30 billion invested as of 2013, and has become the key player in the mining industry on the continent, surpassing China.
The major Canadian corporations operating on the continent are predominantly concerned with the extraction of gold, copper and nickel, though iron and cobalt are also mined extensively. A key driver of this investment has been the African Mining Vision (AMV), a United Nations Economic Commission mineral resource development initiative which was adopted by the African Union in 2009. Its primary purpose was to ensure that African nations negotiating with Canadian (and other developed countries) corporations were able to produce contracts holistically; that is contracts that were fair, had regional and local benefits and ensured development and an equitable disbursement of income. Most African countries, including the three that will be discussed in more detail are participants in this AMV, directly or through the African Minerals Development Centre.
Recorded Incidents
Though Madagascar’s 2009 political crisis is still having a small effect on the country, economic growth in the last 3 yearshas begun to climb, though sluggishly. Madagascar’s Canadian connection is a mammoth $5.5 billion nickel-cobalt Ambatovy mine (40% of which is owned by Sherritt International Corp. out of Toronto, Ontario) and the island nation has been of prime interest to Canadian diplomats seeking to expand relations. The Company’s 2010 Sustainability Report, published on its website, describes the social and economic benefits that will accrue as a result of the mining operations, though changes to the countries mining code (meaning higher royalty fees) may make Madagascar less attractive for investment shortly.
Zambia claims approximately 20% of Canada’s mining assets in Africa (around $6 billion dollars in 2013 and expanding), a large portion of which belongs to First Quantum Minerals. Since 2012 they have invested more than $4 billion (USD) in the construction of a new Sentinel mine in north-west Zambia, near Solwezi, which was expected to produce over 300,000 tonnes of copper by this year, upping combined production from FQM’s Kansanshi mine to 700,000 tonnes, in addition to creating over 2000 jobs and making a significant contribution to the Zambian governments revenues. Barrick Gold Corporation, a Toronto based player in the copper business, operates out of the Lumwana copper mine, whose second quarter profits topped $1 billion in the second quarter of 2015. After a rocky late 2014, when the Zambian government raised its royalty rates from 6% to an incredible 20% for pit mines (and from 6% to 8% for underground mines), the investing atmosphere appears to have settled, with Zambia reducing its rates to 9% and works resuming at the Lumwana mine, after preparations had been made to suspend operations.
The Bisha mine, a producer of gold, copper and zinc in south western Eritrea, is a subsidiary of Nevsun Resources Ltd., a Vancouver based corporation, whose revenue in 2014 was $555 million with earnings per share of $0.47. The mine has however been rocked with controversy as a class-action lawsuit in British Columbia’s Supreme Court determines the culpability of the company in the use of forced labour to build the mine. Though it has faced some political issues recently, Eritrea has been politically stable since independence, and since 1993 has maintained steady internal order, creating an enticing investment climate for Canadian businesses.
A Calamitous History
Having been in power for the last decade, the Conservative government under Stephen Harper quite clearly demonstrated its opinions on Canadian mining companies abroad with increased economic and diplomatic support for these corporations and a focus on education in many of these countries that is concerned with developing programs to feed employment into the extractive industries. Under Harper mining companies have enjoyed a long moment in the sun, with Canadian diplomats lobbying for their interests at home and abroad, and officials in Ottawa seeking to allay their fears with negotiations on foreign investment promotion and protection agreements.
A degree of supervision under this disinterested umbrella came to the forefront in the form of independent NGOs like Mining Watch Canada, which aims to ensure corporate accountability and change “public policy and mining practices to ensure the health of individuals, communities and ecosystems”, both within Canada and abroad. While organizations like these are a vital part of the transparency of information necessary to hold corporations responsible for violations, the Liberal government should aim to operate in concert with them to ensure a multiplicity of voices are included in the conversation.
While corporations supervising and reporting on their own activities within African countries is admirable, it is widely criticized as redundant and in some instances corrupt, particularly when the corporation in question and a national African government with weak laws and weaker enforcement capability (or desire) collude to profit. While increasing expenses internationally, as the Liberal Government requires more stringent checks on operating procedures, may do little to bolster investor confidence in the company, international condemnation and blowback domestically have damaged credibility abroad and may make it harder to do business in the future.
Potential for High Grade Political Yields
With Justin Trudeau now holding the keys to the kingdom, the future will undoubtedly lend itself to the vision held by the Liberal Party. Our new government has expressed its intention to apply increased pressure on Canadian companies in developing countries to ensure they are acting in a socially responsible manner, taking the recommendations of a CSR Advisory Group which advocated the adoption of Canadian CSR standards (which the previous government had widely ignored). In addition, the party has expressed its intent to create an independent ombudsman position to advise Canadian corporations, consider accusations made against them, and investigate allegations. In 2010, Liberal MP John McKay’s private members bill (C-300) attempted to increase corporate accountability in developing countries, however it was lobbied against by Barrick Gold, and was ultimately defeated; with the support of the Liberal majority government and the independent actors that have filled the void in the past decade, perhaps Bill C-300 could be revived.
All federal parties have expressed different levels and kinds of support for increased CSR, and the mounting discontent with the lack of regulatory oversight of the international mining corporations demonstrates that the Liberal Government may have increased impetus to curb these alleged and demonstrated abuses. This may be achieved through investing more diligently in preventing the use of extracted resources as fuel in many of the conflicts throughout Africa, or through government legislation that holds Canadian mining corporations accountable for their actions abroad. Mining corporations and investors alike should share these concerns, and recognize that the prevention of human rights abuses (directly and indirectly) will allow the generation of sustainable, accountable profit in the long run.
While Canadian mining corporations in Africa do generate great wealth and have expanded Canada’s economic profile abroad, their negative environmental and social impacts have caused widespread concern and criticism. Our newly elected leader should take heed of the sentiment growing both domestically and abroad: that environmental and socio-economic concerns should not be sidelined in the face of profit, particularly when these accusations are accompanied by allegations of human rights abuses. The list of disturbing actions Canadian corporations on the continent have been accused of include, but are not limited to: bribery, corruption and collusion, slavery and forced labour, the killing of anti-mining activists, and ecological destruction. While these apparent abuses occur in Africa, they are not limited to the continent; similar violations have also reportedly occurred in South America, and there has been ongoing controversy surrounding mining corporations in the True North itself.
Many African states, including those discussed in this article, are seeking foreign investment and present excellent opportunities for resource extraction. We must maintain Canada’s strong reputation as a world leader in human rights and environmental protection in order to ensure that these developing countries are made better off by our partnerships (in reality as well as in rhetoric), and make use of ‘economic diplomacy’ not just towards states in which we wish to do business, but also when speaking to the corporations that inevitably represent Canada as a whole.
Vennesa Weedmark is Managing Editor of Freedom Observatory‘s English-language publications, having previously served as an Associate Editor between 2013-2015. She also serves as the Director of Journalism & Media at Ethics Without Borders.
This article is a cross-post from our partners at The Freedom Observatory
Image courtesy of Wikimedia
