Clare Short, Chair of the Board, Extractive Industries Transparency Initiative (EITI): Interview

Interview: Clare Short

What challenges do transparency initiatives face in ensuring good governance in sub-Saharan Africa?

CLARE SHORT: For the earliest reporting, the EITI focused on revenue transparency – basically, what companies pay to governments compared to what governments receive. We then reconciled and checked those figures. Regarding enforcement – it is not that difficult – a bi-annual report system has been put in place with a validation process; therefore, figures have to be rigorous. If not, countries have to reconcile when money is missing.

Beyond that, the challenge was to shape the expectations of transparency in the extractive sector, which used to be notoriously opaque and full of secrecies – with massive flows of money going to offshore accounts in tax havens around the globe. Obviously, local populations do not benefit from those resources. So there has been a shift to create an expectation of transparency in the extractive industry. While transparency is not an end in itself, it still leads to more accountability and, therefore, improves governance standards.

In terms of compliance with EITI standards, how vulnerable are member countries to backsliding?

SHORT: A lot of EITI members are low-income countries, with weak governments. Many of them are also former colonies of European countries. Côte d’Ivoire was the apple in the French eye and one of the wealthiest countries in West Africa. Yet, it has faced many crises in recent years, though it is now going forward with stability. Generally, there are an increasing number of reformers, scrutinising existing systems, demanding change and working alongside civil society. This is not going to have an impact in the short-term, but it is slowly changing things. There are always reformers and non-reformers, and tools like the EITI can be used by reformers to drive forward advances in governance.

Just like in developed countries, reforms can be rolled back. There is always a risk that a country will backslide; however, deadlines enable us to exert a bit of pressure. As a last resort, we also have the capacity to suspend countries’ memberships or to dissolute them – as happened in the case of Equatorial Guinea – so, deadlines must be met. We are not trying to be too stringent, but we expect countries to comply with EITI requirements.

Have you noticed a shift in how private firms invest in the extractive industries of frontier markets?

SHORT: Since the US anti-bribery legislation and the OECD Anti-Bribery Convention, there has been a stronger will to comply with best ethical practices. The UK Bribery Act 2010 also helped to address unethical behaviour. All the large companies, listed in countries with strong legislation, have to be more and more careful, and that is encouraging changes in ethical manners. It is becoming a grave risk to large firms to engage in any practices that could result in criminal proceedings.

Overall, enormous changes are taking place in anti-bribery and expectations of transparency, and we are in the process of addressing the challenges. Obviously, some countries are more advanced than others. On a general basis, behavioural improvement is significant; however, it is not just ethics that is helping, but incentives and regulatory frameworks. Even Chinese firms operating in Africa, which used to suffer from bad reputations, are becoming more responsible. While they have been opaque for many years, improvements have been made in terms of employment. It is up to each government to implement good governance standards, then private companies will have to comply.

How can mining and petroleum codes balance the need for public revenues and environmental sustainability while remaining attractive to investors?

SHORT: Countries with a commitment to transparency and better management will end up being more attractive to investors. Foreign investors seek political and economic stability in the long run; this weighs a lot in their investment decisions. Openness and reasonableness are prerequisites to investment, and for this reason codes and institutional frameworks are required.