| Joint Standing Committee on Foreign Affairs, Defence and Trade
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Chapter 6 Trade and Investment
This Chapter commences with a review of the current levels of trade and
the potential for growth. (The education sector has been discussed previously
in Chapter 4.)
There follows a discussion of the levels of investment of Australian
companies in Africa—the ability to raise capital, insurance, and the effects of
sovereign risk. The Chapter then reviews the activities of the Australian
resources sector in Africa and concludes with a discussion of the possibility
to promote the Australia-Africa relationship through the creation of an
Australia Africa Council.
Consistent with the overall scope of the inquiry, this Chapter does not
report on trade and investment with North Africa except for the specific issue
of the phosphate trade with Morocco which was raised in a submission to the
inquiry. The Committee notes that in 2006 its Trade Sub-Committee issued a
report into Australia's trade and investment relations with North Africa.
Trade with Africa
Australia’s merchandise trade links with Africa are relatively small,
comprising in 2008–09 of just 1.6% of total exports and 0.8% of total imports.
Two-way trade, however, has been growing. Trend growth for exports have risen
from 6.7% for the decade preceding 1998–09, to 11.0% for the 20 years preceding
2008-09. For imports to Australia, the trend figures for Sub Saharan Africa are
higher than to Africa as a whole. As a comparison only trade to north and south
Asia grew faster over the last decade.
Obtaining an accurate break down of trade figures is complicated by the
inclusion of a high proportion of 'confidential items' in the listings. DFAT
noted that 'some of the larger exports recorded as confidential to Africa
include wheat, alumina and chemicals.'
A table provided by DFAT shows that in calendar year 2010, total
Australian merchandise exports to Africa amounted to $3.1 billion. After
confidential items (30.2%), the top six commodities comprised:
- civil engineering
equipment and parts—2.8%;
- specialised machinery
and parts—2.6%; and
- meat (excluding
Merchandise imports from Africa in calendar year 2010 amounted to $3.3
billion, the top six categories being:
- crude petroleum—57.0%;
- passenger motor
- edible products and
- gold—1.3%; and
- vehicle parts and accessories—1.2%.
DFAT provided services trade figures for 5 calendar years to 2010. Trade
in services with Africa, excluding Egypt, was growing and in 2010 was $2.2
billion, an increase of 4.3% over the previous year. In 2010 service exports to
Africa, excluding Egypt, amounted to $1.3 billion which was 2.6% of total
services exports. Trade with South Africa made up 40% of services trade with
DFAT also advised that the global financial crisis, whilst having an
impact, had been less severe on Africa:
African countries are less integrated into the global
financial system and their financial institutions are much less exposed to the
derivatives market, relying mainly on domestic market resource mobilisation
rather than on foreign borrowings.
South Africa is by far the highest ranking African trade partner. It was
ranked as Australia's 22nd largest trade partner in 2008–09 and Australia's
18th largest export market. DFAT advised that:
Latest figures put South Africa on a par with Germany as an
export market for Australia, and ranking higher than several countries with
much larger economies, such as France, Italy, Canada, Brazil, Russia and
Table 6.1 provides the top 10 ranked African countries in terms of
Australia's merchandise exports. Also included are Ethiopia and Zimbabwe, two
of the four countries visited by a delegation from the Committee (South Africa
and Ghana were also visited).
The submission from DAFF shows details of 2009–10 agricultural exports
to Africa, 88.9% of which is with five African countries—in decreasing
importance: Egypt, Sudan, South Africa, Mauritius, and Tanzania.
The tourism sector is considered separately at paragraph 6.71.
Table 6.1 Rank order of Australia’s merchandise exports
to Africa for calendar year 2010
Submission No.116, pp. 1363–4.
Potential for growth in trade
Following the global financial crisis and the resulting downturn, DFAT
advised there were moderate prospects for growth for Africa:
As Sub-Saharan Africa is a major commodity exporting region,
lower commodity prices, declining export volumes, lower tourism revenues and declining
remittances have all undermined income and private consumption …
Africa’s growth recovery is expected to be moderate over the
medium term. The rebound in economic activity will primarily result from a
recovery in private demand, exports and investment, with the largest
contribution expected to come from exports. The overall strength of the
recovery will depend on growth performance in key export markets and investment
partners, particularly the United States, the European Union and China.
In addition, DFAT advised that the trading environment for
Australia-Africa was very good—goods from the 33 lesser developed countries in
Africa entered Australia duty free; from the other countries, with the
exception of South Africa, goods received a reduction of up to five per cent on
most favoured nation tariff rates. DFAT noted, however, that Australia had very
low tariff rates anyway and all tariffs on textiles, clothing and footwear
would be reduced to five per cent by 2015.
Referring to the resources sector, Mr Joel Negin told Committee that to
focus solely on that sector was ‘a bit short-sighted and limited.’ He added:
Africa has achieved high economic growth over the last seven
years, higher than any other part of the world except India and China. I think
we forget that. It is certainly higher than parts of Europe or the Middle East
or elsewhere. For example, Africa saw a 550 per cent increase in mobile phone
subscribers, from 54 million 5 years ago to 350 million today, outperforming
all other regions of the world. Kenya, for example, has developed a mobile
phone-based banking system which allows people to deposit, withdraw and
transfer money without a bank account. That is a leapfrog technology …
It must be noted, however, that this growth has proceeded from a very
low base in Africa, and that this makes direct comparisons with China and India
The submission from Mr Peter Odhiambo drew attention to sectors in which
Australian companies could enjoy significant advantages. These included, infrastructure
development, agriculture, manufacturing and tourism:
Australian companies can enhance their profitability by
establishing manufacturing bases in Africa. Doing so would position Australian
products in close proximity to key markets in Europe and the Middle East. This
could result in significant cost savings, both financially and in terms of time
taken to transport goods.
In addition, by investing in manufacturing and agriculture in
Africa, Australian companies can benefit from two conditions: First, they can
take advantage of the numerous free trade agreements and common markets within
Africa, thereby increasing exports. Second, they can exploit preferential trade
arrangements for Africa put in place by the major markets in Europe and North America.
Asian companies have taken advantage of these preferences and substantially
increased their exports to the European Union and the United States.
Mr Odhiambo’s comments about the tourism market are included later in paragraph
The submission from Coffey International suggested there was a link
between aid and the health of the private economy:
… Australia’s aid program has the potential to stimulate the
private sector through programs such as: strengthening the environment for
investment attraction; and addressing good governance (eg improved trade laws
and economic governance); building capabilities of local enterprises …
Mr Negin also highlighted the link between the provision of aid and the
development of markets. In Malawi, Malawi Government provision of fertiliser
and seed to small holder farmers led to an increase in food production and the
development of a fertiliser market and a market for improved seed varieties:
Malawi went from being a country that had to import in order
to feed its people to one that exports to Zimbabwe and elsewhere. This was a
program that was not supported by the World Bank and DFID and others are
initially, and the Malawi government went forward and did it all the same.
[Malawi] has now had a surplus for the last three or four years …
The development of sound economies within Africa clearly impacts on the
necessity for, and level of aid required. DFAT noted:
The only way that poverty and aid dependency will be
permanently reduced in Africa is by African countries achieving sustained
economic growth and becoming better integrated into the international trading
The role of Austrade
The role of Austrade is to 'advance Australia's international trade and
investment interests by providing information, advice and services.' The
specific activities include:
- assist Australian
enterprises to capture increased export and overseas investment opportunities.
- Assist international
buyers in locating and identifying the right Australian suppliers.
- Administer the Export
Market Development Grants scheme, which provides financial assistance to
potential, and existing Australian exporters. …
Austrade currently has four offices in Africa. For a number of years
Austrade had offices in Johannesburg, South Africa and in Tripoli, Libya
(managed by the Dubai office). In December 2008, new offices were opened in
Accra, Ghana and Nairobi, Kenya:
- Accra—two Business
Development Managers with a strong focus on the resources sector, one of whom
is focused on Francophone Africa; and
- Nairobi—one Business
The two officers report to 'Austrade's principal sub-Saharan Africa
office, located in Johannesburg, South Africa.
Austrade told the Committee:
We primarily assist our commercial interests in an initial
market evaluation and selection of representation or partners and support free
trade events and other market entry activities. Because of the vast geography
and the difficulty in tracking we have to segment those markets for
serviceability and prospectivity and we indeed prioritise our resources to a
number of key markets.
Commenting on the service provided by Austrade, Associate Professor
Helen Vella Bonavita, Edith Cowan University, told the Committee that in
providing linkages Austrade had been 'extremely helpful and useful quite
definitely.' On the other hand,
Coffey International commented 'Austrade have good information on certain
countries but not much on others.'
The 53 countries of Africa have a total population in excess of one
billion. The continent is as
large as the combined land mass of Europe, United States, India and China. In
Sub Saharan Africa the population is in excess of 870 million
and represents a potential huge market. Australia is increasing its trade and
investment links with the continent, yet has only a handful of Austrade
personnel in Africa. The Committee Delegation noted the heavy workload and
large area that is serviced from a small number of Austrade offices. The
Committee believes that the increased importance of trade and investment in
Africa combined with a large geographical area and increasing workload warrants
an increase in the number of Austrade offices and/or staff.
The Government should increase the number of Austrade
offices and personnel that are based in Sub-Saharan Africa.
The role of Australia Africa business councils
The submission from the Australia Africa Business Council ACT Chapter
advised it had established ‘a program of interaction between targeted companies
and the various [diplomatic] missions.’ Initially personnel from a major mining
house had been flown to Canberra to ‘interact with embassy trade staff and
share ideas on business opportunities.’ The aim was to expand the program ‘to
increase awareness of business opportunities in Africa and deepen understanding
of the business environment on that continent.’
The Australian African Business Council Victoria Chapter (AABC VC) told
the Committee that it ran business seminars, a trade desk, offered professional
services and a brokerage. It was also seeking to build ‘business mentoring
relationships with relatively recently arrived expatriate Africans within the
The AABC VC advised prospective Australian African traders that:
You need to work out which country you’re dealing with, what
the regime is, whether it has a legal framework largely based around our system
or based on the French-type system, how you are going to invest and who you are
going to be dealing with. Our encouragement is to do the homework first and get
it right, make sure you are in the right area, dealing with the right people
with the right agendas and frameworks in place, having done all the things you
would normally do about your intellectual property and managing your business
risk before going in and so minimise the prospect of things going bad.
The Australia Nigeria Business Council also advised that extreme care
needed to be exercised in investing in Nigeria—especially in terms of problems
associated with ‘governance [and] political stability’. So while currently
stable ‘things can happen any time’.
During the inquiry, the Nigerian and South African High Commissioners
commented, inter-alia, on trade and investment opportunities in their countries.
Other information was provided on Ghana.
The submission from the Nigerian High Commission called for trade
between Australia and Nigeria to be strengthened, citing that Nigeria with a
population of 140 million was the largest market in Africa.
This view was supported by the Australia Nigeria Business Council (ANBC) which
added that ‘in West Africa, everything that happens in Nigeria has enormous
bearing on the rest of Africa’. The ANBC provided an example of a South
African-based communications company which benefited from entering the Nigerian
A snapshot of trade between Ghana and Australia and the potential for
growth was provided by Dr Asumadu. He explained to the Committee that he
imported lightweight plywood from Ghana for use in caravan construction, but he
was also seeking to export products to Ghana. He had identified a market for
the export of ready-to-eat foods for sale in Ghanaian supermarkets.
The submission from the South African High Commission drew attention to
the geographic similarities of South Africa and Australia—similar soils, the
same hemisphere—which meant production of similar vegetables and fruit in the
same season. While this tended to create a competitive environment, ‘companies
had much experience to share in agriculture and animal husbandry, and are
therefore well poised to make joint investments in agricultural projects in the
sub-region’. Not only would the
joint-venture partners benefit, but also the local economies of the countries
The submission also called for increased investment ‘given the immense
new opportunities that are opening up with the elimination of conflict in many
In South Africa, the Committee Delegation met with a number of
government ministers, business representatives, and the Johannesburg Stock
Exchange (JSE). Opportunities for investment and joint ventures were
highlighted especially in telecommunications, retail, transport infrastructure,
The Delegation was told there was little trade between African countries.
One of the main reasons was the lack of land transport infrastructure.
Consequently, there was an opportunity to become involved in the creation of a
north-south transport corridor. As well, huge opportunities presented
themselves in agriculture because some 60 per cent of arable land in Africa was
The JSE advised the Delegation of its strong regulatory role and
governance arrangements, and the structure of the South African economy. It
also drew attention to uncertainty arising from South African Government moves
to increase the percentage of company ownership and representation at all
levels of business by 'historically disadvantaged’ South Africans. As well,
there was a government desire for companies to purchase a significant
proportion of goods and services from 'black economic empowerment' entities.
Impediments to growth in trade
The submission from the Government of Western Australia provided a
summary of the impediments to trade identified by Western Australian exporters
of mining equipment, namely:
- political instability
in some regions;
- shipping capacity and
schedules from WA are not competitive as the commercial logistics of exporting
containerised or modular items on commercial shipping lines to Africa requires
trans-shipment to Singapore or similar trans-shipment ports;
- financial capacity,
compounded by the negative effect on investment levels following the Global
quality and availability;
- equipment for
projects may not always be available or reliable, delaying projects;
particularly at destination ports, transhipment ports and at border crossing
- customs procedures
and transparency; and
- extreme weather
conditions in some areas.
The Committee Delegation noted an article in the Ethiopian Herald Sunday
Edition which identified bureaucracy as historically being 'a constant thorn in
the side of investors’ on the continent:
Contract enforcement, customs procedures and efficient
payment of taxes, followed by the keys of registering a business and land are
very high on the list of priorities for investors.
Some of these impediments are
The submission from the Nigerian High Commission suggested that exports from
Nigeria to Australia should enjoy the same concessions as those granted by the
EU and US. The Committee notes, however,
the low tariff levels for imports to Australia already identified by DFAT.
The submission from the Kenyan High Commission cautioned that the
Australian Government must ensure that the activities of the Australian
Quarantine and Inspection Service (AQIS) ‘though critical in protecting the
boundaries of Australia, do not constitute barriers to trade.’ There was a potential
for AQIS to collaborate with approved inspection services in Kenya to reduce
delays at Australian ports due to quarantine issues.
DAFF responded to this issue in a supplementary submission stating that
AQIS ‘ensures that import procedures do not constitute an unnecessary barrier
to trade by developing import conditions based on science and in line with
Australia’s appropriate level of protection.’ This approach was consistent with
WTO agreements. Further, there were ‘38 Kenyan organisations approved by AQIS
to undertake pre-shipment treatment and inspection for exports of Kenyan cut
flowers to Australia.’ As well, AQIS was working with the Kenyan quarantine
service to progress the accreditation of additional Kenyan companies.
With respect to Australian agricultural exports to Africa, DAFF stated
that there were:
… numerous tariff and non-tariff barriers in place. For
example, in the case of key markets for Australia in the region, in Egypt the
average bound tariff for agricultural imports is 27 per cent, in Mauritius it
is 8.5 per cent and in South Africa it is 10.1 per cent. These average tariffs
also disguise tariff peaks faced by Australian exporters, for example, in South
Africa for wine and sheep meat (25 per cent and up to 40 per cent
Whilst the Australian Government is working towards removal of trade
barriers through the WTO Doha Round, DAFF cautioned:
While in the eventual Doha Round outcome developing countries
will be given certain advantages in terms of special and differential treatment
as compared to developed countries, it is important that these countries
continue to be subject to international disciplines and rules under the WTO to
encourage improved global agricultural markets.
The submission from DAFF also noted that Africa will need to compete for
Australian agricultural products with alternative markets. Prospects for
long-term growth in Australia-Africa agricultural trade depended on factors
within Africa and globally:
… the price obtainable and the complexity of trading
arrangements with African nations will dictate the profitability of the trade
and hence the growth in exports to the region. African nations will also need
to effectively ‘compete’ for Australian exports with Asian markets where
consumers are expected to continue to experience significant growth in incomes,
have a high demand for food and be able to pay higher prices for food in the
Decreasing African bureaucracy
The article in the Ethiopian Herald Sunday Edition noted above presented
an encouraging view of moves to improve the investment climate in a number of
African countries. The Investment Climate Facility for Africa (ICF)—a
government-business partnership—started working in 2007 with two countries. By 2011
… working directly with 14 countries and indirectly with 29.
[It is] working closely with the East African Community to enhance the region
as an attractive investment destination [by] making it easier for business in
one state to operate in another, harmonising commercial laws and tackling counterfeiting
and piracy of goods at a regional level as opposed to country by country.
The ICF has supported projects in a number of countries, including:
- in Dakar, Senegal, a
project to streamline the clearance of goods at the port;
- in Burkina Faso, an
investor can now obtain a construction permit in three weeks at a cost of $450
(previously it took several months and cost $2400);
- in Rwanda, a business
can now be registered in 24 hours at a cost of $43 (previously it took over 30
days and cost $400);
- also in Rwanda, there
are now 'four working commercial courts', the backlog of cases has been
cleared, and 'new cases are resolved in a matter of weeks';
- in Zambia, commercial
court proceedings have been automated, case management improved, and courtroom
staff have been trained.
The ICF was also 'trying to improve the way taxes are submitted by
introducing on-line systems in Senegal, Zambia, Tanzania, Ethiopia and Rwanda.'
Ability to raise finance
Mr Gordon Noble, Director, Responsible Investment Consulting raised the concern
of economic progress being impeded by the under-development of the finance
sector in much of Africa and the consequent inability to raise finance. He told
the Committee there were only two large stock exchanges—in Johannesburg and
Egypt. The challenge the others were facing was that the capital they held was
‘literally next to nothing’.
As well, the other stock exchanges were, in finance terms, illiquid—there
was a lack of willing investors to purchase stock:
The liquidity of some of the stock exchanges in Africa, who
are members of the African Stock Exchanges Association, is less than one per
cent; some of them are down 20 per cent. This actually is a challenge. It means
that they are effectively not invested and, from an institutional perspective,
that means that institutional dollars are not going in and investing in those
There was therefore a need to support finance market institutions in
Africa so they ‘can actually provide significant benefits to build economic
development.’ Mr Noble’s view was
confirmed by the briefing provided by the JSE.
Mr Noble was also sceptical of the ability of the microfinance sector to
progress to the economy beyond a certain point:
The microfinance community globally is starting to move up
the chain and there is now starting to be a debate about private equity. There
is only so much that you can do on a $50 loan. If you want to build a more
substantial business, you need more substantial capital and you need skills to
come with that. Also, for some of our significant global challenges, such as
climate change, you need technology. So I think what you will see over the next
10 years is the microfinance community evolving so it creates partnerships with
cleantech renewable energy companies.
… we should encourage [the microfinance] industry to become
more sophisticated and to link, creatively and seamlessly, into a finance
sector so that someone who does have a great idea is able to demonstrate it,
build a business and then take it through the normal change that we would have.
It could be that you could eventually take it into the listed markets. That is
where it fails at the moment.
At the individual business level, Dr Asumdu told the Committee that he
had been unable to ‘get consultancies through the African Development Bank’
(ADB), and had been told this was because Australia was not a member of the
ADB. He suggested Australia should ‘consider seriously the possibility of
membership’ of the ADB. If Australia became an investing partner, Australian
citizens would ‘have access to services and other financial products that the
Dr Asumadu’s view was supported by Coffey International.
DFAT responded to this issue advising that the Government was increasing
engagement with multilateral development banks such as the ADB, which could
‘play an important role in contributing to the sustainable economic development
and social progress of African countries.’ Consideration of membership was
ongoing, but was not ‘a decision to be taken lightly, given the costs
associated with membership. This would include ‘an expectation of ongoing
contribution to the ADB’s concessional lending arm (the African Development
Fund).’ Australia was in the final stages of negotiating an MoU with the ADB
‘without raising any expectations of shareholder membership at this stage.’
Issuing of visas
The submission from the Nigerian High Commission drew attention to
recent changes in Australia's visa issuing arrangements in Nigeria. Under the
new arrangements service delivery partners had been established across
Nigeria—these would send details to South Africa where visas would be issued.
The High Commissioner told the Committee:
I have been putting a lot of pressure and time into asking
the office of immigration to change this policy because quite a number of
Nigerian businessmen would like to come to Australia but find it extremely
difficult to send their passports to South Africa, which takes about three or
four weeks before they are returned. This may be one of the reasons why it is
not very easy for a Nigerian businessman to move into Australia and vice versa.
A similar frustration was expressed by the AABC VC,
and by Professor Howieson who told the Committee that two students from Nigeria
and Ghana he had invited to attend an international conference had been unable
… because it takes a month to get a visa for Australia. They
cannot be without their passports for a month, so they are not coming.
In response DIAC told the Committee that it had had a visa issuing post
in Lagos but that changed when the capital moved to Abuja. DIAC commented:
We now have an arrangement where there are six centres in
Nigeria that are able to receive applications and forward them to Pretoria for
processing. … Indeed, the Department has quite publicly recently been talking
about a transformation arrangement in the way that we deliver services, which
encompasses things like expanding our applications through e-visas, through
service delivery partners and through better access to client channels. …
If we did not have a service delivery partner arrangement,
they would resort to having to use the postal service to which ever post we
went to. … In fact, it expands an opportunity by providing six more places
where people can go.
The Committee agrees that increasing the number of locations where
Nigerians can obtain visas is in theory an improvement. There is only a
benefit, however, if the subsequent communication with the visa issuing post in
South Africa is efficient. The Committee notes, however, that potential
document fraud might require visa application documents to be physically sent
to South Africa for verification. Nevertheless, the issuing of e-visas to low
risk individuals should improve timeliness of visa processing.
The Department of Immigration and Citizenship should expand
the issuing of e-visas across Africa, with priority to establishing the
service in countries where there is the potential to expand trade, academic,
research and other links.
The market for air travel between Australia and South Africa was
described by Qantas as 'thin', and as sitting outside the top 20 air routes
between Australia and other countries. Qantas advised that competition for air
travellers was increasing because of a 'growing presence' of third country
carriers such as Singapore Airlines and Emirates, and as well the introduction
of services by V Australia and South African Airways.
In response to this competition, Qantas was boosting its capacity by
increasing services to 7 per week by the end of 2010.
The Department of Resources Energy and Tourism (DRET) noted that the capacity
on the Australia–South Africa air route had increased by 16 per cent in 2009
with a forecast of an increase of 22 per cent in 2010.
This increase in capacity has been reflected in an increase in passenger
movements from 340,000 in 2008–09 to 493,000 in the year to February 2010.
Qantas advised 76 per cent of its passenger traffic originated in, or
had a destination of, South Africa and 80 per cent was for leisure—holidays or
visiting relatives—and 20 per cent was business.
DRET advised the Committee that South Africa was in fact the 18th largest inbound
market for air travel.
The Committee sought information about DRET's strategy for marketing
Australia as a tourist destination. DRET responded that its strategy
concentrated on South Africa and was managed through its London office. The
- joint investment in
cooperative marketing campaigns;
- training and
educating travel agents and direct sellers about Australian destinations;
- inviting South
African tour operators to Australia's major annual trade forum, the Australian
Tourism Exchange; and
- leveraging major
sporting events such as the Rugby World Cup.
In other African markets, industry demand was serviced by the Sydney
office through online travel agent training and through Austrade.
Mr Peter Odhiambo identified tourism as one of a number of sectors in
which Australian companies 'could enjoy significant advantages':
Africa has an abundance of tourism products, but a dearth of
tourism infrastructure. It is a popular destination for Europeans, North
Americans, and increasingly East Asians. Australia has a flourishing tourism
sector. Domestic tourism infrastructure in Australia can be replicated in
Africa. The World Tourism Organisation says that Africa is the fastest-growing
tourism destination. There are barely any Australian owned tourism facilities
in Africa; and Australian airlines (Qantas and V Australia) only fly to South
Tourism in Zimbabwe
During its visit to Victoria Falls, Zimbabwe, the Committee Delegation was
briefed by representatives of the Zimbabwean tourism industry. Despite
international sanctions inhibiting the ability to raise credit and political
uncertainty, the tourism industry in Zimbabwe is currently experiencing
increased activity. This has flowed through to the population via jobs and has
been reflected by improved local services—compared to Harare and Bulawayo (both
cities were visited by the Delegation) there is an atmosphere of relative
prosperity in Victoria Falls.
The Zimbabwe Government appears to be responsive to tourism industry
needs and the Committee was told that recently there had been a period of 18
months when there was a suspension of import duty for the industry. The
indigenisation policy remained an issue, but
the Zimbabwe Government appeared to be focusing on the mining sector.
There is still significant capacity for expansion which was revealed by
the large number of unused cruise vessels which the Delegation saw on the banks
of the Zambezi River.
The economic sanctions are imposed by the US and Europe. Australia has
confined its sanctions largely to travel bans and sanctions against a small
number of ZANU-PF controlled companies.
A potential deterrent to Australians contemplating tourism activities in
Africa, identified by the Kenyan High Commission, was the issuing of travel
advisories by DFAT:
However, despite the best efforts by African governments to
promote tourism, travel advisories that are issued from time to time by [DFAT]
go against this spirit. Despite these advisories being reportedly reviewed and
reissued regularly, some of the facts included are either outdated or
The advice on DFAT’s Smartraveller website for Kenya in March 2011 is
for the traveller to exercise a 'high degree of caution' overall; 'reconsider
your need to travel' to four suburbs of Nairobi; and 'do not travel' to the
border regions with Ethiopia, Sudan and Somalia. The advice also contained the
We continue to receive reports that terrorists may be
planning attacks against a range of targets in Kenya, including Kenyan or Western
interests. Western embassies, UN premises, Kenyan Government buildings,
shopping areas frequented by Westerners, hotels, bars and nightclubs,
restaurants and cafes, tourist resorts, safari lodges, major infrastructure,
churches and other places of worship and other places frequented by foreigners
may be particular targets. In planning your activities, you should avoid the
kinds of places known to be terrorist targets.
DFAT told the Committee that:
The government's position is quite clear that they are based
on the best information available to guide Australian travellers. They are
advice, not direction. There are some security issues of concern in Africa. …
It is a firm policy of the government and we will continue to provide that
advice based on the best information we have available.
Phosphate trade with Morocco
The Committee received submissions from the Australia Western Sahara
Association (AWSA) which expressed concern at the importation of phosphate from
Western Sahara (a former Spanish colony) to Australian States by Australian
We regard these imports as unethical and illegal and urge the
Australian government to express this view clearly so that the companies may be
encouraged to put their imports on hold until the conflict is resolved. …
However, in terms of international law, the phosphate is not
Morocco’s to sell. Morocco is the occupying power in this territory, which is
still waiting for a vote of self determination since Spain left without
accomplishing this act of decolonisation in 1975.
The Embassy of the Kingdom of Morocco responded that the AWSA’s
submission was ‘based on false information, and use of false information.’
It commented that for over 30 years no General Assembly Resolution had
conferred the status of occupying power on Morocco and that:
No recognized international body has ever qualified the
exploitation of natural resources by Morocco as acts of plundering detrimental
to the inhabitants of the region.
2004, the Security Council no longer invokes the organisation of a referendum
but promotes seeking a negotiated and mutually acceptable political solution.
DFAT responded with advice that
Western Sahara was classified by the UN as a Non-Self-Governing Territory and
that Morocco and Polisario disputed sovereignty over the area. Negotiations
For many years the UN was focused on the terms of a
referendum. The referendum did not take place because of disagreement between
the parties as to who should be eligible to vote in a referendum. UN efforts
are now focused on negotiations to discuss these two proposals ‘in good faith’
and ‘without preconditions’. …
Morocco and the Polisario have had held four rounds of formal
negotiations under UN auspices, with the most recent held from 16 to 18 March
2008. … [since then there have been] six rounds of informal talks (the latest
round was held in early March 2011), with the aim of restarting a fifth round
of formal UN-mediated negotiations.
Regarding the importation of phosphate from Western Sahara, DFAT drew
attention to the need for companies to consider:
… the possible international law considerations involved in
importing natural resources sourced from Western Sahara and [it recommended]
companies seek independent legal advice before importing such material.
For investment to proceed, DFAT stated that it was important for
‘countries to put in place the rules and the context that allows investment to
succeed both for the company’s economic benefit and for the wider development
gains to be made.’ Issues such as regulatory certainty, security of title of
tenure over mining, and lack of conflict were important.
The submission from the Australia and Nigeria Business Council and
Professor Ann Fitzgerald, Faculty of Law, Queensland University of Technology
was more specific, citing:
- the modernising of
- the administration of
land title and mining registries;
- the creation of
publicly available databases of mineral exploration information; and
- the implementation
and enforcement of intellectual property systems.
Three sectors have been identified where there was either investment
potential or where investment was occurring—energy; infrastructure; and mineral
The Nigeria High Commission advised that Nigerian power production
facilities were ‘grossly inadequate’ and there was potential for investment in
‘power generation, solar energy development, transformers, electrical meters,
and electrical constructions’. The energy sector was
also identified by the Kenya High Commission which stated that ‘the continent
still falls short of its energy requirements.’
The potential of the African renewable energy sector has been identified
in a 2008 Lowy Institute paper, Policy Brief.
This was supported by WorleyParsons:
Obviously, Africa is a wonderful location for solar. The
difficulty of solar is the expense of it at this stage. The cost of solar is
coming down at such a rate that I would think that in the next few years there
will be more opportunities for solar, particularly for remote locations in
Mr Peter Odhiambo drew attention to infrastructure investments:
The development of infrastructure in Africa was traditionally
dominated by European and American companies. Over the past decade, there has
been a shift to the east; Chinese and Indian companies are making substantial
investments in Africa’s infrastructure. By contrast, Australia, despite its
significant advantages in this area, is marked by its absence from Africa’s
With about 30 per cent of total mineral resources in the world, Africa
presents huge opportunities for the resources sector. DRET told the Committee
that the percentages of global production for various minerals were:
- bauxite, 43 per cent;
- copper, 13 per cent;
- diamonds, 27 per
- gold, 21 per cent;
- iron-ore, 17 per
- nickel, 6.5 per cent;
- platinum, 78 per
- uranium, 38 per cent.
… there is a significant amount of production that is
occurring in the minerals area in particular. That is an opportunity for
Australian companies that we do not intend to miss out on.
Rio Tinto also commented that Guinea was ‘the Saudi Arabia of bauxite.’
The AABC ACT Chapter noted that Guinea’s bauxite mine was the world’s largest,
and that Guinea also had the world’s largest iron ore deposit.
These opportunities have not gone unnoticed. As WorleyParsons told the
I think the opportunities there are extraordinary. There and
Latin America are two areas that we are concentrating on from the growth point
of view at the moment. Both of them … have been little affected by the GFC and
so are providing great opportunities for us to expand—both in the services we
provide and the countries we are in.
The AABC ACT Chapter agreed with the Committee that, notwithstanding the
risk, returns in Africa were ‘so much better’ than elsewhere:
You would have to weigh the risk against the reward, but
there is no question. This is across the board. It is not only in mining.
Typically, your returns on capital in South Africa can be anywhere between 50
and 100 per cent greater than your returns in Australia. … Of course, there is
a risk issue here. Australia is a very stable environment to do business in. So
you would expect returns in Africa to be a lot higher—and, indeed, they are.
The question is how you manage the risks so you can get the high returns.
With this incentive, Australian companies are investing in the African
resources sector. DFAT advised that a 2008 Lowy Institute report ‘estimated
that actual and prospective investment by Australian resource companies in
Africa could be close to $US 20 billion.’ DFAT noted this figure
differed from that produced by the Australian Bureau of Statistics, but may
have been due to the way companies, particularly multinationals, structured
their investments. The amount, however, reflected:
… the order of magnitude of Australian interest in African
mining. It is consistent with the value of current investment in Africa ($US 15
billion) that DFAT obtained in 2007 based on both confidential and published
information from a survey of Australian resource companies.
… the actual figure for current and prospective investment by
Australian companies could be even higher, considering that the cost of a
relatively small mines can be around $US 100 million, while larger projects are
valued in billions of dollars.
DFAT provided the Committee with an update in April 2011:
DFAT is aware of 227 Australian resources companies with
projects on the ground in Africa, as of early April 2011. Of these, 203 are in
the mining sector (includes mining operations/minerals exploration/mining
services), 24 in oil or gas production/exploration, and one in geothermal
exploration. These companies have interests in over 620 projects across 42
countries and one territory (projects encompass mines operating or under
construction; oil and gas production facilities; smelters, exploration
licences; and service companies’ branch offices).
The rapid growth in Australian activity in Africa’s resources
sector has accelerated over the past year. At least 53 companies and 172 new
projects commenced operation the first time in Africa since the beginning of
The total projected capital investment of projects at the
feasibility study stage is more than A$27 billion, based on publicly released
feasibility studies and other estimates released by companies.
The submission from AAMIG indicated that ‘150 ASX listed mining and
exploration companies, with a collective market capitalisation of over A$260
billion’ were active in 40 African countries. A further 80 mining service
companies were estimated as having Africa-based operations or were routinely
involved in African assignments.
Several issues have been raised concerning Australian resource company
involvement with Africa. These were:
- the assessment of
- raising finance;
- corporate social
- transparency of
- safety of uranium
DFAT regards corruption as being a significant challenge in Sub Saharan
Of the 47 Sub Saharan African countries reviewed in
Transparency International’s Corruption Perceptions Index 2009,
corruption was perceived as rampant in 31 (a score of less than three out of
10), and a serious challenge in 13 (a score between three and five of 10). Only
three countries—Botswana, Mauritius and Cape Verde—scored more than five out of
10. In Northern Africa, corruption was perceived as ‘rampant’ in 35 countries,
and as a ‘serious’ challenge in the remaining two countries.
… In many countries weak institutions mean that enforcement
remains inconsistent, despite increasing awareness, reporting of corruption and
the strengthening of legal frameworks.
Coffey International supported the view that there was a direct
correlation between the corruption index and the levels of sovereign risk
country to country, and that the other factor was instability.
Regarding corruption, the witness from Paladin Energy told the Committee
that he was responsible for deciding whether his company could operate in
It is a core principle of the company that we will not pay a
single dollar in bribes. We are opposed to that, for obvious reasons. The
reality is that that simply means that there are some countries in which you
cannot operate. …
… there are other countries where clearly there is bribery
and corruption and there is no question that you will be asked. You will be
pressed at various levels, whether it is facilitation payments or whether it is
of a much higher order …
You have to persevere and you have to be firm, but once you
have declared it and if they see it is in their interests for you to be there
then at the end of the day, although it may take longer to get there, it may take
longer to get the process completed, you can do it. … do your homework,
understand the country you are going into, understand its processes and its
culture, be wide-eyed but operate as you would at home.
For companies wishing to invest in Africa, options include raising
capital on stock exchanges and seeking support from the Export Finance and
Insurance Corporation (EFIC).
The AABC ACT Chapter’s submission suggested there was ‘a perception’
that the Australian capital markets had a ‘limited appetite for African risk’.
Consequently, Australian companies seeking finance to establish or expand
operations in Africa would often seek to list on the Toronto or London Stock
Exchanges. This was, the submission suggested, because the Australian
investment community had poor knowledge of the continent:
Investment analysts are far less likely to have direct
experience of Africa and may therefore be more conservative in their
recommendations regarding African prospects. The investment community in
Toronto on the other hand has developed what can probably be described as a
financial cluster around African mining investment with several analysts
focused on this area. This no doubt contributes to the attraction of that stock
market to companies operating in Africa.
This view was supported by Coffey International, a company which values
deposits and assists in the raising of capital:
… the researchers and analysts … do not have strong
information when it comes to decisions around whether to invest in an African
nation or not. Therefore, their decisions are often guided by other sources of
information and quickly become quite concerned about risks in areas like
governance, legal systems, security, transport and so on.
The AABC ACT Chapter told the Committee about an attempt to bridge the
… a contingent of 20 analysts [were taken] to West Africa
last year specifically to try and educate them about the opportunities there. I
think it is a process that will have to develop, and I have no doubt that
Australian capital will start flowing more strongly as the expertise develops.
Export Finance and Insurance Corporation (EFIC)
The role of EFIC, under its legislation, is to complement the private
sector in promoting trade and investment, and doing so profitably. EFIC told
the Committee that it had products to help Australian businesses:
… win business when they are tendering for business. We have
products that helps them to finance what they have won or help their buyers to
finance what they seek to acquire from Australia. We have products that help
them to protect their investments or to protect themselves against payment risk
when they are working in foreign jurisdictions.
EFIC advised that it either lent directly or provided bank guarantees
‘within a very tightly defined framework of Australian and international law
and guidelines, including those related to ethical, environmental and social
standards of business.’ EFIC had provided some $US 353 million over the past
six years to Australian resource companies active in exploration and
development, and to engineering and service companies. This figure was expected
to rise to $US 500 million in the next two or three years. Companies supported
had interests in Mozambique, Ghana, Zambia and Mali.
Jubilee Australia has criticised EFIC’s transparency. This is discussed
at paragraph 6.164.
Corporate social responsibility
The submission from Oxfam Australia (Oxfam) advocated that mining sector
companies investing in Africa should address issues of corporate social
- Business and human
- Accountability and
- Doing business in
- Free prior and
- The gender impacts of
Business and human rights
Oxfam identified core elements including:
… having a human rights policy, undertaking human rights
impact assessments with community participation integrating human rights
throughout a company and tracking as well as reporting performance – both good
Failure to respect human rights, Oxfam suggested, ‘can result in loss of
housing, land and livelihood, environmental degradation, social unrest and poor
Accountability and grievance mechanisms
Oxfam suggested mining companies should be accountable to countries
where they operated through ‘a formal and ongoing mechanism for stakeholder
engagement and a grievance mechanism through which complaints can be raised and
resolved.’ The submission drew attention to several internationally recognized
documents which provide guidelines, including:
- the OECD Guidelines
for Multinational Enterprise;
- the UN Global
- the Equator
- the UN Principles for
- the International
Council on Mining and Metals Sustainable Development Framework;
- the Extractive
Industry Transparency Initiative; and
- the Kimberley Process
Doing business in conflict zones
Oxfam drew the Committee’s attention to the risks of mining companies
operating in conflict or post-conflict zones. It was often not a case of simply
not operating in such zones, Oxfam acknowledged, because investment by
responsible businesses was often needed to repair the country’s shattered
economy. Oxfam also told the
Committee that there was a:
… large presence of Australian companies operating in
countries that are either in conflict, post-conflict or have a weak regulatory
environment, and that creates new challenges. … it depends on the level of
investment they have in their own due diligence mechanisms and their own
investment in developing human rights compatible policies …
Free, prior and informed consent
Oxfam expressed the view that gaining free, prior and informed consent
before undertaking activities on community or indigenous people’s land was
‘fundamental to a rights-based approach to development and offers practical
benefits to all stakeholders including government and industry.’
The Committee notes after discussions with Adamus Resources, operators
of a gold mine in Ghana, that obtaining agreements with local communities may
take several years.
Gender impacts of mining
Oxfam commented that ‘women can experience the direct and indirect consequences
of mining operations in different, and often more pronounced ways than men.’
- Failure to include
women when negotiating community consent …
- The payment of
compensation and royalties goes to men ‘on behalf of families’ which denies women
access to the financial benefits of mining
- Loss of land and
displacement can lead to loss of livelihoods and increased work burdens for
- Displacement and the
shift to a cash-based economy can diminish women’s traditional status in
- The effects of
environmental degradation can undermine women’s capacity to provide food and
clean water for their families
- The employment of men
in mines results in a withdrawal of labour from traditional subsistence
activities and increases the work burden for women
- The influx of a
transient male workforce can result in social and health problems …
- Discrimination in the
Performance of Australian mining sector companies
DFAT’s submission commented that ‘Australian companies have a good
record in Africa in the area of corporate social responsibility’. The witness
from Oxfam stated:
Overall, I think Australian companies have some good examples
of where they are attempting to give consideration to the challenges that they
face through their policy work. What is most critical is: how they go about
implementing those policies, particularly if they have a management structure
which means that there is not as much communication as there could be between
head office in Australia, for example, and site management in a country in
Oxfam told the Committee that its mining advocacy strategy included direct
engagement ‘with mining companies, around assisting them to develop policies and
practice to enhance their operations offshore with regard to corporate
accountability.’ To that end, Oxfam is a member of BHP’s external forum
enabling it to provide advice and comment on BHP’s offshore business conduct.
Oxfam had also assisted Rio Tinto in developing its gender assessment tools and
guidance. The challenge, Oxfam commented, was:
… getting access to the small and junior companies that are
operating in the countries of Africa. Quite often that is where policies and
practice around protection of and respect for human rights may be less well
developed than they are in some of the larger mining companies.
The challenge provided for smaller companies was also highlighted by
Responsible Investment Consulting:
The exploration stage of a mining project has significant
challenges, and that is the space that we see when we look at those companies.
… That is the space where there is a lack of sustainability focus, and I think
that is a risk to our reputation in the long term.
When it comes to endorsement of principles and reporting, Responsible
Investment Consulting indicated that Australian companies in general have some
way to go:
In terms of corporate social responsibility, the
international standard that many companies adhere to is the United Nations
Global Compact. Around 7000 companies have endorsed these 10 principles, and
they cover everything from human rights to labour standards and environmental
issues. The challenge we have in the Australian listed market is that only
seven companies in terms of the ASX 200 are actually endorsing these global
compact principles. …
The international framework … for companies providing
sustainability information—and that is their environment, social and governance
performance—is the Global Reporting Initiative. … We have found that only 10
per cent of the ASX 200 market actually reports according to the GRI reporting
framework. That means that investors do not have enough information in order to
judge their investment decisions, and that is certainly a worry.
The Committee received detailed evidence from mining company witnesses
about some of their company’s corporate social responsibility activities, and the
Committee Delegation visited the Adamus Resources mining site in Ghana. Details
of the visit are at paragraph 6.148.
Mining industry associations
The Committee received evidence from two mining industry
organisations—the Australian Uranium Association (AUA); and the
Australia-Africa Mining Industry Group (AAMIG).
The submission from the AUA provided details of its Charter and Industry
Code of Practice. The Code was developed in accordance with the International
Council on Mining and Metals Sustainable Development Framework and the Minerals
Council of Australia’s sustainable development statement, Enduring Value.
The CEO of the AUA told the Committee that the Association annually
surveyed its members’ performance under its code.
He acknowledged, however, that the survey was a self-assessment instrument, but
the issue of independent audits was one which had been considered.
He commented on the outcome of membership of the AUA:
… the experience of members of the Association is that a
commitment to Australian standards of practice in the area in which we work has
been of benefit to our members and of reassurance to the host countries and the
host communities in which they operate. …
What counts is that we build trust amongst our stakeholders,
many of whom are local communities, … Most of all we should never breach trust,
because once we breach trust that is very hard to get it back again. So what
counts, I think, is our behaviour, and that is why we place is so much emphasis
on our operational performance and on our relationship with our stakeholders.
The submission from AAMIG stated:
Australian mining companies continue to build an extremely
sound reputation for their environmental and social responsibility in an
international context, including Africa. The majority of companies prefer to
transpose more numerous, but familiar, Australian standards in relation to
safety, and environmental and social requirements, rather than adopt the often
less onerous international standards or those of the jurisdictions in which
The submission also summarised the social development programs
undertaken by mining companies in Africa. Several of these
programs were highlighted when representatives from BHP Billiton, Paladin
Energy, and Rio Tinto appeared before the Committee.
The representative from BHP Billiton, Mr Ian Wood, Vice President, Sustainable
Development and Community Relations, told the Committee that it had ‘one
global, consistent operating standard within the company’ and that policies and
standards which were applied in Australia were also applied in Africa and all
other developing countries. These principles were
based on high level international protocols such as the Universal Declaration
of Human Rights, the UN Global Compact and the International Council on Mining
and Metals Sustainable Development Framework. As a result, BHP Billiton had
found that governments did not have issues with its operating principles.
The company also had:
… a group of highly skilled internal auditors that audit each
one of our assets at least every two years to check conformance with those
standards. If there are gaps identified, they have to implement an improvement
plan to address those gaps. If the gaps are significant, it gets reported all
the way up to the group management committee and the board. … Every year we
produce a detailed sustainability report which is audited externally by
BHP Billiton stated that it would not proceed with new projects unless
its project development teams could ‘demonstrate that projects [had] broad
based community support.’ Regarding resettlement of communities, BHP Billiton
commented that its approach was always to avoid resettlement, but if it was
necessary it was committed to follow the guidelines of the International
Finance Corporation for community resettlement.
It sought to differentiate itself from:
… some of the other investment dollars flowing into Africa by
demonstrating the commitment we make to operating globally high standards, the
commitment we make to paying fair taxes and royalties, the commitment we make
to employing local people, the commitment to education and training and to
community programs expenditure.
BHP Billiton added that its community programs were run with partners—it
… hold itself up as an aid agency or a service deliverer at
all. We work very closely with our program delivery partners to make sure we
get the right organisation … We never just sign cheques and leave them to it;
we actively engage and participate.
BHP Billiton advised the Committee that it has a target of spending one
per cent of its pre-tax profit on community programs which in 2009-10 amounted
to $200 million. Commenting on this
figure, Mr Andrew MacLeod, an adviser to Responsible Investment Consulting,
… BHP Billiton is the third largest development agency in
Australia. … that puts them after the Australian government and World Vision
and puts them in front of the Red Cross and the plethora of other agencies and
organisations that do aid and development.
Mr MacLeod supported such private sector assistance because its delivery
effectiveness was motivated by self-interest and was evaluated on outcomes
because of the need to demonstrate value for money to shareholders. This was in
contrast, Mr MacLeod suggested, to the public sector where performance was
measured in terms of money spent:
A well constructed corporate social responsibility or
community investment program tends to work because there is a link with the
profit motive and because the company has invested in the success of the
outcome of the program. It is in BHP Billiton’s interest to have a better
educated second generation workforce and it is in BHP Billiton’s interest to
have less absenteeism caused by malaria. … because they are answerable to their
shareholders, they do need to show effect for the money they are spending.
In Mozal, Mozambique, BHP Billiton has an aluminium smelter. It
conducted an anti-malaria program in the area which was, ‘a partnership between
the Mozambique government, the South African government and the Lesotho
government, with private participants like BHP Billiton’.
Mr MacLeod noted that the program had resulted in the rates of malaria
declining ‘from 74 per cent of the population to 17 per cent.’
The HIV/AIDS program run by BHP Billiton in its South African operations
had resulted in infection rates of 14 to 15 per cent, whereas the demographic
infection rate was ‘closer to 25 per cent or higher.’
The representative from Paladin Energy, Mr Gregory Walker, General
Manager, International Affairs, explained to the Committee that his
responsibility was oversight of the company’s ‘social responsibility programs
in-country and corporate relationship with the host governments.’ He agreed
with Oxfam concerning communication between head office and on-site management
I think that this is true generally, but also specifically in
the case of social responsibility. Paladin recognises this fact and it is part
of my accountability within the company to ensure that those linkages exist and
that the cultural values we espouse at head office are in fact reflected at the
In developing its mine site in Malawi, Paladin Energy had:
…‘established and conduct[ed] a formal process of negotiation
and consultation with local traditional authorities and the community as well
as the government of Malawi. This is an ongoing regional program which is
conducted informally almost on a daily basis and formally on a quarterly basis.
The environmental impact assessment process had been undertaken by an
internationally recognized consulting group and followed requirements in Malawi
legislation which were comparable to Australian requirements:
The Kayelekera EIA was subjected to extensive stakeholder
review by government agencies, NGOs, the general public and international
experts, including the International Atomic Energy Agency. Both the Kayelekera
mine and its EIA have been designed to meet not only local regulatory
requirements but also international standards and guidelines, such as those
stipulated under the Equator Principles.
Paladin Energy’s performance against its commitments was routinely
audited by its banking consortium’s independent technical consultant.
Paladin Energy described to the Committee the impact of its operations
Prior to investment of in excess of some $200 million in
Kayelekera, Malawi had no modern mining industry at all, much to their
distress, just a handful of small partisan operations mainly focused on coal
and gemstones. It has been estimated that Kayelekera, once it is in full
production, will add 10 to 15 per cent to Malawi’s GDP and account for up to 70
per cent of total foreign earnings. … The project has provided a direct
employment for some 2250 Malawians during the construction phase and will,
long-term, about 500 local people during the operations phase. … the company
has spent more than US$10 million on social development projects, most notably
in construction of a new water supply project for the northern regional town of
Karonga. It utilises Australian filtration technology and guarantees the 40,000
odd residents of Karonga for the first time in almost living memory a clean,
reliable, assured source of water which is designed to meet the town’s needs
until at least 2025.
Paladin Energy also advised that it employed four Australian
environmental or community development officers who worked in ‘agricultural
outreach, education support, HIV/AIDS, and health and hygiene campaigns.’ The
company had also ‘built or renovated schools, built new teacher’s housing and
established health clinics.’
The representative from Rio Tinto, Mr Bruce Harvey, Global Practice
Leader, Communities, told the Committee that it had a small corporate team,
reporting directly to the Rio Tinto board, which ‘oversights policy, community
standards and guidance notes to operating teams on the ground and, more
importantly, runs a very important assurance function’. In addition, the team’s
performance was subject to independent auditing—the auditors reviewed a sample
of Rio Tinto’s operations on an annual basis.
Mr Harvey added:
… we have literally hundreds, if not thousands, of people at
sites all around the world who work in direct engagement with host communities
and governments. More importantly, every single one of our operating officers
has a communities and socio-economic mandate, because as I said we are not
running a philanthropic organisation; we’re running a business, and the single
biggest contribution we make is in the business activities of our operations.
So a huge effort is going into local training and employment, the development
of local and national procurement programs, regional infrastructure,
environmental co-management programs, site and land access security, and human
Rio Tinto described its contribution to the gross domestic product of
Namibia where it had been operating for 35 years:
Close to 100 per cent of our employees are Namibian. We
currently contribute four per cent of Namibia’s GDP. In the past it has been
much larger. Twelve per cent of the current exports of Namibia are from that
operation. … An informal measure of ours is that over time we want to see our
GDP contribution reduce because that implies the rest of the economy is growing
strongly. That is absolutely demonstrable in Namibia.
Also in Namibia, Rio Tinto has established the Rossing Foundation:
Over the years it has invested at a national level a
substantial amount of money … It has co-partnered with the European Union and a
number of other highly credible international donor organisations. In fact,
that has happened as a result of the governance conditions … It is one of the
strongest governed development organisations. It is essentially a development
NGO. Other donors are happy to put funds into the organisation because they know
that it will be well governed and the money will be well spent. It is
essentially a partnership with the Namibian government. … since 1978, $33
million has been donated from the operation through the Rossing Foundation and
more through leverage in with others, specifically to projects directed at
empowering women, agricultural development, small and medium enterprise
development, education centres—mathematics, science—and many other things.
In addition, in Limpopo Province, South Africa, the Palabora Foundation
provides ‘the logistical-administrative support, the clinics and all the
anti-retroviral medication and other things’ for the HIV-AIDS program in the
region. The Foundation was
created in 1986 in partnership with the provincial government of Limpopo. Until
2001, it received three per cent of the after-tax profit of Rio Tinto’s
Palabora copper mine. After 2001 its operating expenses have been met by
interest earned from its trust fund.
Responding to the issue of joint ventures with other countries in
developing Africa’s resources, Rio Tinto advised that its new iron ore Simfer
project in Guinea was a joint-venture with a Chinese company Chinalco. Rio
All of those operations comply fully with Rio Tinto’s
international expectations, which are to an Australian standard. The sovereign
and private equity companies are not constrained by similar self-discipline,
and that puts us at a distinct disadvantage, but we are certainly not going to
reduce our standards of behaviour.
While in Ghana, the Committee Delegation inspected the Adamus Resources
Nzema Gold Project in western Ghana. The Delegation visited the Salman village
resettlement project and was provided with the report of Adamus Resources’
The Salman resettlement was preceded by a two-year consultation period
which resulted in a Resettlement Agreement. The resettlement involved ‘over
2000 people, 450 structures and 19 public buildings’, and was based on:
… Ghana EPA standards, as well as previous resettlement
projects in Ghana. It is a ‘like-for-like’ resettlement, with additional terms
agreed with the community that go beyond statutory minimum requirements. These
include the provision of a police station and medical clinic in the village,
bathrooms and verandas to all houses, larger room sizes compared to standard
practice and a commitment to provide electrical distribution throughout the
In partnership with AusAID, training has been provided at nearby
training institutes for 141 local community youths in ‘carpentry, welding and
fabrication, mechanical, plumbing, masonry, and electrical installation.’ The
report noted that ‘almost 60% of those involved are now self-employed, 24%
working within organisations including Adamus and its contractors, and 5% are
continuing with further education.’
In addition, Adamus Resources had:
- built three schools
and provided text books, stationery, sporting goods and other suppliers;
- installed mechanised
bore holes in local schools, communities and nursing facilities;
- repaired existing
- partnered with a
mobile Telco to deliver a 3-G network to the plant site and adjoining
- conducted a malaria
education program during which 160 treated mosquito nets were ‘distributed to
vulnerable community groups, particularly pregnant women, new mothers and
The report noted Adamus Resources was committed:
… to the Community Consultative Committee made up of
representatives of local government authorities, traditional councils, farmers
and Company representatives, [which was] paramount to receiving continued
assistance and support from affected communities.
The company was also undertaking a progressive rehabilitation of the
mine site and was conducting ongoing water sampling, dust monitoring and waste
The response of African governments
In September 2010, South Africa's Department of Mineral Resources issued
an amendment to The Broad-Based Socio-Economic Empowerment Charter for the
South African Mining and Minerals Industry. The provisions included:
of a percentage ownership by historically disadvantaged South Africans;
- procurement and
enterprise development—procuring a minimum percentage of capital and consumer
goods from black economic empowerment entities; and contributing a minimum
percentage of annual income towards socio economic development of local
equity—achieving a minimum percentage of historically disadvantaged South
African demographic representation at all levels of management;
- human resource
development—investing a percentage of annual payroll in essential skills
- mining community
development—investment in community consultative and collaborative processes,
and assessment of developmental needs;
- housing and living
conditions—targeted improvement of standards of housing and living conditions
for mineworkers; and
development and growth of the mining industry—improvement of environmental
management and health and safety performance.
It appears to the Committee that the South African initiative has been
reflected in a strengthening of SADC’s attitude towards the foreign extractive
industries sector. A joint statement issued by SADC’s Parliamentary Forum and
the Southern Africa Resource Watch in October 2010 contained the following:
Sub Saharan Africa continues to be resource rich but
paradoxically remains unlikely to meet most of the United Nations’ Millennium
Development Goals, and more especially the goal on Eradicating Extreme Poverty.
Our governments are deemed to be lenient towards Foreign
Direct Investors whereas it is necessary to uphold stringent standards
prevalent in their respective countries of origin …
The resolutions in the statement included:
- … African countries
and urged to prioritise their own development needs and zealously guard
national interest and sovereignty. …
- The legislative and
institutional environments currently obtained are weak and urgently require
strengthening to ensure greater returns from the extraction of natural
- It is imperative that
Strategic Environmental and Social Impact Assessments be prepared by reputable
experts, who are independent of both government and private sector interests …
- Local communities
living adjacent to extraction areas, including those who are moved from their
traditional lands, are often neglected and there is a need to ensure that they
become ultimate beneficiaries through participation and overall empowerment;
- … Mining companies
should be held liable for remediation for the entire operation; …
- The corporate
practice of hoarding mining revenues outside the borders of a country where
mining is taking place, militates against the balance of payments of that
country and should thus be discouraged; …
- There is thus a need
for a SADC Parliament … which would ensure harmonisation of legislation and
lead to greater regional oversight of extractive operations;
- The role of civil
society including media is crucial in providing a sound partnership in
tracking, raising public awareness on critical issues as well as assisting in
oversight of function.
Responding to this statement, BHP Billiton said:
While we would not necessarily agree with every one of the
recommendations, the sorts of areas that they have identified as being important
gaps that need to be addressed, if all countries in Africa are to capitalise on
their resource endowment, seem to be in the right sorts of areas.
Extractive Industries Transparency Initiative
The Extractive Industries Transparency Initiative (EITI) is a coalition
'of governments, companies, civil society groups, investors and international
organisations' which has developed a 'globally developed standard that promotes
revenue transparency' at the country level. It aims 'to strengthen governance
by improving transparency and accountability in the extractives sector.' 
DFAT advised that a key objective of EITI was the 'verification and full
publication of company payments and government revenues from oil, gas and
mining.' Since 2007 Australia had provided $1.4 million to the EITI.
There are several stages in a country becoming an EITI compliant nation:
- a country signals its
intent to implement the EITI;
- when the EITI Board
considers a country has met four indicators, including the development of a
work plan, it becomes an EITI Candidate;
- to achieve EITI
Compliant status a country must complete an EITI validation by an
independent validator, meeting all EITI indicators, within two years of
becoming a candidate;
- thereafter the
validation occurs every five years.
If the EITI validation only shows progress of a candidate nation towards
EITI, it retains its candidate status, but if there is no meaningful progress,
the EITI Border may revoke candidate status.
The EITI website indicates that in 2011 there were:
- 11 compliant
nations—5 are in Africa;
- 24 candidate
countries—15 are in Africa; and
- 4 countries have
signalled their intent to implement EITI—3 are in Africa.,
In a supplementary submission, DFAT provided further details:
… 50 of the world's largest mining, gas and petroleum
companies are supporting company members of the initiative. Five Australian
mining companies have already endorsed EITI including BHP Billiton, Rio Tinto,
Santos, Woodside and Newmont.
In addition, 80 of the world's largest investment
institutions are supporting investor members of the initiative. The largest
manager of Australian sourced funds, Colonial First State Asset Management, has
also endorsed EITI.
Mr Roger Donnelly, Chief Economist, EFIC summarised the initiative as
being an urging of host governments to publish what they receive and mining
companies to publish what they pay in order to 'shine a bright light of
transparency upon what is going on to minimise the risk of corruption'. Mr
Donnelly commented that industry saw it as necessary but not sufficient for
achieving good governance and transparency. A lot of companies, he suggested,
saw value in signing up to the initiative because it enabled them to engage in
dialogue with the host country to encourage them to also adopt the initiative.
BHP Billiton stated that it was a strong supporter of EITI and it had
begun to report its taxes and royalties on a country by country basis. If
governments were intent on keeping EITI-relevant information secret, BHP
Billiton added, 'you have to question their motive, and if that is corruption
and misappropriation then maybe that is a government that we are better off not
Further, the Committee notes that of the First World Countries, Norway
is the only country that is EITI compliant and that no other countries are
either EITI candidates or have signalled intent to adopt EITI principles.
Indeed, Australia has been criticised for encouraging countries to implement
EITI, but is not itself taking steps to become an EITI compliant country.
The Committee is satisfied that the Australian mining sector operating
in Africa is committed to fulfilling its corporate social responsibility
Unfortunately, no evidence has been received from small exploration
companies who do not necessarily have a long-term commitment to a project
beyond proving its economic viability. Consequently there is value in
government continuing to espouse the need for corporate social responsibility
policies and adherence to those policies especially to new entrants and small
The Committee notes the government’s support for the EITI process, but
the promotion of this concept needs to be ongoing.
The Committee considers it would considerably enhance Australia's
advocacy of EITI adoption if it was itself engaged in the process of becoming
The Government should undertake steps for Australia to
become an EITI compliant country.
The Government should promote corporate social
responsibility and continue to promote the Extractive Industries Transparency
Initiative principles and other corporate social responsibility instruments
to the Australian mining sector, in particular at the Australia Down Under
Conference, and especially to new entrants and small operators.
The Government should facilitate contacts between mining
sector companies, NGOs, and the broader private sector who are able to assist
them in creating and executing corporate social responsibility policies.
Transparency of the Export Finance and Insurance Corporation
Jubilee Australia has criticised EFIC for its lack of transparency. Its
report, Risky Business, drew attention to the exemption from the Freedom
of Information Act 1982 enjoyed by EFIC for documents relating to its
Insurance and Financial Service Products and National Interest Transactions.
The report commented:
Statutory exclusions like Section 7 of the FOI Act, dual
accounts (each with a distinct statutory regime), and a low public profile
combined to make EFIC one of the most scrutinised and least accessible
statutory corporations in Australia.>
Jubilee Australia told the Committee that there needed to be:
… increased government scrutiny of EFIC to ensure its support
for our exporters does not come at the cost of social and economic development
and environmental protection of the countries of Africa.
Specifically, Jubilee Australia sought increased disclosure to include
the public release of:
- all project Action
Plans and Impact Assessments created by the client in compliance with the
International Finance Corporation (IFC) Performance Standards;
- IFC Performance
Standard benchmarking completed by EFIC staff in compliance with the EFIC
- all documents
received by EFIC from clients relating to ongoing compliance with measures
agreed in the environmental assessment to mitigate environmental and social
harm, and the results of ongoing monitoring programs.
EFIC responded to these criticisms, and to the Risky Business
report in a supplementary submission. EFIC stated that in its
reporting, it followed ASX guidelines and 'follow every conceivable rule and
regulation when it comes to disclosure of significant environmental projects.'
We have a category A [projects], which is where there is a
significant risk or a significant potential for impacts. For those ones, before
making a decision to support a project, we disclose whatever environmental and
social information we have at the time, which is usually an impact assessment
of some kind or sometimes management plans if they are available. … Then, in
our annual reports, for that type of project we typically say: 'We looked at
this project. The major issues that we were concerned about were these and,
typically, this is how we would manage those.' So we actually do what they are
asking for. We do not do it in the same format perhaps, but we disclose and
publish a lot more than we are obliged to under our international obligations.
In withholding commercial-in-confidence material, EFIC told the
Committee that often small firms gave EFIC their financial statements which
would enable the identification of the salary of their CEO. The
commercial-in-confidence extension was based on the fact that firms did not
want that sort of information in the public arena. EFIC’s reason was that from
experience, it had found it would get a 'better quality of information from
these companies' when they were told it was not going to be released.
EFIC also advised the Committee that after the public hearing it had met
with Jubilee Australia and Oxfam Australia, and others, as part of a review of
its environment policy.
An issue which had been raised by Jubilee Australia—the publication of
EFIC board minutes—was discussed and revealed that the underlying concern was
the desire to receive timely information 'concerning EFIC’s provision of
support to exporters.' In response, EFIC had agreed to maintain on its website
a table listing all signed transactions. This would be updated several times a
year and 'interested persons will be able to receive an automatic alert each
time the table is updated.'
Safety of uranium mining
The Australian Conservation Foundation (ACF) expressed concern about
uranium mining in Africa:
ACF believes that the absence of a robust regulatory regime
covering this sector in many African countries could see a situation where
Australian companies are engaged in activities that would not be acceptable in
this nation, especially given that many of the Australian companies active in
the African uranium sector are juniors with limited capacity and little or no
operational experience or proven compliance ability.
As a result, the ACF proposed a series of recommendations designed to
create 'a culture of accountability and transparency' including practical
mechanisms 'on the ground, particularly through strengthening civil society.'
Other recommendations concerned 'not facilitating or financing Australian
companies either through rebates or exploration tax write-offs'.
The ACF witness added that if uranium miners responded that they were in
fact operating to Australian standards, his response was:
I welcome that and I would say, 'Prove that by mandating it,
and do not be hostile to it.' That is the way to engender confidence and earn a
social license. 'Don’t tell us about it. Legislate it, regulate it, monitor it
independently and rigorously. If you can prove it then you’ve stepped up.'
The ACF also noted that there were many policy documents, but they were
inadequate because there was no mechanism for punishment or penalty for
non-compliance and there was no independent assessment of how a company
performed against those procedures.
In response, the AUA commented that the ACF submission and its proposals
lacked 'an analytical or evidential basis' and there was 'little to connect the
ACF recommendations to identified problems or issues'. The detailed response
- The ACF provides no
independent analysis to show that African countries lack a robust regulatory
regime for uranium
- There is no basis for
the assertion that small and mid-tier uranium companies necessarily have
limited capacity and operational experience. Small does not mean incapable. If,
as the ACF implies, lack of a proven track record of compliance should be a
criterion for a licence to operate, no new business would ever get off the
- The ACF gives no
indication that it has sought or taken into account the potential reaction of
sovereign African countries to its proposal that an Australian regulator make
assessments of uranium industry performance in those countries. …
- The ACF has not made
out any case for Australian uranium companies operating in Africa to be
excluded from receiving support from Australian government programs that are
generally accessible by Australian companies operating overseas.
The AUA noted that all its members had agreed 'to adopt and apply the
Association's Charter and its Code of Practice. The Code
contained the following sections:
improvement to best practice in management
- Safely manage,
contain and transport all hazardous material, tailings and other wastes
- Provide adequately
for mine closure and rehabilitation
improvement in best practice in radiation control
- As a
minimum, adhere to the applicable international and national laws, regulations
and codes that govern the industry
- Provide information
about uranium and its properties to stakeholders.
AUA also stated that its members were fully aware of the obligations to
operate to high standards, were committed to doing so, and were doing so. Also,
the standards to which they worked with those that applied to them in
Regarding the risk of proliferation, the AUA commented that uranium
mining itself was not a significant proliferation risk which was why the IAEA
focused on safeguarding 'the back end of the nuclear fuel cycle.'
The Committee notes the ACF comments and AUA response. A solution would
be to introduce independent auditing of AUA member performance in the interests
of providing openness and transparency.
Australia Africa Council
One proposal considered by the Committee was that an Australia-Africa
Council be created by DFAT to foster relations between Australia and African
nations. Mr Sibraa told the
Committee that such a council could be a significant help to Australia’s
interests in Africa, especially if focused, in particular, on the areas of
trade and resources.
There are currently nine geographically-specific councils sponsored by
DFAT through which it seeks to enhance relationships with other nations, and
groups of nations.
These councils comprise stake-holders with interests spanning Australia
and the specified nation or group of nations, including representatives from
the business community. Members of the Council on Australia Latin America
Relations, for example, include representatives from: mining and other
industries; higher education; financial services; the Lowy Institute; and the
Australia-Brazil Chamber of Commerce.
A sample of selected councils—the Australia-China Council;
Australia-India Council; and Council for Australia Latin America Relations—indicates
that their budgets range from approximately $500,000 to $750,000 per annum, of
which approximately 10% is spent on administration. The Australia-China and
Australia-India Councils spend most of their budget to fund grants allocated
through competition rounds. The Council for Australia Latin America Relations devotes
much of its discretionary spending to events which promote relations between
Australia and Latin American nations.
Two of these councils were created as a response to recommendations of
parliamentary committee inquiries. The Australia-India Council was created in
response to a recommendation of the Senate Standing Committee on Foreign
Affairs, Defence and Trade, while the Council on Australian Latin America
Relations was created in response to a recommendation of the Trade
Sub-Committee of this Committee.
The Committee believes the links between Australian and African nations
and the increasing trade and investment and other opportunities warrant the
establishment of an Australia-Africa Council along lines similar to those
currently existing for other countries and regions.
The Department of Foreign Affairs and Trade should establish,
and provide adequate funding for an Australia-Africa Council.
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