TORONTO (miningweekly.com) – The Mining Shared Value venture of Engineers Without Borders Canada (EWB) has partnered with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) to work with international mining companies to establish a measurement and reporting standard for local procurement by the industry.
The objective of the new reporting system will be to standardise how mining and, in a subsequent initiative, oil and gas companies, report on their sourcing of goods and services in the countries where they operate. Buying goods and services in developing countries increased local jobs and income, as well as transfer of skills and technology. It also helped create vital domestic business networks,” said venture leader Jeff Geipel in an interview with Mining Weekly Online.
“Companies tend to spend more money on local procurement than on tax, yet there is no accepted standard of reporting on local procurement. We’re looking at making it easier for companies to report on that missing data point,” he explained.
Pressure had been growing in sub-Saharan Africa and other developing regions to create more economic and social benefits from mineral extraction, particularly in light of recent plummeting commodity prices and plunging associated tax revenues. Several countries were in the process of drafting new ‘local content’ regulations to increase local participation in extractive industry value chains.
The project’s focus on local procurement also featured prominently in the African Union’s African Mining Vision, agreed to in 2009 by all African heads of State as a guide to mining-sector governance.
“There has rightfully been increased focus on improving transparency in mining company tax payments to developing country governments but, in most cases, mining operations spend far more on procuring goods and services than in taxes. This means encouraging and helping companies to provide more data to inform local governments and communities . . . to help improve the development impacts of mining,” Geipel stated.
The emphasis was based on the notion that better data made for better decisions, he stressed.
Geipel noted that there had been a marked improvement by Canadian companies reporting on their local procurement strategies abroad, but the goal remained to establish a global initiative.
Next steps included working with mining companies to establish how much detail was achievable in reporting on local procurement practises. “We don’t want to create a reporting burden for participants, but would need to include as many data points as possible,” said Geipel.
Initiatives such as the Extractive Industries Transparency Initiative and Global Reporting Initiative had been established in recent years as international government and civil society organisations recognised the need to make natural resource extraction work for economic and social development.
Geipel advised that this standard represented yet another action in a global movement to help developing countries overcome the ‘resource curse’ – the phenomenon where many countries with a wealth of mineral and/or fossil fuel resources paradoxically faced underdevelopment and poverty.