The supply and demand sides of corruption: Canadian extractive companies in Africa

ABSTRACT

With the rapid expansion of Canadian investment in extractives around the world, it is perhaps not surprising that Canada’s reputation as a low-corruption country has faltered: Canada currently ranks ninth internationally in Transparency International (TI)’s corruption perception index, down from sixth in 2010, and sixth, down from first (i.e. best), in 2009 in TI’s Bribe Payers index. This article presents the preliminary findings of our ongoing research regarding both the demand side (that is, the request for bribes, principally by foreign officials) and the supply side (that is, the giving of bribes, principally by corporations) of corruption. We have examined Canadian mining companies operating in Ghana and Burkina Faso and have identified 10 “tensions” which need to be acknowledged in public policy formulation. We note that Canada is implementing policies to reduce supply-side corruption (e.g. by adopting anti-bribery legislation and guidelines for corporate social responsibility) but recommend that more be done, especially oversight of anti-corruption laws by Parliament. We also recommend that mining companies undertake ex-ante corruption risk assessment and develop proactive corporate anti-corruption policies. And, finally, while host countries have anti-corruption laws, implementation is weak. Global affairs could usefully support stronger parliamentary oversight in these countries.

RÉSUMÉ

Avec l’expansion rapide des investissements canadiens dans l’extraction à travers le monde, il n’est peut-être pas étonnant que la réputation du Canada en tant que pays à faible taux de corruption ait faibli : au niveau international, le Canada se positionne actuellement au neuvième rang de l’indice de perception de la corruption de Transparency International, en baisse depuis le sixième rang en 2010 ; et en 2009, il occupait le sixième rang de l’indice de paiement de pots de vin, en baisse depuis le premier rang (c’est-à-dire le meilleur). Cet article présente les résultats préliminaires de notre recherche en cours à la fois du côté de la demande (c’est-à-dire la demande de pots de vin, provenant principalement de fonctionnaires étrangers) et du côté de l’offre (c’est-à-dire le versement de pots de vin, principalement par des entreprises) de la corruption. Nous avons enquêté sur des sociétés minières canadiennes opérant au Ghana et au Burkina Faso et identifié 10 « tensions » qui nécessitent d’être reconnues dans la formulation des politiques publiques. Nous relevons que le Canada met en place des politiques de réduction de la corruption du côté de l’offre (par exemple en adoptant des lois de lutte contre les pots de vin et des directives pour la responsabilité sociale des entreprises), mais recommandons néanmoins que davantage d’actions soient menées, en particulier la surveillance parlementaire de l’application des lois anti-corruption. Nous recommandons également que les sociétés minières réalisent des évaluations ex-ante du risque de corruption et élaborent des politiques anti-corruption proactives. Et, finalement, alors que les pays hôtes disposent de lois contre la corruption, le taux d’application de celles-ci est faible. Affaires mondiales Canada pourrait apporter une contribution utile à une surveillance renforcée de la corruption dans ces pays.

KEYWORDS:

• corruption
• mining
• Canada
• Africa

Notes

1 In the Corruption Perceptions Index, Canada’s drop represents increasing global perceptions of corruption in Canada, while in the Bribe Payers Index, Canada’s drop represents global perception of increasing bribes by Canadian companies operating abroad.

2 Canada is chosen because 75 per cent of the world’s mining companies are based there. Africa is chosen because African countries are among the most corrupt-prone (Transparency International 2015a, 2015b); these particular countries are chosen because we have good contacts with companies operating there, with governments and with parliaments.

3 Stapenhurst, Pelizzo and Jacobs (2014) demonstrate that 64 per cent of the variation in corruption across countries can be attributed to differences in the effectiveness of parliamentary oversight.

4 In Canada, the Corruption of Foreign Public Officials Act; the Canadian government’s policy regarding CSR in the extractive industries, called “Doing Business the Canadian Way: A Strategy to Advance CSR in Canada’s Extractive Sector Abroad” was announced on Nov. 14, 2014 (Global Affairs Canada 2016).

5 Comment by Tanzanian investigative journalist Lawrence Kiliminwiko to Stapenhurst in 2005: “Canadian mining companies are the worst (in terms of good corporate citizenship).”

6 We are grateful to Jeffrey Davidson for this comment.

7 Part of EITI is developing local in-country capacity to hold the central government to account for the way it spends or allocates these revenues. Several of our respondents noted, however, that implementation of EITI in host countries remains weak, as does oversight (and even knowledge of EITI) by host parliaments.

8 As is now happening with EITI++ (i.e. upstream and downstream approaches) and a variety of home country initiatives, such as Dodd-Frank in the United States, and more recently by Canada’s Extractive Sector Transparency Measures Act.

9 With Canadian government support Global Compact Network Canada (2016).

Additional information

Funding

This work was supported by Canada’s Social Sciences and Humanities Research Council (SSHRC) [grant number 241757].