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Hard talk on Saturday: ‘Citizens actually pay for CSR programmes’

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Corporate Social Responsibility (CSR) has become a modern-day catchphrase. But what does that really mean when it comes to the extractive sector? Are CSRs what people really are meant to believe them to be? CHARLES MPAKA engaged David Van Wyk, a well known researcher in the extractive industry in Southern Africa. Van Wyk works with South Africa-based Bench Marks Foundation. Excerpts:

What’s the rationale behind CSR? Why are they necessary?

CSR is based on the false premise that corporations should be allowed to self-govern their social, environmental and economic impact. This, in turn, flows from the flawed idea that the less government controls there are over the private sector the more attractive a country will be for foreign investors. Another doubtful notion is that proposed by the World Bank, the International Monetary Fund and the World Economic Forum that Africa should focus on its competitive advantages in mining and extractives rather than aspire to manufacturing, finance and communications which are deemed to be the competitive advantage of industrialised nations. These global institutions also preach against resource nationalism. Thus, mines and extractives should, according to them remain in the hands of foreign investors. All of this combines to trap Africa in cheap labour economies with huge gaps between rich and poor, import-dependent on a situation where the balance of trade always benefits the industrialised north. African governments need to begin to realise the fallacy of the current development model – simply put “you cannot dig yourself out of a hole.”

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Among communities that I have been to where there are mining operations, people do not feel that there is any other way for them to benefit from extractive operations other than CSR. What can this problem be blamed on?

Because CSR is voluntary, rather than statutory the corporations are under no compulsion to do much for local communities, or even for the host country they are in. [Kayerekera uranium miner] Paladin’s agreement with the Malawian government included a 10- year tax holiday for a mine with a 10- year life of mine. No wonder Malawi benefitted little from the project.

At the time that the Malawi government was to award oil exploration licences in 2011, one of the firms, Surestream Petroleum, had a maternal health plan to implement under the foundation of the First Lady then, Callista Mutharika. There was a sense here that this was a way for Surestream to buy its way into being awarded a licence other than being assessed in terms of its technical merit. At what point should CSR be an issue? Should that be one of the considerations in the bidding process or after the awarding of the contract or licence?

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Concerning the issue of oil, we are concerned that the emerging oil industry combined with uranium mining on the escarpment above Lake Malawi will in the medium to long term simply destroy the lake and compromise Malawi’s food and water security. Additionally, oil will bring with it conflict; conflict with Malawi’s neighbours and conflict within Malawi. In any case, the use of fossil fuels has severe impacts on the environment and has significantly brought closer the extinction horizon for humanity. While scientists are warning that we should be rapidly reducing our dependence on fossil fuels the extractive industries are selling the notion of extracting fossil fuels as a viable future for African countries. As for the CSR contributions of these firms to local ‘causes’, such contributions are nothing more than sophisticated forms of bribery and corruption to gain the support of the African political elite.

From what I know, CSR among these firms is not law. That is, the investors can choose not to implement them and there cannot be legal sanctions about it. How can this be dealt with?

This can be dealt with by passing proper laws and regulating the economy strictly, in other words, you need strong, rather than weak, government. You also need an informed and activist citizenry.

There are CSRs on the one hand and on the other, the nation at large is supposed to benefit in terms of taxes and royalties from the investors. Where should the emphasis be or how can the two be balanced?

Cumulative corporate tax in Norway is 87 percent, corporate tax in Malawi stand at 30 percent. However, many mining and extractive companies are given extended tax holidays, and capital expenditure and often CSR are tax deductible. This means that citizens actually pay for the CSR programmes of the corporations; the expense is simply externalised. Mining companies manipulate capital expenditure and we at the Bench Marks Foundation have found that there are companies where the life of the mine is 15 years for example, the company has shown no profits by year 12, and has therefore paid no taxes. Few African governments actually bother to check the validity of the capital expenses the corporations claim. Mining and extractive corporations also sell their commodities forward to addresses in tax havens at below market value and once the resource is out of the host country resell it at actual market value thereby evading taxes in the host country.

One would have a sense that the increasing emphasis on CSR is crowding out the real, greater benefits a country is supposed to get through taxes and royalties. Is that a correct observation?

That is indeed a correct observation.

One of the oil exploration executives I have spoken with says that pressure for the firms to implement CSR is providing such a weight on the investors as it is not core responsibility. He said the weight is even greater when a company is required to implement the CSR when it is only exploring and is thereof way off before it gets into real mining when it starts making money. What is your comment on this argument?

I think he is talking nonsense, but his is a standard comment from such corporations. As I have demonstrated, the corporations simply externalise CSR costs.

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