MINING COMPANIES PUSH BACK AGAINST PRESSURE TO PROHIBIT ‘FACILITATION PAYMENTS’

SCOTT BEVAN: As pressure mounts to tighten anti-bribery laws around the globe, Australian mining companies operating in some of the world’s more corrupt countries are starting to feel the heat.

So-called facilitation payments have for many companies, until now, been a routine part of doing business in the developing world. But moves are afoot to make them illegal.

Some sectors of the mining industry believe this will have a disastrous impact on their operations.

Mary Ann Jolley reports.

MARY ANN JOLLEY: There are approximately 240 Australian mining companies operating in Africa and many of them rely on what they call facilitation payments to do business.

BILL TURNER: Facilitation payments are defined in legislation as small payments made to government officials to secure the timely delivery of routine government services to which you’re legally entitled.

MARY ANN JOLLEY: Bill Turner is the chairman of the Australia-Africa Minerals & Energy Group, which was established two years ago to represent more than 100 mining and mining services companies.

Following the lead of the United Kingdom, Canada is the most recent country to move to make facilitation payments illegal and punishable by fines or jail sentences.

Bill Turner believes it’s too premature to do the same in Australia and would make operating in developing countries almost impossible.

BILL TURNER: What we’re saying is facilitation payments should continue to be allowed, as they are under the current anti-bribery legislation in Australia, the way they are in the US, they’re recognised as a legitimate business practise.

When these payments are made, it’s important to understand the real intent of the payments, and the underlying intent of a facilitation payment is just to get a job done. There are many countries in Africa that are emerging from conflict situations and have a lot of challenges – a lack of foreign investment, a lack of industry and a lack of tax collection, a lack of capacity in government to pay the public service and to pay public servants to do the job they should be doing.

MICHAEL AHRENS: We say to Bill, “Look, Bill, you’re right, it is extremely difficult to operate on zero tolerance policies in parts of Africa where your members are operating, but you know it also much more important that people start to hold the line against these officials.

MARY ANN JOLLEY: Michael Ahrens is the executive director of Transparency International Australia. He says the problem is that the line between what the mining industry sees as small, insignificant payments for routine government services and what are illegal bribes is blurred.

MICHAEL AHRENS: In order to qualify as a legal facilitation payment as opposed to a bribe, there are about four or five conditions imposed under the law and very few, if any companies claim they have a system for paying legal facilitation payments actually comply with these conditions.

And they’re hoping, because it’s peanuts money, that these federal police won’t take an interest and that’s probably right. But it has a terrible effect on the standards that these companies are trying to get their people to comply with.

MARY ANN JOLLEY: According to 2011 report by the Australian Council of Superannuation Investors, only 16 per cent of top Australian companies listed on the Australian Stock Exchange have a zero tolerance to facilitation payments.

The United States and European Parliament are currently working to implement legislation to require mining companies to disclose all payments made to foreign governments.

Michael Ahrens is hoping that Australia’s national anti-corruption plan, to be launched later this month, will head in the same direction.

MICHAEL AHRENS: We would like to see the Government come out with some tightening of the rules, for example about indirect payments through foreign subsidiaries and agents and joint venture partners.

Having the mining companies disclose what they are paying, it enables these other countries, such as East Timor and so on, to keep a track on whether they’ve actually received this money. It’s enabled the treasury offices in these countries when they say the mining people claim they’ve paid X to say, “Hey, why did we only get X minus Y?”

SCOTT BEVAN: Michael Ahrens from Transparency International Australia ending that report by Mary Ann Jolley.

To listen to the interview please follow this link: http://mpegmedia.abc.net.au/news/audio/pm/201307/20130712-PM-MINING-TRANSPARENCY.mp3