Why nations need good Natural Resource Governance

In the past months alone, concerns were raised in South Africa about the risk of state capture by influential businesses, the Brazilian president has been suspended, facing possible impeachment for the manipulation of state accounts to secure re-election and a number of prominent individuals and businesses were exposed for abusing tax-free havens in Panama.

Civil society sets rules and boundaries that determine and govern reasonable behavior. Some rules are hard and clear, but other more subtle, but they are rules nonetheless.

Anyone unclear on whether a rule or law is being transgressed might try a few simple tests:

• Would a reasonable person regard my behavior as fair and reasonable?

• How would I feel if my decisions were exposed to the world?

• Would my decisions and behavior stand the scrutiny of those impacted by it, if they knew about it?

Rules of good governance also apply to national mineral assets and their exploitation. Similar to the tests I proposed above, societies, countries and industries could ask themselves questions like:

• Will the way in which Governments govern the extraction industry stand the test of time when future generations look at the economies that were built by leveraging these assets?

• Will the national economy be sustainable when non-renewable resources run out?

• Can companies really be sure that they adhere to all accountabilities accepted or implied when given the right to extract and exploit assets?

• Can governments rest assured that they leverage the extraction industry optimally to bring about national development of human talent and infrastructure?

• Did a nation do everything it could to optimally leverage beneficiation of resources and achieve economic transformation to an industrialized and ultimately knowledge economy?

• What will be the lasting social and environmental impact of extraction on a nation?

Mineral resources and reserves represent the largest national asset many nations possess and failure to govern its exploitation could very well destroy a nation’s future. Sound governance is required to break the resource curse, where nations are rich in resources, yet their people remain poor. Ultimately, no sustainable economic development and transformation can be achieved without sound governance. Likewise, sound National Resource Governance gives stakeholders confidence:

• Governments know that they did what they could to optimally leverage mineral endowments;

• Investors are confident in regions and nations as investment destinations;

• Companies have confidence that they adhere to all accountabilities accepted when given extraction rights;

• Citizens benefit optimally through the social and development benefits and have confidence in the sustainability of future generations.

As custodians of this country’s mineral wealth, we have to ask whether clear and transparent disclosure of the impact of current decisions on future generations will make us feel like proud ancestors, or if we’ll hang our heads in shame when judged by our children.

We are obliged to make the best decisions we can with the information available, with the best interests of all citizens in mind. For this we need good governance of national mineral resources and its extraction. It might very well be the most critical focus area to enable economic sustainability beyond extraction. Who could argue that we do not need that?

Since my appointment as Industry Executive for National Resource Governance at MineRP, I’ve been responsible for the design of the company’s solutions addressing this emerging domain.

In posts to come, I will focus on some of the means we have at our disposal to allow governments to focus on sustainability and transformation without completely giving up the goal of creating wealth.