‘Money & morals in rogue regimes’ – published by Mining Environmental Management

October 2008

By Juliet Hepker – A version of this article originally appeared in the Mining Journal publication, Mining Environmental Management.

Companies should know whose side they are on

Resource companies face global criticism when they deal with abusive governments. Whether they deserve it depends on their approach.

Criticism in recent months of investments by Anglo American in Zimbabwe and Total in Sudan and Burma has added another chapter to the long and fractious debate about the rights and wrongs of multinational corporations investing in rogue regimes. Not in question is the oppressive rule of government in these countries – the challenge is how best to bring pressure to bear on them to act in the interests of their people.

It may be that divestment by companies is not the only ethical option – firms which instead stay in, but exert significant pressure on host governments to reform their behaviour sometimes may offer a promising way to affect change. The trouble is that is difficult for outsiders to judge whether companies are indeed exerting such pressure (by its nature this tends to take place behind closed door), rather than just claiming to do so.

The case against foreign investment in rogue regimes certainly needs answering. The revenues it provides, for example, can sustain the existing power structure of such regimes, increasing the risk of rights abuses. The sums are often particularly large for resource projects: Total’s operations are believed to account for a significant chunk of the annual $2.7 billion of government revenue from Burma’s gas exports to Thailand. Another serious concern is the legitimacy and even the vote of confidence that investment by otherwise respected, global companies can be seen to lend.

At the same time, there are at least some grounds for thinking that, with the right approach, investment in rogue regimes can be better than the alternative. Given fierce competition for energy and mineral resources, companies that opt to withdraw are swiftly replaced, often by rivals who may be less subject to the influence of international public opinion. Talisman Energy, for example, was the only western company in a Sudan oil consortium when it was forced to withdraw under pressure of a divestment campaign. Anglo American has argued that if it ceases to develop its platinum mine in Zimbabwe, it will be seized under the government’s ‘use-it-or-lose-it’ legislation. Meanwhile at the local level, such companies are becoming more adept than before at creating positive socio-economic outcomes, including livelihood and educational opportunities.

But perhaps more important in the context of rogue regimes is the potential for companies to influence outcomes beyond their immediate area of operation. Ideally, this should include advocacy for the protection of human rights at the highest possible levels of government. The potential helpfulness of this approach is increasingly recognised, even by NGOs. For example, the Sudan Disinvestment Task Force, while keeping up the pressure on companies to exit Sudan, has said “We are asking Total to engage the government of Sudan – foreign oil companies have significant leverage over the government.”

History provides a few examples of the positive influence companies can exert through engagement in rogue regimes. In South Africa, for example, General Motors’ adoption of the Sullivan Principles against discrimination and segregation in the company is believed to have contributed, at least in part, to the dismantling of the apartheid regime.

At the same time, as mentioned, the cloak of secrecy which companies usually insist on in their private discussions with governments must not be used by them as an excuse for inaction. Beneath this cloak, some foreign investors may be a force for good, others may be guilty of hypocrisy. As with apartheid South Africa, history eventually will reveal which is which.

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