Ethiopia today is corruptocracy (a political system operated and controlled by a small clique of corrupt-to-the-core vampiric kleptocrats who cling to power to enrich themselves at public expense). In its report, the WB documents in the usual arcane bureaucratese of international organizations that corruption in the Ethiopian mining sector is just as malignant and metastatic as in the land, education, telecommunications, construction and other sectors. According to the WB report, the “mining sector in Ethiopia is relatively undeveloped” but the “country is rich with mineral resources.” A recent report citing official sources stated, “The Ethiopian government earned USD 419 million from the export of minerals supplied by artisanal miners operating in the country in the first 11 months of the current financial year. Export of gold made up the largest proportion of minerals, generating USD 409.1 million in foreign currency, followed by gemstones and tantalum earning USD 9.3 million and USD 1.6 million. This income came from the export of 7878.3 kg of gold, 20,126.3 kg of gemstones and 32.95 tons of tantalum…. MIDROC Gold is the only company that is engaged in large-scale gold mining.” Other reports indicate the “export of minerals has become Ethiopias second largest foreign currency earner, contributing over 23 percent of overall export earnings.” The WB report identifies “seven areas of corruption risk” in the Ethiopian mining sector” including the “three main risk areas” of “license issuing, compliance with license conditions, and mining revenues”. The other critical areas of corruption include fraudulent practices in “compensations and obligations to local inhabitants, contracts with contractors and suppliers to the mining companies, falsification by mining companies of product quality, and theft of mining products and equipment.” In the area of “license issuing”, the WB report states that “officials may extort or be offered bribes by mining companies in return for issuing licenses, for issuing licenses more quickly, or for specifying less-onerous license conditions.” A related risk is that “officials may secretly have ownership stakes in companies to which licenses are granted; acquire land for which a license application has been made; demand a share in mining companies or in their profits; and manipulate license registration to give themselves or their associates prior registration.” In “license compliance”, “mining companies may deliberately breach mining conditions (for example, environmental, health, and safety regulations, as well as the extent or area of mining)” with impunity. In the area of mining revenue, “mining companies may deliberately understate output and profit and overstate costs to reduce royalties and profit taxes.” The regime has no independent means of verifying the revenues of mining companies. “Collection of royalties and income tax apparently depends almost entirely on the mining companies’ self-certification of output and profit because of the lack of resources at the Ethiopian federal, regional, and city licensing authority levels. It would, therefore, be relatively easy for the mining companies to exaggerate their capital and operating costs and understate their output and profit.” When “license operation and mining revenue breaches are discovered, the mining company may also bribe inspectors to overlook the breaches.” The catalogue of corrupt practices documented in the mining sector covers the entire spectrum of corruption ranging from bribes, falsification of records, shakedowns and takedowns of mining companies and stealing compensation designated for local inhabitants to criminal use of insider information and fraudulent shell corporations. By Alemayehu G Mariam November 4, 2013 Ethiomedia
Posted on: Mon, 11 Nov 2013 15:04:19 +0000
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