This week, the presidents of the world’s leading emerging economies – Brazil, Russia, India, China and South Africa (known collectively as the BRICS) – are meeting in Durban for the annual BRICS summit.
The “Africanised Agenda” for this year’s summit, where the BRICS’ cooperation with Africa is under the spotlight, means that investment in extractive industries is a high priority on the agenda. And extraction of Africa’s oil, minerals and gas is where the national interests of each of the BRICS nations and those of African governments converge.
This is good news for the huge BRICS’ business delegations that have booked out Durban’s beachfront hotels. But it’s a source of concern for civil society coalitions, whose interaction with governments and the new BRICS business council has been limited by the worrying absence of any formal means of engagement.
Civil society’s concerns center on the veils of secrecy that still plague the extractives sectors of the BRICS – secrecy around corporate ownership, contracts and revenue flows. This secrecy is allowing phantom firms – anonymous “shell companies” created for the sole purpose of shifting profits across borders into low tax jurisdictions or havens – to rob citizens of the revenues to which they’re entitled. In addition, it’s a serious disincentive to foreign direct investment as few astute investors are willing to invest in opaque environments that offer no accurate accessible data with which to make decisions. And without information on what revenues governments are receiving from companies, how those revenues are invested, and what results they’re achieving, parliamentarians and citizens can’t hold government leaders accountable for the use of revenue that they’re managing on citizens’ behalf.
ONE is urging BRICS’ Finance Ministers to open up their extractive sectors. We’re calling on them to mandate all oil, gas and mining companies listed on the national stock exchanges of the BRICS countries to disclose their payments to governments in the countries in which they operate, and to publish the names of the people who ultimately own or control listed companies and their subsidiaries.
We’re calling on securities exchanges to put in place regulations to ensure that extractives companies submit country-by-country and project-by-project reports on their payments to governments in all operational jurisdictions, to align their reporting with open data standards, and to make this information publicly available online.
It makes good economic sense. Not only do disclosure regulations help improve investment climates, combat corruption and reduce tax evasion, their application by securities regulators can help improve the functioning and attractiveness of BRICS’ stock exchanges and draw more companies to list in these emerging financial centres. Harmonised rules and standards across the BRICS’ exchanges can help level the playing field, reduce corporate costs associated with following different practices in different jurisdictions, and lower reputational risks for companies should they be accused of bribery and fraud in host countries. Transparent reporting also strengthens companies’ social license to operate by making clear to host communities how much state and local level revenue companies are paying to extract resources.
And what responsible government would turn down the opportunity to improve collection of owed revenue and to better track the massive incoming and cross-border capital flows their countries’ resources are generating? It’s an essential step towards higher public savings and better domestic resource mobilisation for the BRICS and for all resource-rich countries. And it’s a golden key to securing the critical development finance needed to deliver public services to populations in need.