| JOHANNESBURG, July 6
JOHANNESBURG, July 6 Murky deals between
resource companies and governments in Africa and elsewhere face
tougher scrutiny after U.S. authorities c l arify disclosure rules
next month, although intense lobbying by industry giants may
have ensured the changes are limited.
The rules require energy and mining firms with U.S. listings
to disclose payments to foreign governments. Enacted two years
ago under the Wall Street Reform Act, the U.S. Securities and
Exchange Commission (SEC) has not finalised the requirements,
frustrating investors and activists alike.
On Monday, however, the SEC said it would vote on them on
The stakes have been especially high in Africa, where vast
oil and mineral wealth has not translated into wider prosperity,
a state of affairs widely referred to as t h e "resource curse".
That takes several guises. Sometimes oil or mining crowd out
other industries, or a country's economy dances to the beat of
volatile commodity or energy markets.
As governments tend to control access to natural resources,
graft becomes a problem if states become addicted to the spoils
that can be reaped from the resource sector.
The payment disclosure rules were widely hailed as the most
sweeping measures yet to try and tackle the problem as they hit
the primary cause: opaque deals between governments and
But two years of foot-dragging have raised concerns the
final rules will be rendered toothless after a barrage of
lobbying, from the oil industry in particular.
One point of contention has been whether or not exemptions
should be made if a country has laws that forbid a company from
disclosing the payments it makes to the government.
U.S. oil lobbyists, who have claimed this kind of
legislation exists in countries such as Angola, have been
pushing for such exemptions.
However, Brazilian oil giant Petrobras (PETR4.SA)(PBR.N),
which will fall under the new rules because of a U.S. secondary
listing and operates in Angola, has said it was not aware of any
country with a curb on official disclosure.
PROJECT BY PROJECT
Another area that has stirred controversy revolves around
how a project is defined.
The legislation calls for project-by-project details of
payments to foreign governments, a provision welcomed by some
investors and anti-poverty campaigners but resisted by industry
groups such as the American Petroleum Institute (API).
Among the objections API raised last year in a lengthy
submission was that project-by-project payment disclosure could
"identify the location of the firms' most important personnel
and their most important capital assets."
"Given the current state of affairs in Chad, Nigeria and
other oil-rich states, it would seem intuitively obvious that
handing criminals, terrorists or partisans in the Chadian or
Nigerian conflicts the financial equivalent of a roadmap ...
would be unwise," it said.
These concerns are certainly legitimate. But a project could
be defined all the way up to the country or regional level, so a
mineral trend - deposits running through several countries -
could be construed as a project.
Anti-graft campaigners have said defining a project so
widely would dilute its transparency aims as corruption often
bubbles at the micro-level and payments could be hidden th ere.
Investors are also anxious to see if the SEC will allow
disclosure requirements on payments to foreign governments to be
"furnished" rather than filed. If they are furnished, the
information would be presented in an attachment to the annual
report, and not filed in the body.
Analysts have said this will have implications for
shareholders. For example, if such a payment was found to have
been materially misstated and resulted in a loss to investors,
under U.S. law th e y would have no legal recourse if it was
furnished rather than filed in the body of the report.
If a filed disclosure were misstated, investors would have
Regardless of what the SEC decides, it will at least finally
be providing clarity for investors on an issue that has been
closely followed by lobbyists, boardrooms and activists.
Whether or not the final rules actually improve transparency
in the obscure world of oil and mining payments to governments
is another matter.
(Editing by Susan Fenton)