Social Partners' Charter on Good Governance in the Extractive Industries in the East African

Social Partners' Charter on Good Governance in the Extractive Industries in the East African Community

Trade Union Proposals

Paper prepared for discussions at the regional consultative forum to be organized by the East African Trade Union Confederation, May 2015.

Contents

Preface

PREAMBLE

PART I: DEFINITIONS

PART II: GENERAL PRINCIPLE AND OBJECTIVE OF THE SOCIAL PARTNERS' CHARTER

PART III: PRINCIPLES OF GOOD GOVERNANCE IN NATURAL RESOURCES

PART IV: EMPLOYMENT AND INDUSTRIAL RELATIONS

PART V: INSTITUTIONAL FRAMEWORK, ADOPTION, ENFORCEMENT AND FOLLOW-UP

ANNEX 1: NATURAL RESOURCE CHARTER

Preface

Over the last few years, significant new oil, gas and mineral exploration reserves have been discovered in East and West Africa, as well as Eastern Mediterranean, the Caribbean and the Asia-Pacific region. These discoveries have very quickly added several new countries to the ranks of world’s oil and gas producing nations.These countries have shown interest in advice on governance. They are keen to avoid the mistakes that have led to accountability failures in other more established producing countries.

These newmineral-rich countries often lack the capacity and ability to implementt international “best practice” due to limitedexperience in managing resources and tend to make policy decisions without a clear knowledge of the size of their resource base.

The extractive industry in the East African Community region is a new area generating a lot of interests and debates among the governments, other stakeholders and the general public. The extractive industry is already characterized by a number of challenges propping up in the region, including lack of involvement or participation in drafting of agreements and policies, and lack of transparency and accountability by the government.

The East African Trade Union Confederation (EATUC) and the other stakeholders have opted to face up to these challenges. The intention is to build capacity in understanding the dynamics of the extractive industry including governance structures;technical skills; health and safety considerations, and better working conditions that will be make sure that the benefits to be derived from the extractive industries will be distributed equitably. By engaging with enterprises in the extractive industry, policy makers, workers, communities and other stakeholders will go a long way in ensuring that the decent work agenda of employment, job security, respect for human and workers’ rights and social dialogue are promoted.

This is the background on why EATUC sought the collaboration Friedrich Ebert Stiftung-Tanzania Office to develop these proposals for purposes of initiating a discourse with the East African Community organs, national governments, employers’ organizations and trade unions on ensuring that good governance and democracy is promoted in the extractive industry in the region.

Caroline Khamati Mugalla,

Executive Secretary,

East African Trade Union Confederation

Arusha, 9 March 2015

Draft for discussions, March 2015Page1

Social Partners' Charter on Good Governance in the Extractive Industries in the East African Community

PREAMBLE

We, the Social Partners in the East African Community:

RECALLING the objectives of the East African Community (EAC) as spelt out in Article 5 of the Treaty for the Establishment of East African Community (as amended on 14 December 2006 and 20 August 2007), and

RECALLING Articles 3 and 6 of theTreaty for the Establishment of East African Community on adherence to universally acceptable principles of good governance, democracy, the rule of law, accountability, transparency, observance of human rights and social justice, and equal opportunities, and

RECALLING the regional East African Community Decent Work Programme 2010-2015 which is aimed at promoting decent work for all, and

CONSIDERING that economic development must serve as a basis for social progress, and

CONSIDERING thatevery effort should be made, on an international, regional and national basis, to secure financial and technical assistance safeguarding the interest of the people of the East African Community, and

BEARING IN MIND the importance of minerals and other natural resources, notably in contribution towards inclusive growth and sustainable development through job creation, wealth creation and poverty eradication thus leading to social and economic transformation in East Africa, and

DEEPLY CONCERNED about the fact that the region's natural resources are not yet contributing equitably and effectively towards improving the living conditions of the citizens of East Africa, and

FURTHER CONCERNED that there is ample existing evidence that African countries rich in extractible natural resources, especially oil, gas and minerals, often suffer from high poverty, frequent conflict, poor governance, including lack of consultations with social partners, and endemic corruption, and

ALSO CONCERNED about the increasing competition and demand for the region's natural resources and the imposition of trade conditionalities, both of which are likely to reduce the policy space to pursue local beneficiation, value addition and resource-based industrialization, and

AWARE of the enormous potential and the appropriate development of mineral resources offers to propel the region towards broad-based social and economic development, and

RECALLING the commitment made by our Heads of State and Government in the Solemn Declaration on the occasion of the 50th Anniversary of the Organization of African Unity (OAU)/African Union (AU) to take ownership of, use and develop the natural resources endowments and mineral resources, through value addition as the bases for industrialization of the African continent, and

CONVINCED that it is now time for Africa to regain ownership of its natural resources to implement the Africa Mining Vision, with sound, prudent management and good governance, with a view to maximizing the benefits derivable from mineral resources exploitation for present and future generations while limiting negative environment, occupational health and safety considerations, and macroeconomic impacts, and

RECOGNIZING that the implementation of the Africa Mining Vision is a joint responsibility of state and non-state actors, including the private sector, community-based organizations, specialized institutions, employers and workers' organizations, and

RE-AFFIRMING the objectives and commitments of the EAC Protocolon Environment and Natural Resources Management and calling for its efficient implementation in order to achieve the intended transformation of the lives of East African citizens and the integration of the region into the global economy, and

We hereby adopt the objectives and sprit of this Social Partners' Charter as per the following:

PART I

DEFINITIONS

ARTICLE 1

DEFINITIONS

To the extent possible, this Social Partners' Charter shall adapt the same meaning to the terms and expressions as defined in Article 1 of the Protocol on the Establishment of the East African Community Common Market, unless the context otherwise requires.

“Consultation” means a process of discussion which involves information sharing, and the making of representations on relevant issues with a view to achieving consensus;”

“Decent Work” involves opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men;

"Extractive industry" is concerned with the physical extraction of metals, minerals and aggregates from the Earth and is responsible for providing the raw materials that make it possible for communities to survive and enjoy life. The extractive industry is made up of the mining, quarrying, dredging, oil and gas extraction industries. Extractive industries are considered to include enterprises conducting exploration, construction, extraction, processing, transport, storage and marketing of oil, gas and mined minerals and their by-products;including contractors and sub-contractors.

"Good governance" in the extractive industry means how to get a good deal and how to structure institutions, especially for emerging producers with weak institutional capacity and low knowledge of the sector, coupled with pressing socio-economic challenges. Good governance must be based on realities of the national context and allow incremental improvements to the process. Good governance must be progressive, leading to higher standards of good governance;

“International instrument” means any international treaty, declaration, convention,recommendation, or relevant international agreement in the social, human rights and labour fields subscribed to by Partner States;

“ILO” means the International Labour Organization;

“Social Partners” means Governments, representative organizations of workers and representative organizations of employers in respective Partner States; and

"Stakeholder" may be an individual or group that has an interest in or is affected by decisions relating to an extractive industry project. For the purpose of this Social Partners' Charter, 'relevant stakeholders' to be engaged include, but not limited to affected communities (including nomadic communities, communities living downstream from a river near the site, or along a transport route); indigenous people; workers (including local and migrant workers); civil society organizations; host governments (local, regional and national); and entities related through a business relationship (suppliers, contractors, sub-contractors, and shareholders).

PART II

GENERAL PRINCIPLE AND OBJECTIVE OF THE SOCIAL PARTNERS' CHARTER

ARTICLE 2

GENERAL PRINCIPLE

Over the last few years, significant new oil, gas and mineralsexploration reserves have been discovered in East Africa, as well as in West Africa, Eastern Mediterranean, the Caribbean and the Asia-Pacific region. These discoveries have very quickly added several new countries to the ranks of world’s oil and gas producing nations. These countries have shown interest in advice on governance. They are keen to avoid the mistakes that have led to accountability failures and oil curse in other more established producing countries.
The basic principle of this Social Partners' Charter is to enable Partner States in the East African Community to honour commitments which they have freely entered into, in conformity with the national law and accepted international obligations so that:

a) All programmes and projects in the Extractive Industry shall be primarily directed to the well-being and development of the population and to the promotion of its desire for social progress, as prescribed in the Treaty for the Establishment of the East African Community: Article 5, 3 (c) "the promotion of sustainable utilization of the natural resources of the Partner States and the taking of measures that would effectively protect the natural environment of the Partner States";

b)Partners States shall formulate and harmonize legislation, political and socio-economic policies and programmes in the Extractive Industry, which contribute to the enhancement of Decent Work, productivity, productive employment opportunities, industrial harmony and generation of incomes in Partner States; and

c)Partner States should respect the African Charter of Human and Peoples’ Rights, the Universal Declaration of Human Rights and the corresponding International Covenants adopted by the General Assembly of the United Nations as well as the Constitution of the International Labour Organization and its principles according to which freedom of expression and association are essential to sustained progress.

ARTICLE 3

OBJECTIVES OF THE SOCIAL PARTNERS' CHARTER

The objective of this Social Partners' Charter shall be to facilitate, through close and active consultations among social partners and in a spirit conducive to support Partner States in developing the extractive industry (including environmental considerations and employment creation) and implementation of relevant policies, the accomplishment of the following aims:

a)Implement the EAC Protocol on Environment and Natural Resources Management and the Africa Mining Vision to ensure the improvement of standards of living as the principal objective in the planning of social and sustainable development;

b)Promote the enabling environment for social and economic transformation of the East African economies through natural resources development towards inclusive growth and sustainable development;

c)Promote institutionalizing responsible management of natural resources by adopting key factors for success including cautious macroeconomic policy, fiscal based rule, good governance, capacity building constituencies over time with a focus on skills development with the capacity to manage extractive sector;

d)Ensure the retention of the tripartite structure of the social partners, namely: governments, employers and workers’ organizations in the facilitating effective and predictable integration in the natural minerals sector, including the development and implementation of policies; and

e)Promote the region's and continent's policy space to pursue local beneficiation, value addition and resource-based industrialization process;

PART III

PRINCIPLES OF GOOD GOVERNANCE IN NATURAL RESOURCES

ARTICLE 4

OBJECTIVES OF GOOD GOVERNANCE IN NATURAL RESOURCES

The discovery of substantial natural resources, and especially oil, gas and mineralsin the region, has brought with it the notion of increasing wealth and creating a potential sustainable economy and positive long-term human development. At the same time, human rights abuses have increased in tandem with growing investment inflows largely fuelled by oil and mineral finds in the region.

Based on the wide range of experience in both developed and developing countries, the region must learn and share best practices in good governance in natural resources. Partner States are encouraged to join and effectively implement standards such as the Extractive Industries Transparency Initiative (EITI), Publish What You Pay (PWYP), Strategic Environment Assessment Initiative (SAEI). These initiatives aim to strengthen governance by improving transparency, accountability and resource revenues protection of the environment in the extractive sector.

In giving effect to Articles 3 and 6 of theTreaty for the Establishment of East African Community on good governance and democracy, prudent management of the natural resources, accompanied by a strong, dedicated and accountable political leadership and citizen participation, the East African region can transition to higher and sustained levels of development. Transparency, accountability and strong institutions are needed to complement economic prescription of sustainable management of natural resources with the following objectives:

Attract the most qualified investor in the long run
Maximize economic returns to the state through licensing
Earn and retain public trust and manage public expectations
Increase local content and benefits to the broader economy
Ensure national participation in the development of the resources
Realize equitable distribution of income from the resources
Build capacity and enable actors to perform their role
Increase accountability and transparency

ARTICLE 5

THE PRINCIPLE OF MOST QUALIFIED INVESTOR IN THE LONG RUN

Best-practice standards that have been established in successful petroleum-producing countries undoubtedly represent the international gold standard in the oil and gas sector. But while such practices may work well for successful, well-resourced producers, the same policies may be entirely inappropriate for emerging producers, such as at East African region, which often face significant development challenges. Indeed, many emerging producers have weak institutional capacity and low knowledge of the petroleum sector, in addition to pressing socio-economic challenges.

The East African Community should pursue policies that acknowledge the realities of their national contexts, that can bring about rapid results in a context of urgent need, and that allow for incremental improvements to their governance processes. As capacity grows and greater revenues begin to flow, emerging producers will need to adjust their methods and institutions to promote evolving, and ever higher, standards of good governance.

One key objective is to attract the most qualified investor for the long run. Partner States should encourage speculative companies to sample geological data, since data reduce uncertainty for investors. Governments should also set out strong prequalification criteria to weed out any suitors who may be under-qualified for exploration and production. The relevant legislation should specify that government approval is necessary for any transfer of control. Disclosure of bidding information to the public will discourage corrupt bidders.

ARTICLE 6

MAXIMIZE RETURNS THROUGH LICENSING

Reassertion of the role of the state is a critical element in promoting greater transparency and accountability in the extractive industries. As such, Partner States need to develop capacities to critically analyze investment proposals and establish mechanisms in which the feedback from technocrats is taken into account when considering license applications.

Partner States must develop strategies to introduce remunerative licensing and tax structures that take account of increased revenue (from royalties and other taxes), as well as higher returns (from any equity participation or from state-owned companies). Governments must seize the opportunity to use their stronger revenue to catalyze wider economic development, and may want to consider some of the global mining trends—and the implications for Africa and the region.

ARTICLE 7

ROLES OF THE STATE, BUSINESS AND MACROECONOMIC FRAMEWORK

The primary responsibility for social development, poverty alleviation and the protection and realization of human rights lies with sovereign states. It is states that have ratified international conventions and adopted United Nations and African Union resolutions relating to human rights, development and environmental protection. States are also responsible for developing legal frameworks in support of development, the management of natural resources on which development depends, as well as protecting the human rights of citizens.

It is also recognized that the private sector has both a responsibility to respect human rights and an important role to play in contributing to social development and poverty alleviation.

Governments need to provide the legal frameworks andinstitutions to support development, effectively manage naturalresources on which development depends, and protect thehuman rights of its citizens. It is therole of government to promote transparency and eliminatecorruption. The rolethat the Extractive Industries Transparency Initiative (EITI)plays in enhancing transparency and curbing corruption is important.

Government initiatives to enact sound policies are key to economic success. The ownership of natural resources management, incorporating the Africa Mining Vision and providing the continent with its own framework requires that the government has a role to manage natural resources in an accountable and transparent manner.

Governments must commit to an open and transparent bidding process for the allocation of extractive contracts and licenses, including publication of contracts. Governments must commit to creating open budgeting processes so as to ensure extractive revenues are responsibly spent. Also include beneficial ownership declaration forms in procurement and contracts. The East African Community Procurement Policies and Procedures Manual is a good reference in this regard.

Governments should come up with strategic decision regarding saving and investment of its natural wealth. The medium term macroeconomic framework for natural resources management should be linked to the underlying saving-investment strategy for natural resources.

Governments must also manage the negative consequences arising from large increases in a country's income, the so called “Dutch disease”. Dutch disease is primarily associated with a natural resource discovery, but it can result from any large increase in foreign currency, including foreign direct investment, foreign aid or a substantial increase in natural resource prices.

Strong institutions are critical in monitoring and enforcing government adherence to the Generally Accepted Principles and Practices (GAPP) set rules and practices. These rules ensure that the revenues from natural resources are managed in a transparent, balanced and accountable manner.

The role of governments is there to provide the crucial opportunity for all parties to make concrete commitments to enhancing extractive governance. At the same time, consultations with Social Partners is pivotal, as they need a guaranteed space and platform to operate.

ARTICLE 8