Transparency as a tool for trust-building

The article was first published by Business Action for Africa in their 2009 report From Crisis to Opportunity. The report can be downloaded as a pdf.

The PSD Blog over at the World Bank offered some kind words about the article in this blog post.

Transparency as a tool for trust-building and stability in a Volatile World

By Peter Eigen, Chairman of the EITI, Member of the Africa Progress Panel

In the land of the blind, the one-eyed man is king.  When it comes to knowing how the global financial crisis will affect Africa we are all living in the land of the blind.  Usually we can rely on the IMF to be the one-eyed man, but the IMF’s growth predictions for 2009 give such a mixture of signals that it is impossible to form a clear overall picture.  We do know, however, that 2009 will see a series of difficult social and political changes in Africa: elections, strikes, civil unrest, rising fuel and food prices, and a more challenging environment for exports.  Because of Africa’s unique finance and liquidity circumstances, and due to volatile exchange rates and commodities prices, it is safe to assume that the financial crisis will be felt differently in Africa than elsewhere.  Given all of the above, the question is how to avoid the global financial crisis becoming a social crisis in Africa. 

This is where I believe that transparency comes in.  We have all seen cases in the extractive sector where opacity and silence has created mistrust and suspicion.  Affected communities and ordinary citizens often assume that the government and companies are in cahoots to keep the wealth for themselves.  Sometimes companies feel that governments and citizens are ganging up on them to reset the rules and renegotiate contracts. 

The Extractive Industries Transparency Initiative (EITI) has long been held up as a shining example of how multi-stakeholder initiatives can address these kinds of challenges.  But much of this praise has been premature.  The initiative is still young.  In the past 18 months the number of EITI implementing countries has doubled to 30, with 20 of them in Africa.  8 African countries have now produced EITI reports.  As these countries approach validation – the test of whether they have met all of the indicators in the EITI governance standard – we are for the first time getting a clear picture of how the relationship between transparency, multi-stakeholderism and development works. 

In many countries we have seen specific cases of civil society being given increased voice, legitimacy and democratic space, as part of the EITI process.  In others, where this voice has been threatened or intimidated, the EITI has proven to be a critical instrument for demanding that civil society plays its rightful role in governance and society.  I expected to see all of that though I am heartened by the extent of EITI as part of the process.  What I am more surprised to note, is how countries are seeing the initiative contributing to trust-building.  Building on this, most of the countries who are now joining the initiative are not those plagued by corruption in the extractives sector.  Governments, like Zambia with their sorrow copper history, want to use the EITI to inform the public on revenues and address some misunderstandings about contracts and deals.  Others like Tanzania and Madagascar, use it as a way to engage communities on a wider set of issues.  For post-conflict countries, like the DRC, Liberia and Sierra Leone, it is a part of a wider peace and reconciliation process.  And I am pleased to see how some companies are embracing it, like Newmont in Ghana, to show communities how much they are paying to various levels of Government. 

EITI is morphing well beyond a ‘resource-curse’ initiative and into a vehicle to build trust at regional/local level.  This, I believe, could provide some salutatory lessons for a world and a continent facing the dangers and difficulties of financial volatility and distrust.

Head on over to the Business Action for Africa website to join the online discussion on harnessing the power of business to sustain progress towards the Millennium Development Goals in the context of the economic crisis. A range of other contributors, including Kofi Annan, Lord Malloch Brown, Professor Paul Collier and Sir Mark Moody Stuart, share their views on how to ensure the private sector continues to act as the engine room of Africa’s growth and development, and the type of policies required to help businesses to manage and innovate through the current economic and financial crisis.