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Investigating the extent of direct mineral sales by governments and SOEs

December 2018. In response to growing scrutiny into the sales of minerals and metals by governments and state-owned enterprises (SOEs), NRGI has worked with RCS Global to produce a working paper to better understand the scale and nature of these transactions. The findings will be presented at a session on commodities trading transparency at the 11th Meeting of the OECD’s Policy Dialogue on Natural Resource-Based Development on 12-13 December 2018 in Paris.

View the OECD presentation in full here. 

The draft working paper found that direct sales transactions between governments (including SOEs) and buyers (e.g. commodities traders) are much less common than government sales in the oil and gas sector conducted by national oil companies. Instead governments tend to tax and take stakes in mining companies in order to derive revenues from the mineral sector.

Nevertheless, there are a number of very large SOEs such as Chile’s Codelco or Morocco’s OCP, which engage in direct sales of copper and phosphates respectively, generating significant revenues for the SOE and the countries at large. The working paper also considered diamond production in Botswana, cobalt and copper production in the Democratic Republic of the Congo and bauxite production in Guinea. It also identified a number of other countries where direct sales likely take place.

The working paper is an initial effort to better understand the scale, nature and degree of public information that is available on mineral sales by governments and SOEs. A key challenge in undertaking this research was the difficulty of identifying a mineral-focused SOE in the first place, given that ownership structures are often unclear. The trend towards improved beneficial ownership information in the natural resource sector could help to solve this issue. A further suggested solution in the working paper could be for a global or country level database of SOEs to be established with support from the EITI or OECD.

Being government-owned, there is a clear public interest in SOEs transparently managing natural resources which belong to all citizens, including the sales of those minerals to third parties. As more examples emerge, the working paper will be further elaborated to shed light on this little-understood part of the natural resource sector and a published version will be made available in 2019. A copy of the presentation given at the 11th Meeting of the OECD Policy Dialogue will be made available on this blog following the event.

Joseph Williams is an Advocacy Manager at the Natural Resource Governance Institute (NRGI).

Alice Valvodova is Co-Head of Advisory Services at RCS Global.