While the streets of North Africa were filled with revolution, dozens of Canadian mining companies were enjoying a placid convention at the southern tip of Africa, in the sleepy city of Cape Town.
Around the halls of Africa’s biggest mining summit last month, there was little talk of democracy. And why would there be? Canadian investors have always cared more about political stability than political freedom. With commodity prices booming, many were confident that authoritarian regimes will continue to prove as profitable as any democracy.
But the dramatic rebellions in Egypt and Tunisia – and, a few days after the convention, in Libya – have shown the risks of relying on autocracy. Two of Canada’s biggest companies, SNC-Lavalin Group Inc. and Suncor Energy Inc., suddenly found their reputations tarnished and their massive Libyan investments in jeopardy as the country collapsed into violence.
Is it time for a reassessment of doing business with despots? Around the world, Canadian companies have invested billions of dollars in dozens of undemocratic regimes, from Congo and China to Russia and Zimbabwe. Now they are facing awkward questions – and perhaps a new assessment of what “political risk” really means.
Tye Burt
In any decision on mining investments around the world, he says, Kinross must ask itself: “Can we live with the environment, politically and economically?”
The company tries to do its homework before investing. “A stable dictatorship would not be a good investment,” he says. “Ultimately those regimes will face the political changes that we’re seeing now [in North Africa].”
Yet while rejecting some countries, Kinross has chosen to invest billions of dollars in Russia and Mauritania – two countries that are considered “not free” in the latest reports by Freedom House, the respected U.S.-based institute that conducts an annual global survey of democratic freedoms and civil liberties.
Both countries have held elections in recent years, but there were serious doubts about their legitimacy. In both countries, opposition activists are harassed, and human-rights abuses are common. It’s not something that Canadian investors like to discuss.
“We’re not sitting in judgment of the political process,” Mr. Burt says. “We’re dealing with the administrators. At some point you have to act in the best interests of your shareholders and your employees.”
Mauritania suffered a military coup in 2008 and last year’s election was won by the former army commander who led the coup. But the country is “moving in the right direction,” Mr. Burt insists. He notes that his company is providing thousands of jobs in Mauritania, along with $10-million for a mining school to train geologists and technicians.
On Russia, he is more cautious in what he says. “We have to be pretty circumspect on the political front,” he says. “But we’ve found it to be stable and improving.”
Canadian business leaders are generally uncomfortable with questions about the lack of democracy in the countries where they invest. Like Mr. Burt, they prefer to talk about the benefits they provide to the local population, the jobs they create, and their consultations with the local communities.
