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A Sudanese demonstrator casts his shadow onto a protest banner outside the Talisman Energy Annual General Meeting in Calgary, Wednesday May 1, 2002. (Adrian Wyld/The Canadian Press/Adrian Wyld/The Canadian Press)
A Sudanese demonstrator casts his shadow onto a protest banner outside the Talisman Energy Annual General Meeting in Calgary, Wednesday May 1, 2002. (Adrian Wyld/The Canadian Press/Adrian Wyld/The Canadian Press)

Time to Lead

Canadian companies urged to look at the cost of doing business with despots Add to ...

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, chief executive officer of Toronto-based Kinross Gold Corp., one of the world's six biggest gold companies, says he wrestles with these questions all the time. He says he wouldn't have invested in Chile under the military junta of Augusto Pinochet, no matter how attractive its mining sector. And his company sold its assets in Zimbabwe in 2006, partly because of the political turmoil under the autocratic president Robert Mugabe.

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.

Consider the case of Eritrea - one of the most repressive countries in the world and one of the few that has never held a national election in its entire history. Human Rights Watch says the small African country is becoming "a giant prison" of torture, arbitrary arrest, forced labour and lengthy military conscription. One of the biggest investors in Eritrea is a Vancouver-based company, Nevsun Resources Ltd., which is developing a $260-million gold mine there.

Asked about the human-rights abuses and the lack of democracy, Nevsun president Cliff Davis is reluctant to discuss it. "I don't see any of that affecting us," he says. "It's a tough one for me to judge. There are always tradeoffs in where you're working. As a mining company, we shouldn't be imposing some form of political environment that we're familiar with. It's self-determination."

He prefers to talk about Eritrea's lack of corruption, its political stability and the integrity of its leaders. "It's not a wealthy elite class - they're very highly principled," he says. And he talks about the jobs and other benefits that the gold mine provides to the community. "When you have consensus and grassroots involvement by the communities, it can be just as important as a voting process."

Canadian investors are rarely in the spotlight for their business dealings in obscure countries like Mauritania and Eritrea, but they would be foolish to assume that the public will never notice. Canadian companies such as Talisman Energy Inc. and Ivanhoe Mines Ltd. sparked a furor when they invested in the autocratic regimes of Sudan and Myanmar, where they were accused of involvement in human-rights abuses.

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