A new report by the Centre for Environmental Rights’ shows major inadequacies in the way mining companies disclose information about environmental rehabilitation costs.
A key finding of the report, entitled Full Disclosure: the Truth about Mining Rehabilitation in South Africa, notes that neither the law, nor the accounting standards governing company disclosures, ensure the necessary transparency and accountability about the money that mining companies must set aside to rehabilitate environmental damage.
Accountability is lacking
CER attorney, Christine Reddell, says they assessed the public disclosures of eleven JSE listed mining companies in relation to their financial provision for environmental rehabilitation and found that the information provided about the costs of rehabilitation, and the companies’ ability to cover these costs, is inconsistent, unclear, in some cases unreliable, and not comparable between companies.
“This means that it is impossible to check whether the estimated costs of rehabilitation given by mining companies are accurate, whether enough money has been set aside to pay for it, and whether rehabilitation is actually being carried out. In other words, it is impossible for shareholders or taxpayers to hold companies or regulators to account.”
Taxpayers pick up the tab
Mining causes extensive damage to the environment. The law requires mining companies, which profit from causing this damage, to set aside and ring-fence enough money to fix it.
If a mining company fails to rehabilitate, the state is supposed to be able to access that money and carry out the rehabilitation itself. Rehabilitation is expensive, and when this system fails, it is the taxpayer who ultimately must pick up the tab.
The CER’s Full Disclosure report is based on assessments conducted by Intellidex, a leading capital markets and financial services research company, its engagement with the companies assessed, and its own research and extensive work on mining, environmental regulation, and corporate reporting.
Full Disclosure includes detailed recommendations aimed at achieving transparency, consistency, clarity and comparability in company disclosures, and at supporting a legal system that ensures that mining companies fix and pay for the environmental damage they cause.
Orin Tambo, Senior Analyst at Intellidex notes that most companies interrogated in this study indicated that they would not object to disclosing or publishing more information if it becomes a regulatory or financial reporting requirement.
“The onus in our view lies with the Departments of Mineral Resources and Environmental Affairs, and IFRS, to patch up the gaps in their disclosure requirements. The Department can also go a step further by publishing company submissions on its website.”