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EU: Conflict Minerals agreement reached as exemptions added

The European Union (EU) this week took a positive, but half-hearted, step towards cleaning up Europe’s trade in minerals.

EU legislators concluded their negotiations on a new law on so-called ‘conflict minerals’—a Regulation which is meant to ensure that minerals entering the EU do not finance conflict or human rights violations. Certain EU companies will, for the first time, be legally required to take responsibility for their mineral supply chains and to take steps to prevent their trade being linked to conflict or human rights abuses. 

However, a string of concessions and last-minute loopholes could undermine the Regulation’s impact, as they exempt a large number of companies from the law.

 

Civil society organisations, including Amnesty International and Global Witness, are today calling on the EU and its Member States to show that they are serious about making sure these exemptions do not undermine the Regulation’s stated aims.

“This Regulation is a welcome step forward,” said Michael Gibb of Global Witness. “But while the EU has sent a strong signal to a small group of companies, it has ultimately trusted that many more will continue to regulate themselves.

 

It is now up to these companies to show that this trust is well-placed and well-earned; and we expect our lawmakers to act if it is not.”

The EU is a major destination for minerals, both as a market for raw materials and the everyday products that contain them, from laptops and mobile phones to engines and jewellery.

The Regulation will cover EU imports of minerals tin, tungsten, tantalum and gold from all countries in the world, and is the first mandatory law of this kind to be truly global in its scope.

 

But while global standards on the minerals trade require all companies to check their supply chains for conflict financing or human rights violations, the EU’s mandatory provisions will cover only a small part of the supply chain. In defiance of the European Parliament’s more ambitious proposal in May 2015, only companies that import minerals in their raw forms—as ores and metals—will be covered. Companies that bring the very same minerals into the EU inside components or finished products are let off the hook.

 

Late in negotiations EU Member States also successfully pushed for the inclusion of a series of import thresholds that will further reduce the number of companies required to comply.

“These volume thresholds, that exempt companies from complying with legislation, are dangerous loopholes,” said Nele Meyer at Amnesty International. “They could let minerals worth millions of Euros enter the EU free of any scrutiny—often those with the highest risk of being linked to conflict. This new law can only be the very first step forward.

 

Additional measures will be needed to ensure that all companies will and can adequately check their supply chains.”

Even companies required to comply with the Regulation have been offered shortcuts. The European Commission has agreed to accredit private industry bodies to which companies have increasingly sought to outsource their obligations to check their supply chains. Members of accredited industry bodies will benefit from limited oversight.

 

In addition, companies will be encouraged to source from a list of “responsible” smelters and refiners, despite few mechanisms being put in place to actually assess the behaviour of all smelters and refiners on the list.

The Regulation will not come into force immediately, with legislators opting instead to insert a lengthy phase-in period.

“Talk of a phase-in is a red herring. The Regulation reflects responsibilities companies have had for many years, and they have all the tools and information they need to comply.

 

Enough time has been wasted looking for ways to help companies shirk their responsibilities. Now the focus must be on making sure they meet them as soon as possible,” said Michael Reckordt of PowerShift.

By itself, this trade Regulation cannot bring peace and prosperity to communities blighted by the resource curse. Civil society has therefore welcomed the EU’s integrated approach intending to complement the new Regulation with diplomatic and development measures.

“Concluding these negotiations is an important step, despite the limited scope of the new law.

 

But this is only the beginning of the process, not the end. Now is the time for companies to show that they are serious about meeting their responsibilities; for EU member states to show that they are committed to enforcing the standards which have now been established; and for the EU to make use of all its resources to promote a more sustainable and responsible sourcing of minerals worldwide.” said Frederic Triest of EurAc. â€¨â€¨POLITICAL UNDERSTANDING 

The EU reached a “political understanding” in June 2016, which set the broad political contours for the Regulation.

 

Technical discussions were then held to develop the final text of the Regulation. This “trilogue” process concluded today, with the European Commission, European Parliament, and Council reaching agreement on a final text. This text will now be voted on in the Council and Parliament.

The Regulation applies to companies whose imports of ores or metals of tin, tantalum, tungsten, or gold into the EU exceed certain specified annual thresholds.

 

The law will require companies to conduct “due diligence” on their supply chains broadly in line with the requirements of the Organisation for Economic Cooperation and Development’s (OECD) “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.” Unlike the EU’s Regulation, this OECD Guidance applies to all mineral resources and to the entire supply chain, including companies that buy or trade products containing those minerals.



Due diligence on mineral supply chains does not aim to discourage sourcing from fragile and high-risk areas. Rather, they seek to encourage and facilitate a more responsible and transparent trade with these regions.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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