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402 Diagnosing Corruption in Ethiopia
• Inspections of license areas should be unannounced to prevent the
mining company from complying with requirements only when the
inspector is expected or from having sufficient warning to conceal
breaches.
• The risk of an individual inspector receiving or demanding bribes can
be reduced in the following ways:
° Conduct inspections using a team of at least two inspectors: one
responsible for environmental issues and the other to verify compliance
with other license conditions. However, they should both be
aware of the other’s responsibilities and should discuss their observations
with each other. This team approach would increase the chance
that one inspector would notice if the other inspector overlooks a
major issue.
° Rotate the inspection team so that consecutive inspections are never
undertaken by the same team.
• Detailed guidelines should be prepared on what to look for during an
inspection and what actions to take if license conditions are breached.
• The local community should also be involved in policing compliance
with conditions.
• Permanent installation of environmental monitoring equipment at
major sites should be considered.
Risk 3: Mining revenues
Potential risks in sector
In the third key area of risk—mining revenues—the potential corruption
risks in the Ethiopian mining sector include the following:
• Premiums are misappropriated (although this is currently not an issue
because mining companies in Ethiopia do not pay premiums in
exchange for licenses).
• Mining companies fraudulently understate output or profit or overstate
costs.
° A mining company may operate two sets of accounts: (a) one that
correctly states the mine’s annual production and is used for the
mine’s internal accounts, and (b) another set that understates annual
production figures. The mining company sends the accounts with the
lower figure to the licensing authority to reduce the amount of royalty
it pays.
° A mining company may, in its accounts, falsely increase the mine’s
capital or operating costs or falsely decrease the mine’s revenues from