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Corruption in the Mining Sector: Preliminary Overview 405
• Auditors with experience in the mining sector and its costs could audit
the annual accounts of mines. They will be able to query and check any
unusual figures.
• Mining companies should be required to fully disclose to the auditors
all their documents, production records, and accounts.
• Comparative analysis of the data from different but comparable mines
should as far as possible be assessed to try to identify trends and
d iscrepancies.
• The estimated mine output at time of license should be checked against
the actual declared output, and the mining company should be asked
to explain the reason for differences (although the mining company
may have deliberately understated estimated production at the time of
license application).
• The land shape at time of commencement of mine operation could be
checked against the current shape (the difference being the amount
excavated). However, several factors make this an inexact method:
° Dependence on the sophistication and accuracy of
– the ground contour data possessed by the licensing authority
– the equipment used by the inspector
– the inspector
– the methods used to compare the data.
° The amount of inappropriate material or wastage that is excavated
but not exported
° The fact that gold mines in particular export only a fraction of the
product excavated.
Risk 4: Compensation and obligations to local inhabitants
Potential risks in sector
When a mining company applies for a license, it must negotiate compensation
and land use rights with the local zones, woredas, and inhabitants.
It may also have to agree to mining conditions that benefit the local
inhabitants. In the fourth key area of risk—compensation and obligations
to local inhabitants—the potential corruption risks in the Ethiopian mining
sector include the following:
• Officials or community leaders steal compensation.
° A fund may be set up to compensate all affected residents, the value
of which may be a fair market value. However, local officials may
expropriate all or part of the fund before the affected residents
receive it.