How Good Governance, Ethics and Anti-Corruption Compliance Can Enhance Accessibility To Global Capital Markets.

1. CORPORATE GOVERNANCE, ETHICS, CORRUPTION & ACCESS TO CAPITAL – Myron
Betshanger
Corporate Governance, Corruption and Access to Capital – Myron. D. B. Betshanger
The latest publicised Research Reports on the Top Business Risks facing the mining and metals
industries indicate that Capital allocation and access to capital have rocketed to the top of the business
risk list for mining and metals companies globally. These "capital dilemmas" threaten the long-term
growth prospects of the larger miners at one end of the sector, and the short-term survival of cash-strapped
juniors at the other end. According to Mark Elliot, Ernst & Young's Global Mining and
Metals leader,:
“For larger miners, the rapid decline in commodity prices in 2012, rampant cost inflation and falling returns
have created a mismatch between miners' long-term investment horizons and the short-term return horizon
of new yield-hungry shareholders in the sector. "Many years of high growth in earnings, cash flows and
capital appreciation has attracted a different group of investors to mining, investors with short-term
investment horizons who are not as comfortable with the sector's longer-term, and often counter-cyclical,
development, investment and return horizons.”
While the Ernest and Young report no doubt raises important issues around the most significant
business risks facing the mining and metals industry globally, the question which the report does not
raise nor attempt to answer is, to what extent perceptions of poor corporate governance and continued
corruption contributes towards the difficulties of mining and metals companies to access capital.
THE INTERNATIONAL CALLS FOR GREATER TRANSPARENCY
The year 2013 has seen the calls for greater transparency in the international extractive industries,
including mining and metals, being firmly set on international policy agenda with the coming into
operation and enforcement of Section 1504 of the U.S. Dodd-Frank Act. While the former has
particular application to mining and metals companies registered and having operations in the U.S. it
does have extraterritorial jurisdictional impacts in that it requires any U.S. company to disclose it
financial payments to any foreign government in which it has operations, whether directly or indirectly
through partnerships, investments, joint ventures, in which such US company has a substantial
shareholding or controlling interest.

2. On the international arena, the G8 Group of Nations has, during the organisations April/May
2013 Summit in Ireland, agreed on the development and implementation of new rules regarding
financial transparency in the international extractive industries . The European Parliament has
taken the leading role in this regard and has on 24 May 2013, by a 98% vote, agreed on rules
which would force any company listed on any of the European Union member states stock /
securities exchanges with interests in the extractive industries, including oil, gas, mining and
metals and logging, to disclose all financial contributions made to foreign governments in which
they are having operations or planning future expansion of operations . This call for greater
financial transparency in the extractive industries is also firmly set for discussion as an agenda
point of the upcoming G20 Summit in September 2013 in St. Pietersburg, Russia. Indications are
that the G20 countries will adopt similar transparency rules to be implemented by individual
member states.
INTERNATIONAL ANTI-CORRUPTION LAW ENFORCEMENT
The past decade has witnessed a proliferation in international anti-corruption law enforcement with
countries such as the U.S.A., Canada, The UK, Germany and Australia taking a leading role. Recent
developments has seen Russia, China, Brazil and India all stepping up their anti-corruption efforts.
Over the past few years we have also witnessed an increase and more aggressive enforcement of the
Foreign Corrupt Practices Act (FCPA) by the U.S. Department of Justice (DOJ) and the U.S. Securities
and Exchange Commission (SEC) of both anti-corruption and anti-trust laws with a number of
multinational corporations (MNCs) and individual directors and senior management members either
being the subject of investigations, prosecutions or sanctioned. The penalties imposed on corporations
for their involvement in foreign corrupt activities has risen sharply and has seen record high fines
imposed on companies such as Siemens, Daimler-Chrysler, and the like, while individuals have seen
sentences of imprisonment of varied periods being imposed. We have also witnessed the fines imposed
by the U.S. DOJ on Parker Drilling (US $ 15million) when the latter company entered into a Deferred
Prosecution Agreement (DPA) with the U.S. DOJ. And more recently we witnessed an Siemens senior
executive arrested and detained in the US for his alleged role in the Siemens FCPA violation.
In China, for example, the UK drug manufacture r, GlaxoSmithKline, is the subject of an on-going
investigation that have seen the company’s Head of Finance being prevented from leaving Beijing as a

3. result. Not too long ago, March 2010, we witnessed 4 of Rio Tinto’s staff members in China sentenced
between 7 and 14 years imprisonment for among others corruption (bribery).
The U.K. Bribery Act of 2010, which came into effect recently, has some of the most progressive, and
according to some, strictest liability provisions for corporations and individual directors and company
officers alike, namely, “Failing to Prevent Bribery” which carries an unlimited fine.
More recently and perhaps of greater significance is the establishment of the International Foreign
Bribery Task Force between the U.S. UK, Canada and Australia as part of a new trans-border
agreement to combat foreign bribery.
“What has this to do with the South African Mining Industry’s Top Business Risk, namely, Access To
Capital ?
The statement that “Corruption Kills” has particular relevance to the current difficulty of South
African mining companies ability to access capital. The persistent national and global perception of the
prevalence of corruption in South Africa have had and continues to have an adverse impact on the
South African mining and metals industry and indeed our country’s economy at large. We have
witnessed international rating agencies such as Standard & Poor, Global Financial Integrity and
Transparency International continuously down grading South Africa’s economy over the last 5 years.
The net result of this is that South African mining companies with international operations face s the
risk of an ever evolving tangled web of possible investigations and prosecutions for allegations of fraud
and corruption. As international anti-fraud and anti-corruption measures are being more stringently
applied and international investors become more circumspect about the risks to which their investments
are being exposed, it becomes increasingly difficult to obtain the necessary capital through investment
funding to fund expansion projects and so to create new employment opportunities and increase profit
margins. For example, in the US the increasingly stringent application of the country’s FCPA has the
effect that investment firms and private investors having become increasingly weary as to where they
invest their funds for fear of investigation and criminal prosecution under FCPA provision by the US
Department of Justice and the Securities Exchange Commission.
No doubt this have an impact on the mining and metals industry’s ability to obtain much needed
investment funding for expansion projects, increased production outputs and so maintain profitability
in our operations as well as our ability to create and sustain sustainable employment opportunities. This

4. is one of the contributing factors which makes obtaining direct foreign investments increasingly difficult
and contributes to what may be described as a “legitimate flight of capital” from South Africa as
investors both domestic and foreign seeks out more secure locations for their investments. And it is for
this reasons that Ernest & Young’s forecast of “Business Risks Facing Mining and Metals Industry in
2013” places “Access to Capital” at the top of the risks facing mining and metals companies in South
Africa. Simply stated, the costs of corruption and fraud for the South African mining and metals
industry is threatening to severely harm the industry in its entirety.
It is against this background that I venture to introduce some “new” and perhaps innovative
corporate governance “be st practices” that has seen the light in countries such as the US, UK
and Canada.
NEW BEST PRACTICES IN CORPORATE GOVERNANCE
1. BOARD LEVEL –COMPLIANCE AND ETHICS COMMITTEE
Leading multinational corporations in the US and UK has established a standalone Board Ethics and
Compliance Committee consisting of various stakeholders, including non-executive directors, senior
management and labour, which
provide the Board of Directors with direct oversight over the company’s ethics and compliance function
and which makes provision for real-time responses to compliance issues. The Compliance Committee
also provides the Board
with relevant and continued information which are necessary for risk-based strategic decision-making.
The Board is thereby in a better position to set the company’s risk appetite and risk tolerance and has
direct inputs in the ethical
and compliance culture of the organization.
2. ENPOWERING THE CHIEF COMPLIANCE OFFICER.
Separating the functions of the Chief Compliance Officer (CCO) from that of General Counsel (in-house
legal counsel) and/or the Company Secretary and escalating the CCO position to C-Suite level has
proven to be an effective

5. manner in enhancing and monitoring ethics and compliance for a number of reasons. More importantly
it demonstrates to regulators, law enforcement agencies and investors that the company is proactive in
its ethics and compliance
regime thus making it an attractive and safer haven for investment funds. Companies that have
implemented this corporate strategy has seen an increase in not only risk management but also in
investment funding and thus able to
acquire greater capital funding at reduced rates and so are able to engage in future expansion projects.
3. ESTABLISHMENT OF REGIONAL COMPLIANCE COUNCILS
Depending on the scale of a company’s international operation, a number of multinational corporations
(MNCs) has also established “Regional Compliance and Ethics Councils” to implement, monitor and
reports on all major
compliance and ethical risks facing the corporations in the various regions of the globe in which
it operates. This provides greater assurance to the Board and Senior Executives that the
company’s ethics and compliance program is in
fact implemented in a consistent manner throughout the organizations business units throughout
the globe.
4. BUSINESS UNIT COMPLIANCE OFFICERS AND COMPLIANCE CHAMPIONS
Embedding Compliance Officers within each business unit as a separate function from internal
auditing to implement and monitor the organization’s compliance and ethics program has been
proven as an effective means to ensuring
the effectiveness of a compliance program. It also enables real-time responses to threats facing
the company and may contribute in stirring enhanced investor confidence in the corporation.
Embedding compliance champions within each functional department and training these non-compliance
personnel members greatly contribute towards ensuring that a company’s ethics and
compliance program, especially its anti-

6. corruption program are more acceptable by lower tier employees and this mitigating risks
associated with non-compliance to laws and regulations.
While no singular solution can address all the risks associated with the international corporate
environment and given the slow recovery of the international markets after the 2008 Global
Financial Crisis coupled with the growing call for financial transparency in the international
extractive industries and increasing international and national anti-corruption
enforcementactions, the above “best practices” in corporate governance may assist in pacifying
and perhaps enhancing positive investor sentiment in the South African mining and metals
industry, thus making Access To Capital less of a business risk facing both large and junior
mining companies.
I, as many other, have engaged in research into the Chamber of Mining as the voluntary body
for mining in South Africa. I have in this research discovered a very disconcerting lack of a
properly constructed industry-wide “Ethical Code of Conduct” which clearly sets out the
industry’s expectations as regards what may be regarded asproper ethical business conduct
expected from its individual member companies. While most individual mining companies do
have such ethical codes which contain clearly stated anti-fraud and anti-corruption provisions,
the constitution of the Chamber of Mines does not. This, ladies and gentleman, exposes The
Chamber and indeed the mining industry as a whole to reputational risks which may arise from
the fraudulent and/or corrupt conduct engaged in by any of its members. Critics to the
introduction by the Chamber of such an Ethical Code of Conduct may point to the fact that the
Chamber is a voluntary association of mining companies, but the latter fact should not prevent
the Chamber of setting standards of ethical conduct for its members. In fact, the King III Report
on Corporate Governance makes the development, implementation and continuous improvement
of an “Ethical Code of Conduct” part of the whole corporate governance initiative aimed at
improving transparency, accountability and responsibility within corporations and industries.
It is against the background of all the foregoing and the theme of this event that I venture in
introducing to this conference for discussion and debate the topic of “International Best
Practices In Combating Fraud and Corruption” - with specific reference to the approach
adopted by The International Bank For Reconstruction and Development, popularly known as
“The World Bank” and the strategies and guidelines expounded in the United Nation’s Global
Compact’s 10th Principle Against Corruption.

7. I therefore wish, firstly, to draw attention of the conference to the approach adopted and implemented
by the World Bank on the basis of the recommendations made by the Volcker Commission of Inquiry. I
am not going to expound with great detail into the latter commission report save to say that it
recommended to the World Bank the establishment of an independent and impartial integrity
department which it recommended be elevated to the position of Vice Presidency within the Bank and
with direct reporting responsibilities to the President of The World Bank in order to ensure its
independence and impartiality.
Since its establishment the Vice Presidency Integrity has done well to ensure the integrity of the
World Bank in projects it funded and the World Bank’s Integrity Vice-Presidency has, as part of
its broader mandate, the mandate to investigate allegations of fraud and corruption committed
by any of the Bank’s employees as well as contractors and service providers of The Bank relating
to any development project funded by the Bank or in which it has a substantial intere st.
In execution of its mandate The World Bank’s Integrity Vice -Presidency has entered into cross-debarment
agreements with other regional development banks, the IMF and other international
organisations and financial institutions. In terms of these cross -debarment agreements any company
who is contracted to any of these banks, financial institutions and/or the World Bank and which makes
itself guilty of engaging or having engaged in any fraudulent and/or corrupt activities will be debarred
from participating in any project involving that regional development bank, financial institution or the
World Bank.
A further implication of this type of agreement is that such contracting company is automatically cross -
debarred by all other members of the cross-debarment agreement. In addition to the afore mentioned,
and since the World Bank has, similar to the South African Chamber of Mining, no prosecutorial
powers, the World Bank, through its Vice Presidency, makes use of a referral system by means of which
it refers cases of corruption to the national authorities having jurisdiction either over the “corrupt”
company/contractor involved or the national authority of the territory in which the World Bank-funded
project is situated.
The efforts made by the World Bank’s Vice Presidency-Integrity have, since the inception of this
program, seen a significant reduction in the prevalence of fraud and corruption in World Bank-funded
projects. It has further seen a number of international companies who engaged in fraudulent and/or
corrupt activities in World Bank related projects debarred, cross -debarred and successfully prosecuted
by either their national authorities or the authorities in the countries where such corruption either
occurred or where the project is or was situated. Also significant is the financial recoveries made by the

8. World Bank from company contractors for their involvement in corruption and fraud in World Bank
related projects, either as restitution or as fines forming part of the sanctions implemented by the
World Bank or civil procedures the Bank instituted against such wayward contracting companies.
Admittedly and as pointed out earlier, the South African Chamber of Mines and its member companies
do not have any prosecutorial powers and may at the moment lacks the necessary resources to initiate
proper investigations into allegations of fraud and corruption to which both the Chamber as well as its
members are being exposed to on a daily basis.
The Chamber of Mining, as regulator of the South African mining industry suffer reputational
damage as a result of the corrupt and fraudulent activities committed by its individual member
companies with no real defensive or preventative mechanism at its deposal. The repercussions of
even the perception of corruption or fraud in the mining and metals industry has far wider
consequences as can be determined with any great certainty. It’s negative effects can impact on
wholly innocent players in the sector as well as the wider economy as such perceptions of fraud
and corruption are often (very) unfairly imputed to the industry as a whole or even the country
as a whole and as such makes life difficult for everybody else.
By analysing the Volcker recommendations and adopting a similar strategy or approach as the World
Bank, the South African Chamber of Mining and its individual member company no longer have to be
“totally defenceless” against the prevalence of fraud and corruption that seem to dog the industry. By
establishing a similar “Integrity Department” within theChamber Of Mining, the mining and metals
industry can acquire the tools to effectively combat, eradicate and prevent fraud and corruption.
The establishment of a fully and professionally staffed, adequately funded and resourced independent
Integrity Departmentwithin the South African Chamber of Mining with reporting responsibility to the
President of The Chamber Of Mining has a plethora of positive spin-offs of which the following are of
the most important:
 Enhancing the overall business integrity of the South African mining and metals industry.
 Ensuring fair and honest competition among members of the Chamber of Mining.
 Enforcing compliance with the Chamber of Mining’s Code of Ethics by both its members
as well as non-member contracting parties.
 Ensuring and enhancing compliance with industry standards, legislation, regulation and
government policies by member companies of the Chamber.

9.  Providing assistance to member companies in establishing, implementing and reviewing
the adequacy, relevance and operational functionality of their internal anti-corruption
and anti-fraud programs.
 Providing investigative assistance and protection to individual member companies against
exploitative practices, fraud and corruption.
 Investigating and reporting on allegations fraudulent and corrupt practices by individual
member companies, their directors, executive management.
 Cooperating with national law enforcement agencies in the investigation of corruption
and fraud within the mining and metals industry.
 Creating and maintain a Register on instances of fraud and corruption within the mining
and metals industry and developing best practices aimed at the prevention and combating
of corruption and fraud.
 Provide an independent and impartial review function in respect of new applications for
membership to the Chamber of Mining.
 Facilitate the entry into cross-debarment agreements between individual members within
the Chamber of Mining.
 Provide a central point for the development and implementation of anti-corruption and
 anti- fraud educational and training programs which are specific to the mining and
metals sector
It may perhaps be time that both the South African Chamber of Mining as well as its individual
member companies become members of and subscribe and implement the anti-corruption measures
expounded in the United Nations Global Compact’s 10th Principle Against Corruption. By becoming a
member of the UN Global Compact, the South African Chamber of Mining and its individual members
may be able to tap into a plethora of international business opportunities.
The UN Global Compact and its 10 Principles lay done specific standards with which its members have
to comply. Although this may be seen as unnecessarily complicating the international commercial
environment there are a number of benefits which the Chamber of Mining as well as its individual
members may reap from it, the following being the more important:
1. Enhanced business reputation equates to enhanced profits and better business opportunities. By
being a member of the UN Global Compact and implementing the guidelines expounded in its 10th

10. Principle Against Corruption, the South African Chamber Of Mining and its individual member
companies can enjoy the support of an international organisation in fighting corruption and fraud.
2. This will enhance the business integrity and reputation of the South African Mining and metals
industry and of individual companies and as such they may be exposed to greater investment
opportunities,
An enhanced business integrity program often attract greater numbers in investor funding as
investors becomes more confident that the mining and metals industry is a less risky haven for
the investment. This enhanced investor confidence may directly be translated into greater capital
availability and the ability of mining companies to improve production outputs, increased
revenue, sustainable profit margins and the creations of new long-term sustainable employment.
3. An enhanced business reputation brought about by a vigorous and rigorously applied anti-corruption
and fraud program will actively assist in rejuvenating a sluggish economy and enhance
the opportunity for greater economic growth.
I thus strongly suggest that we strongly look into the possibility of adopting similar measures as those of
the World Bank and become members of and subscribe to the Global Compact’s 10th Principle Against
Corruption as well as implementing the latter organisation’s Anti-corruption and fraud guidelines
within the South African mining and metals industry in order to-
(a) Effectively combat, eradicate and prevent fraud and corruption,
(b) To enhance the Business Ethics and Integrity of our mining and metals sector as a whole,
(c) To enable our mining and metal companies to attract greater direct foreign investment,
(d) To enable our mining and metals companies to be greater players in the international mining and
metals industry and so be able to increase their ability to earn foreign capital, and
(e) To enable the South African mining and metals industry and the Chamber of Mining to deliver on
its mission of unearthing the vast mineral resources in this country to the improved wealth of every
South African citizen.
I believe that all this is possible by taking a proactive and positive stance against fraud and corruption
and I am more than ready to place my bottom dollar as wager that our mining and metals industry will
raise to the challenge and actively and effectively lead the battle against corruption and fraud and not
only that, I do firmly believe that the Chamber Of Mining will be at the forefront in this battle as it has
done on so many occasions in its illustrious history.

11. Myron Duncan Burton Betshanger
Mobile: +27 740 780 3862 / +27 76 228 6088
E-mail: betshangermyron2@gmail.com
LinkedIn: http://www.linkedin.com/pub/myron-duncan-burton-betshanger/37/219/1b8
@myronbetshanger