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The Norwegian State Pension Fund has invested in three mining companies which operates in Eritrea. (Photo: Steve Rhodes)

The Pension Fund Profits from Gold Rush in Eritrea

Eritrea’s youth is fleeing the country by the thousands to get away from forced labour and one of the world’s most repressive countries. The authoritarian government of Eritrea has invited international mining companies to participate in the extraction of gold, copper, and other minerals. The Norwegian Government Pension Fund – Global is taking part in the gold rush, as investor in three mining companies in Eritrea, which all contribute to maintaining the controversial regime.
Artikkelen er mer enn to år gammel. Ting kan ha endret seg.
Eritrea’s youth is fleeing the country by the thousands to get away from forced labour and one of the world’s most repressive countries. The authoritarian government of Eritrea has invited international mining companies to participate in the extraction of gold, copper, and other minerals. The Norwegian Government Pension Fund – Global is taking part in the gold rush, as investor in three mining companies in Eritrea, which all contribute to maintaining the controversial regime.

Eritrea gullGold from Nevsun's Bisha mine in Ertirea. Photo: NevsunEritrea has developed into one of the world’s most repressive regimes. No election has been held since its independence in 1991; there is no opposition or freedom of speech. President Isaias Afewerki is criticised for keeping the country almost in a state of war with its neighbours and thus legitimising a total control of its citizens. Women and men between the ages of 18 and 50 years of age are transferred from compulsory military service to forced civilian service for indefinite time.  

The authoritarian regime has high hopes that the mining industry will come to the country’s rescue and does its best to open the country for the mining companies. The mining industry is now in the process of becoming the government’s most important source of income. The UN has in separate resolution expressed concern that the income from the mining industry is being used by the government to destabilise neighbouring countries.

International mining companies and investors are now taking part in a gold rush in Eritrea. The Canadian company Nevsun Resources started commercial production in the gold mine in Bisha in February of 2011. The profits in the first half of 2012 was a little less than US$300 million. The Norwegian Government Pension Fund – Global has shares in Nevsun worth NOK 74 million and owns 1.12% of the shares. Nevsun’s gold find has inspired other international mining companies, and during the past few years altogether 14 international mining companies have been active in the country. The Pension Fund has invested in Nevsun and two others of these companies.

It is difficult, if not impossible, for the international mining companies in Eritrea to start mining operations without supporting the regime’ gross violations of human rights. The government party has taken control of the whole construction field and squeezed out private and independent companies. The government companies build, among other things, roads and barracks for the mining industry.

Also read our story "Pension Fund Company accued of forced labour".

Eritrea has a minimal export industry and a struggling economy. The country’s most important income is tax on money sent by Eritreans in exile to their native country, even though the income from the population in exile is decreasing. The export income in 2008 before the gold mine became operative was approximately 10 million Euros.  
In August of 2011 state-owned Eritrean National Mining Corp bought 30% of the Bisha mine from Nevsun and now has 40% of the shares. Nevsun is the operator of the mine, with South African Senet as a support company. The Eritrean state company SEGEN has been subcontractor and built infrastructure such roads, barracks and housing for Nevsun and Senet.

Norwegian investments
The Pension Fund has direct or indirect ownership of 3 of the 14 international mining companies that operate mining activity or are exploring for minerals in Eritrea:

 Nevsun Resources owns Bisha Mining Share Co (BMSC), which is the first operative gold mine in Eritrea. Underneath a several-metre-thick layer of gold-containing stone another layer of copper and zinc is located, which will keep the mine operative for many years in the future. In 2011 the Pension Fund increased its ownership from 0.49% to 1.12% of the shares, and the sums invested have increased from 41 to 74 million NOK.

NGEx Resources Inc is another Canadian mining company operating in Eritrea. In 2011 NGEx Resources started to explore for potassium chloride, also known as “potash”, in the Bada Potash project license area. The company has had three exploration licenses in Eritrea but this past summer sold its license for the Mogoraib area, which probably contains copper and zinc, to Nevsun for US$5 million, and a further $7.5 million if production is started in the area. The Pension Fund has invested NOK 16.9 million directly in NGEx Resources and NOK 65 million in Lundin Mining, an associated company of NGEx. These companies have the same chairman, Lukas Lundin. The mining companies form a part of the large Lundin Group, involved in mining operations and petroleum all over the world, including Norway. NGEx works in accordance with the aggressive slogan “No Guts, No Glory”.

 AngloGold Ashanti Ltd has established the company Thani Eritrea, which has a license for two exploration areas in Eritrea. The Pension Fund has invested NOK 1.7 billion in AngloGold Ashanti. 

Violation of the Ethical Guidelines?
The Pension Fund has its own ethical guidelines, which declare that the fund should not “make investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages.” Exclusion of companies is one of three defined measures to promote the ethical guidelines. According to the guidelines, companies will be excluded “where there is considered to be an unacceptable risk of contributing to serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation.”

A separate resolution by the UN Security Council, no. 2023, criticises Eritrea for its aggressive attitude towards its neighbours. The resolution expresses a definite concern that the income from the mining sector could be used as “a financial source to destabilise the Horn of Africa”. Eritrea is accused by its neighbours of financing rebellious groups in Somalia and Ethiopia, and a separate UN monitor group has had its mandate extended to examine these allegations. In one of its reports the group recommends that UN member countries institute strict guidelines for the mining companies to prevent that the income from the mines is misused by Eritrea’s government.

Close Collaboration
The situation in Eritrea is about to receive increased attention, also because of Nevsun’s successful gold mine production. The British Foreign Office writes that it expects increased attention to possible investments in Eritrea when the gold production gets started but also notes, “Some foreign countries, however, may feel uncomfortable with close association with a country whose human rights record is so flawed.”

Nevsun, for its part, dismissed the problem when queried about violations of human rights and lack of democracy: “I can not see that it influences us,” Nevsun’s president, Cliff Davis, said. “It is difficult for me to judge. You must always strike a balance when you work.”

A secret cable from the American Embassy in Asmara, Eritrea, refers to a meeting at which Eritrea’s government together with representatives from Nevsun were to inform visitors from the UN commission and the World Bank about investment possibilities in Eritrea: “Eritrea’s government and Nevsun gave a performance worth an Oscar.”

Systematic Human Rights Violations
The violations of human rights in Eritrea have for more than a decade been systematic and extensive. The government party PFDJ is the only one permitted. Even feeble attempts to criticise the president were brutally suppressed. Of a group of 35 known politicians and journalists who have been imprisoned during the past decade, 15 are supposed to have died in prison and 9 to have been physically and psychologically injured. Only 11 are supposed to be “aware of their situation,” according to the United States State Department’s human rights report for Eritrea in 2010.

This report also informed about other abuses of the population: “The government continued its practice of summary executions and shooting of individuals on sight near mining camps and border regions for allegedly attempting to flee military service, interfering with mining activities, or attempting to leave the country without an exit visa.”

The refugee flow out of the country is extensive, even though it is prohibited and the refugees risk being shot at the border if discovered by the military. In 2010 Eritrea topped the statistics for refugees seeking asylum in Norway. Of a population of only 5 million in 2010, 1711 refugees came to Norway. Next on the list is war-torn Somalia, with about 9 million citizens. In the statistics for 2011 the two countries have exchanged places.

On 18 September 2011 the organisation Reporters without Borders marked the 10th anniversary of the arrest of Eritrea’s independent editors and journalists. According to the organisation, 30 journalists are today imprisoned in the country, including Swedish-Eritrean Dawit Isaac. Several journalists have also been killed while fleeing across the border or drowned while crossing the Mediterranean. The same organisation has elected Eritrea the world’s worst country with regard to press freedom, worse than North Korea.

Use of forced labour through civilian service is one of the most important reasons the youth is fleeing the country. The general conscription applies to both men and women above the age of 18 years. After half a year of military training they are transferred to civilian service, where they must perform community services indefinitely. The wages for the compulsory service are very low: $9 a month after 18 months’ training, even though the tasks often constitute regular jobs in civilian life. Human Rights Watch has written en extensive report about the use of forced labour, based on, among other things, interviews with Eritrean refugees.

The state companies that use forced labour by conscripts are dominant in the economy. In the construction field the state companies are omnipotent after the government divested the private construction companies of their licenses.(*)

In practice, the civilian service may last forever: “the criteria for demobilizing were unclear, and many were required to work indefinitely in any location or capacity chosen by the government,” according to the American Department of State’s Human Rights Report for 2010. The Human Rights Watch report Service for Life describes this in detail. Eritrea’s president still keeps the country mobilised because of the unsettled border conflict with Ethiopia in 1998 and 2000. In 2008 a new border conflict with Djibouti started. The perpetual mobilisation is used as a justification for the extensive use of forced civilian service.

The United States Commission on International Religious Freedom (USCIRF), which advises The White House and Congress, has recommended that the American government “prohibit any foreign company’s raising capital or listing its securities in the United States while engaging in developing Eritrea’s mineral resources”.

The UN has passed sanctions against Eritrea because of the country’s military support of the al-Shabaab militia in Somalia. The sanctions entail prohibition of arms sale to Eritrea, travel ban for political and military leaders and freezing of their assets abroad.

Relevant Sources for This Issue
•    Human Rights Watch: Service for Life (2009)
•    Human rights Watch: Ten Long Years – A Briefing on Eritrea’s Missing Political Prisoners (Sept 2011)
•    US State Department, Bureau of Democracy, Human Rights, and Labor: 2010 Human Rights Report: Eritrea                 

«Eritrea is one of the world’s youngest countries and has rapidly become one of the most repressive. There is no freedom of speech, no freedom of movement, no freedom of worship, and much of the adult male and female population is conscripted into indefinite national service where they receive a token wage. Dissent is not tolerated. Any criticism or questioning of government policy is ruthlessly punished. Detention, torture, and forced labor await anyone who disagrees with the government, anyone who attempts to avoid military service or flee the country without permission, and anyone found practicing or suspected of practicing faiths the government does not sanction.» Service for Life, Human Rights Watch

(*) Gaim Kibreab, “Forced Labour in Eritrea,” Journal of Modern African Studies, vol. 47, no. 1 (2009), http://www.ehrea.org/force.pdf (accessed August 8, 2011), p.61