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Nevsun’s Militarized Commerce And Slave Labor In Eritrea

In a response to a Bloomberg News report that QKR Corporation was in talks with Nevsun and close to making a $1-billion bid, on Nov. 20, 2014, Nevsun disclosed that it “recently received from various parties expressions of interest on a potential corporate transaction“. It added, “Nevsun does not intend to comment further on potential corporate transactions unless and until it deems further disclosure is appropriate or required by applicable law.

QKR is a mining fund headed by a former JPMorgan Chase & Co. banker and partly bankrolled by Qatar’s sovereign wealth fund and Kulczyk Investments, founded by the controversial polish oligarch, Jan Kulczyk, who holds investment portfolios in mineral resources and energy in Africa and elsewhere. According to Forbes magazine, Mr. Kulczyk, the richest man in Poland, amassed his fortune in the 1990s during the privatization of Poland’s state enterprises.

According to observers, facing multiple lawsuits, human rights criticism, and UN scrutiny, Nevsun has been actively pursuing a business strategy of positioning itself as an attractive target for a takeover by investors with the hope of becoming a privately held company.

The two reasons for this move are believed to be an escape from legal and media scrutiny and mitigate the single country risk factor by diversifying its portfolio to include other gold mines in Africa.

To achieve this objective, Nevsun had hired Kin Communications, an investor relation firm to bolster its battered image, and in 2011 started publishing annual Corporate Social Responsibility reports, comprising of an unaudited self-assessment of the company governance practice and uncorroborated stakeholders’ testimonies.

Recently, it hired an international lawyer who conducted an investigation into Amnesty International’s allegation. After two one-week visits to Eritrea and failing to interview a single victim of the alleged use of slave labor, the lawyer concluded the allegation was unfounded.

Last summer, Nevsun settled one of the dozen class action lawsuits on behalf of shareholder who alleged that Nevsun mislead investors by manipulating production schedule to overstate its earnings report.

This was not the first time Nevsun was accused of misleading investors. On a June 15, 2006 in a WikiLeaks cable, the American Ambassador to Eritrea, Scott de Lisi, described how a group of investors were hoodwinked by Nevsun and stated that “according to staff of the European Commission and the local director of the World Bank, the GSE [Government of the State of Eritrea] and Nevsun gave an Oscar-worthy performance which, in their view, mislead those who visited.

As a privately held company, Nevsun would have little or no reporting requirements and obligations for transparency through annual reports and regulators filings. Unencumbered by oversight by an elected board of directors and not being required to disclose details about its operations and financial dealings, Nevsun will not be forced to disclose information on its shady practice with the Eritrean government.

As a 40% minority owner of Nevsun, Eritrea would welcome the opportunity for Nevsun to be privately owned in order to avoid compliance to international regulations. However, it is not clear if the Eritrean ruling party would allow the new owners to divest outside Eritrea. Nevsun is careful not to antagonize the ruling party for fear of nationalization of the Bisha mine, its single revenue generating asset located in Eritrea. It widely known that Eritrea has exercised similar threats when it forced the sale of the Australian mining company Chalice to China’s SFECO Group.

To date, Eritrea refuses to adhere to the policies of the Extractive Industries Transparency Initiative (EITI), which according to its website is “a global coalition of governments, companies and civil society working together to improve openness and accountable management of revenues from natural resources”. EITI has 31 member countries 21 of which are in Africa.

Militarized Commerce

Since it ended the gold production phase and moved to copper production, which requires more logistical support and infrastructure to export, Nevsun has relied on the Eritrean ministry of defense to provide it with slave labor for security and transportation services to move its production to the port of Massawa.

Every year the Eritrean government rounds up about 20,000 eleventh grade students to finish senior high school in Sawa military camp after which most of them are conscripted. The majority of the youth are sent to work for the ruling party’s companies which supply slave labor to Nevsun.

Segen Construction is the main contractor of Nevsun and it has thousands of slave labor that its assigns to its many projects.

For the past three years in anticipation for the need to transport copper across Eritrea, the Eritrean military has been using forced labor to make substantial road improvement and maintenance necessary to handle the massive truck traffic moving over Eritrea’s often narrow and winding escarpment roads.

The slave labor is extracted from conscripted Eritrean youth in programs overseen by ministry of defense. The appointment of Sebhat Ephrem, Eritrea’s former defense minister who recently became the minister of mining underscores Eritrea’s crucial reliance on mining revenues. With payment of close to half a billion dollars in the last three years to Eritrea, Nevsun has become a financial savior to the ruling party whose grip to power relies primarily on mining revenues from Nevsun and Diaspora remittance.

Nevsun has always denied the presence of military units in Bisha mines. However, according to WikiLeaks cable from Asmara, “Eritrea’s government gave Nevsun a security team of 2000 persons, permanently stationed in the Bisha area”.

According to an international law expert, this mutually agreed upon engagement effectively renders Nevsun activities as engaging in militarized commerce and risks assuming the liability of these abuses. He further added that, “Nevsun’s officers would not be immune to criminal prosecution or civil litigation in Canada or elsewhere for abuses committed by security forces overseas.”

Modern Day Slavery

The recent lawsuit alleges that Nevsun used salve labor to build the Bisha mine. The complaint filed in Canada where Nevsun has corporate head office, will make potential acquirers to think twice especially considering the implications of sanctioning the use of slave labor supplied by its partner the Eritrean ruling party.

Nevsun’s CEO, Cliff Davis has denied the allegation of using slave labor though an entire generation of Eritreans whose labor was forcefully extracted under the guise of “national service” bear testimony to the injuries. In the past, whenever a lawsuit is filed against Nevsun, Mr. Davis was quick to state that his company will vigorously defend itself only to settle out of court few months later.

Nevsun has been adamantly denying accusation of violating human rights of Eritreans and damaging the country’s environment. However, wells in the Bisha region are depleted of deep sweet water and wells now yield only salty water.

Indigenous residents of the area who have been stranded in Sudanese camps for over four decades lament at the graves of their ancestors that were unearthed to make way for Bisha’s open-pit mines.

An exiled resident from the area said, “we thought it was the Eritrean ruling party, but Canada is also abusing our ancestral lands.

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  • Tesfabirhan WR

    News coming from Yahoo too

    It reads, “Eritrea is one of the most repressive regimes in the world. It is a dictatorial one-party state with no elections, constitution, functioning legislature, or independent judiciary, and all media is controlled by the Ministry of
    Information. All power is concentrated in the hands of President Isaias Afewerki, in office since 1991.”

    For more details, read: http://finance.yahoo.com/news/canadian-mining-company-nevsun-resources-203400583.html

    tes

  • dawit

    The first time I read about opposition to the Bisha mining prospect and the possibilities the money received by Eritrean government was in an article written in Tigrai on line. The author argued that the Eritrean government might use its fund to buy advanced military hard ware to invade Ethiopia and increase support to Somalia insurgents. The article suggested that Ethiopia must oppose the development of the mining sector in Eritrea. On the second round of Sanction at UNSC was raised to strength the first sanctions. The issue was dropped to include sanctions on the mining companies operating in Eritrea. The latest frenzy of ‘Slave Labor’ may be to give another reason for those who oppose Eritrean independence, because the old reasons for th un sanction are wearing out, no connection with arming Al-Shabab and there are no prisoners of war from Djibouti. It is the season for fishing some imaginary problems in Eritrea to continue the old sanction and create new ones to change the Eritrean government. This must be the coordinated media campaigns season before the next round of sanction being contemplated. Will it work, I doubt it ‘The Camel keeps Moving’

  • unedited11

    How interesting and hilarious. I wonder who benefits most if the Canadians can no longer work in Eritrea 🙂

    The desperate enemies of Eritrea always end up strengthening her when they attempt to break her, its people and Government.

  • Nitricc

    I am trying to understand this thing. So, how is it the company’s fault? The company needed workers and the Eritrean government provides the workers and the company pays the government. So why are they suing the company?
    If they are going to sue, then it will be the government of Eritrea.
    Besides how about this clip!

    https://www.youtube.com/watch?v=p_WMpOup6Sc

    • Amanuel Hidrat

      Nitrikay,
      You have said: “The company needed workers and the Eritrean government provides the workers and the company pays the government”. Why is the labor of the Eritrean youth paid to the government? You are now living in the USA and you are working with company-A. Would you like company-A pay the cost of your labor to the “State or Federal government ” rather to you. Why don’t the companies hire themselves and pay directly to the labor workers? You know why they are paying to the government rather to the laborers. Nitric it is your generation who are in the modern slavery and are exploited not by the company but by their own government. Think about them please and engage to free them from that trap of serfdom.

      Amanuel

    • T..T.

      Nitricc,

      If the government has system disabilities that deny it to understand what is going on
      due to self-denial of the reality on the ground or other undefined causes or
      communication barriers and hostile behavior towards those who question its behaviors,
      then one can take up her/his case with the caregiver “The Qatari Government” or
      the employed agent or agents who are the source of the denied act of exploitation
      directed at the bonded or enslaved Sawa youth.

    • derebew

      There are international regulations and laws that mandate any company that works in other countries (poor countries) has the responsibility of making sure that their company is not involved directly or indirectly in the violation of the rights of the nationals where the business interest is. In particular Canada has a law that makes Canadian companies that work with other gouge governments repressible for their share of violations of the rights of the natives by the act of omission or neglect of their duty or active participation in violation of the rights other people. Hence the litigation agains the mining company can be opened in Canadian courts.
      It is funny you provided a promotion video as evidence of how good the company is but if the slave owners of the cotton farms of the south were able to make video I am sure they would have presented them selves as the most charitable and God appointed saviours of the slaves with out whose help they woulds have all perished and anointed them selves sainthood.
      Just wait and see if this video will have any effect to relive the company form its responsibility in the court of justice. The litigants will have a day in court to prove their case un like inEritrea were in spite all their hard slave work I am sure would have been executed if they demanded redress.

      By the way did you hear the woman in the video talking about the Cyanide they are using to extract gold. That is the worst thing a mining company could do as it gives the company the highest percentage of gold extraction but leaves the environment polluted with highly poisons and carcinogenic Cyanide for ever. I had mentioned that I suspected they may be using cyanide and how deleterious it is to Eritrea in my other posting in commentary section of the preceding article, which broke the news of the litigation and it seems it is the case as we can hear it from the Tigringa speaking woman with head scarf talking to the workers in a class room.
      The share of money Eritrea gets from this fiasco will not be enough to clean the environment and it will never go back to how it was. The least the government of Eritrea could have done is make them pay the workers a decent salary and tax the workers appropriately and monitor the mining company so they don’t use Cyanide and protect the environment.

      • Nitricc

        Deribew your concern about CN and the environment is outdated.
        CN is the safest way to extract Gold. The other alternative is using Mercury and trust me you don’t want do that. Hg is far more damaging than CN. In the mining they use a very dilute of sodium cyanide solution. The concentration of cyanide used in this process is normally in the range of 0.01% and 0.05% sodium cyanide which is nothing. Because cyanide is rapidly destroyed through natural processes, unlike Hg. So there is nothing to be negative about using CN. Remember, there are many of our food contain CN, our body is not stranger to CN, of course to low levels.

        • derebew

          Yes cyanation is excellent for max gold extraction but its effect on environment is bad, howver you want to sugar coat it becuse you raise Hg a heavy metal that should never be used at all in the 21st century doen’t make Cyandie harmless.

          . Through a process called “gold cyanidation”, “the cyanide process”, or “cyanide leach mining”, cyanide is used to extract gold from the surrounding rock. While cyanide is both effective and economical, its use and transportation present significant environmental risks.

          Read more: http://www.groundtruthtrekking.org/Issues/MetalsMining/GoldCyanidation.html#ixzz3K5kCyfCz

          • Nitricc

            I am not going to argue about this. You are telling me about old and outdated methods. All I am saying is there is no other way to extract gold with out using CN or Hg . and CN is the best opetion. And you do so while you protecting the environment and lives. All they got to do is raise the PH of the slurry by alkalizing it so that the CN ions won’t evolve in to toxic cyanide gas. That is all. And CN does NOT cause cancer. CN does not build up in the body. CN does not persist in the environment. Again it is the safest way to extract gold. That all I am saying. having said that of course you need to manage the waste.

    • haileTG

      Hey Nitricc,

      About the vid: If the Bisha (small company) can do that in a no man’s land, why is it the toothless and useless regime can’t keep supplying water and electricity to the capital, using infrastructures that were already built by Italians in the last quarter of a century? May be that IA should shadow Clif Devis for a year:)

      About your question: Yes, that is exactly Nevsun’s defense. I.e. Jurisdiction. The case is however, as explained below:

      “from 2008 – 2009 Nevsun entered into contractual agreement with Segen (PFDJ company) to hire Eritreans to build the mine. By then (by 2008) there was already “credibly established” knowledge that the PFDJ is engaged in forced labor (akin to slavery). Hence, Nevsun has “expressly or implicitly” uproved the act of forcing Eritreans to work in slave like conditions by entering into such contractual agreement that it stood to financially benefit from. Nevsun has already admitted that it only started regulating the acts after 2009 when a direct allegations were made by human rights organizations. It also said it can’t rule out that it didn’t use forced labor between 2008 – 2009.

      Regards

    • Tesfabirhan WR

      Have you questioned the advertising video before posting it here?

      There is no free lunch in business. But Nevsun is happy to announce that everything is free, food, lodgment, sport center, etc. Why they are providing it for free? It is obvious that there are two possible things; 1. The salary is not enough to cover their over-all expenses or 2. the workers are hostages and the only way to keep them around is to encourage them by providing free services (this is what PFDJ does), “the Slavery”

    • Nero

      What is the link between the Bisha Mine and the self reliance policy of Eritrea – as the video alludes to in its title?

      The 60% Nevsun owned mine is not really giving back to the local population nor is it contributing to the local economy. All the benefits that are enumerated – growing food for employees on the mine as opposed to buying from the local economy is actually not very self reliant if you think of the larger picture for the country. They import all the gas they need to generate electricity from Oman and the use of solar is not that high at all. The mine is actually an island cut off from the local economy and the buses that ferry in the workers might as well be ferries. This is not all the doing of Nevsun but they happily work in this setting. They do just the minimum required to get a nod for their investors and for their new buyers.

      They have done well – scrapped the gold on top and now dug out a bit of the copper – my guess is they have recouped their initial investment and some more – and soon they will be gone.

      As to the self reliance policy – it is a self imposed delusion of the state and it has been disastrous for the regular Joe/Ghere/Ali. It is just a cover to continue the game of being a regional spoiler and justify the economic inadequacy of the state. – Doro mata doro mata….bicha

  • Amanuel Hidrat

    Selam Awate Team,
    Thank you for this wonderful reportage. This report support to my argument I made in my recent article “Democratic coup: Unrealistic Utopian project.” In that article (a) I argued that the Eritrean Defense Force (EDA) has shown an institutional entrenchment as well as organizational entrenchment in the PFDJ party (b) EDA has shown also “self-interest” in the political and economic life of the nation. The appointment of General Sebhat Efriem to the ministry of mines could give the whole picture as to the nature of army we have, and how they are entrenched in to the national economy of our nation, like of that of EGYPT, even though there some specifics that somehow could differ each other.

    This piece clearly shows that the idea of Democratic coup in Eritrea is unrealistic but a wishful thing. And to call EDA to make a coup and to promote democratic transition is to ask the senior army officials to act against their self interest. The system of PFDJ is entrenched its power by in the army and its security apparatus. So when we wish it should be realistic.

    Amanuel Hidrat

    • haileTG

      Merhaba Aman (I know this topic has been much debated on:-)

      We know palace coup isn’t likely (the IA dictatorship is well past that point now, because it is only the close knit and tightly associated bunch left at this stage).

      – There are those of us who think popular uprising can be ignited. But I know you rule it out (you explained before that there is no sufficient strength inside the country to do this)

      – EDF (without popular support) mutiny followed by displacement of the regime is most likely a route to another dictatorship.

      Now, my question is what “vehicle” do you envision to eventually overthrow the dictator?

      It is all fine and well to have the most well organized and united opposition groups. But who exactly would do the actual lifting? (I mean specifically speaking, who do you pin your hopes on?)

      One other option that hasn’t been discussed so far but has been the most common (if not the only) way of physically removing a regime in the post cold war era (where liberation movements are relics from the past) and short of external invasion, is the use of militias. However, when it comes to the use of militias, three things have been shown repeatedly in an almost patterned fashion:

      1) They are highly effective in quickly knocking down any central government.

      2) They often lack the political sophistication to bring the conflict to end.

      3) If change comes through militias engaged in rebellion, a long term and intractable conflict follows (Somalia, Libya, Iraq…) In all cases, the militias are fractured and have deep alliances based in region, tribe or religion.

      So, my question is dear Aman, who do you eye for the role of “vehicle” to actually drive out the regime?

      Regards

      • Truth

        Truth,
        Not sure he will answer it clearly.Aman Hidrat’s approach has been only to challenge and refute new ideas without providing any solutions-thus far.
        But hope he will come up with some solutions now based on your challenge.
        I know one thing about one of his possible solutions:
        The Ethiopian role..

        • Amanuel Hidrat

          Hello Truth,

          You might not like it but I will not be accused of not proposing. Here is the link and I am sure you have already read it. I haven’t seen any solution so far. May you will say “the democratic coup” written by saay. It hasn’t any reality on the ground.
          http://awate.com/contours-of-change-and-equilibrium-of-its-parts-p-v/

          Amanuel Hidrat

      • Amanuel Hidrat

        Hailat,
        I support the EFND’s approach. As a member of EFND that is our envision, a collective envision already in the public domain. Isn’t it understood if I am member of EFND.
        Amanuel Hidrat

        • haileTG

          Hey Aman, ( I only read the EFND memorandum posted at assenna.com)

          But hasn’t ENFD acknowledged* that they have no “vehicle” of their own, and by using [ Call Upon…] list, that their approach is more of hitchhiking with whoever ends up bringing down the regime?

          Regards

          * “[..] it is hard to predict how soon and by what means the political change in Eritrea will come, it is certain that it will come.” Proposed Platform, Internal Working Memorandum, October 2014

          • Amanuel Hidrat

            Hailat,

            Well, Hailat most of the time politics is unpredictable. What one or a group could give is the most possible safe scenario and with minimum cost. There are always unknown factors that could alter the possible predictions. So in politics you couldn’t say it with certainty. However, EFND’s working memorandum is not that much different than what you advocating. Second Any working memorandum is amendable with change of circumstances. Not only that it could also be reshaped with the in put of the public as far as it help us to work together.

            Amanuel Hidrat

  • T..T.

    The notes hereunder discuss the operational definition of ‘slavery’; however, based on Isayas’s words that “we liberated you, we own you” and the escapee Sawa youth “government spent money on them” should be repaid. Accordingly, holding them for life as a repayment puts the Sawa youth on bonded labor and that is worse than the given operational definition of ‘slavery’.

    Walk Free Foundation operationally defined “slavery” in 2013, selected points are quoted hereunder for your quick reading:

    Quote

    It was noted that when we think about defining modern slavery, it is
    relevant to think about:

    1. the way in which a person entered into a situation of slavery,

    2. the conditions or nature of their enslavement, and

    3. their freedom to leave the situation.

    In addition to the various stages of slavery, participants recognised the importance of including possession and/or control, significant deprivation of liberty, exploitation for profit/benefit and the inability to get out of it without punishment, threat of punishment or penalty.

    It was recognised that the core concept is unfree work or service in which a person cannot leave without risking violence, force, denunciation to the authorities or withholding of pay. Further, the
    concept of involuntary exploitation was raised. It was agreed that clarification is required about entrance into slavery versus being enslaved and if, or where consent or voluntariness becomes a factor. A small team has been established to reconcile these issues and formulate an operational definition to be used for the 2014 Index.

    Proposed operational definition for workshop: ‘Modern slavery = a situation in which a person, through force, fraud or violence, is forced to work for no pay beyond subsistence, and is unable to leave that situation freely’. It was noted that Walk Free’s policy intent is to cover all practices described in international law as slavery, slavery like practices, trafficking and forced labour. There was
    general agreement that there were three different ways that concepts like ‘slavery’ and ‘modern slavery’ can be used by an organisation such as Walk Free:

    1) For rhetorical purposes, in public facing campaigns and communications;

    2) For legal purposes, for example, in discussions with governments who
    understand concepts based on national or international laws;

    3) For research purposes, to define the parameters of what we are
    measuring.

    The second definition was rejected as being too limited, with the reference to ‘no pay beyond subsistence’. The first definition, used in the GSI 2013, was discussed with commentary on whether what it covered should be called ‘slavery’ or ‘modern slavery’. The suggestion was also made to use the concept ‘human trafficking’ as this is what most governments use.

    Participants agreed that the definition needed to facilitate not only research clarity but also government engagement – so it was important to keep the international conceptual consensus in mind.
    Participants discussed the value of using the terms ‘slavery’, ‘human trafficking’ or ‘modern slavery’. It was noted that when using the word ‘slavery’, the term ‘modern’ moves the concept away from historical connotations of slavery, which, in the context of countries such as Ethiopia, is important. It was specifically noted that ‘Ethiopia was one of those places where people were being sold, so instead of using the term slavery, it is important to use the term modern slavery’. Another view was expressed that there is no difference between ‘modern’ and ‘old’ slavery so the distinction does not make sense. Finally, it was noted that 4 in international law, ‘slavery’ is recognised as a pre-emptory norm of international law, which all countries are bound by irrespective of whether or not they have signed onto a relative treaty. Not all forms of human trafficking meet that standard.
    Unquote

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