Due Diligence on African Mineral Suppliers: A Checklist for South African Compliance Officers.
South African compliance officers procuring minerals from the rest of Africa face complex regulatory challenges spanning financial crime, ethical sourcing, and international sanctions. Robust due diligence (DD) is not merely a formality; it is a legal and ethical shield that protects the company and its reputation. The following checklist outlines the essential areas South African compliance teams must investigate when onboarding a new African mineral supplier to ensure adherence to South African, regional, and international compliance standards.
Legal and Corporate Vetting
The foundation of any successful supplier relationship is a verified and legally sound corporate structure.
Official Registration and Licensing: Verify the supplier’s legal registration status in the host country. Obtain copies of the Certificate of Incorporation, local tax registration, and, most critically, the Mineral Trading or Export License issued by the relevant government ministry. Ensure the license is current and covers the specific mineral being supplied.
Ultimate Beneficial Ownership (UBO): Identify and verify the natural persons who ultimately own or control the supplier entity. This step is critical for Anti-Money Laundering (AML) compliance. Compliance officers must look past nominee directors or layered corporate structures to uncover the real owners.
Sanctions and Watchlist Screening: Conduct thorough screening of the company, its directors, and all UBOs against global and regional sanctions lists, including those maintained by the UN, OFAC (US), EU, and the South African Financial Intelligence Centre (FIC). Any hit must be fully investigated and adjudicated.
Financial and Anti-Corruption Review
The financial flows associated with mineral trade are high risk for corruption and money laundering.
Anti-Corruption Policies: Review the supplier’s internal policies related to anti-bribery and corruption (ABC). Determine if they have internal controls, a code of conduct, and provide training to employees on relevant laws, such as the UK Bribery Act or the US Foreign Corrupt Practices Act (FCPA), especially if your company has global ties.
Payment Due Diligence: Scrutinize the requested payment structure. Payments should be made directly to the corporate bank account of the supplier entity in the country of origin. Any request to pay third parties, offshore entities, or cash is a significant red flag requiring enhanced due diligence.
Pricing Verification: Cross-check the contracted price against global commodity benchmarks. A price significantly below market value may indicate smuggling or fraudulent sourcing, while a price significantly above market may suggest bribery or price manipulation.
Sourcing and Ethical Compliance
The origin and handling of the minerals are paramount, especially for conflict-affected and high-risk areas.
Origin and Chain of Custody: Demand detailed documentation proving the legal and ethical origin of the mineral. For high-risk minerals (e.g., tin, tantalum, tungsten, and gold), require compliance with the OECD Due Diligence Guidance for Responsible Supply Chains. This should include site visits or third party audits verifying the mine site.
Social and Environmental License: Assess the supplier’s commitment to labor and environmental standards. Verify that the mine site has obtained all necessary environmental permits and adheres to core International Labour Organization (ILO) standards, particularly regarding the prohibition of child labor and forced labor.
Transportation and Logistics Vetting: Verify the integrity of the transportation route. The supplier must demonstrate that the mineral is tracked from the mine gate to the export point, with appropriate security and documentation to prevent substitution or theft, particularly through border crossings.
Glen Supply Chain provides the on-the-ground support necessary to complete this demanding checklist, transforming paper-based compliance into verifiable, ethical sourcing practices across the African continent.