The Board agreed that Guinea has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Guinea

Decision reference: 2019-17 / BM-42
Decision basis: 2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

27 February 2019

Board decision

Following the conclusion of Guinea’s Validation, the EITI Board decided that Guinea has made meaningful progress overall in implementing the EITI Standard.

The Board congratulated the Government of Guinea and the Multi-Stakeholder Group (MSG )on the progress made inimproving transparency and accountability in the extractive industries. In the context of rapidly growing mining sector, the Board believes that Guinea EITI has the potential to play a keyrole insupporting sector reforms and informing the public debate on natural resource governance.

The Board congratulated stakeholders for strengthenin the comprehensiveness and quality of EITI reporting, and enhancing transparency in licence allocation procedures ,the licence register, and in the disclosures of state-owned enterprises. The Board also recognised Guinea’s efforts to go beyond the requirements of the EITI Standard in the disclosure of mining contracts through its contract transparency portal (www.contratsminiersguinee.org).

The Board encouraged Guinea EITI to ensure that improvements in MSG oversight over the EITI process are commensurate with improvements in EITI reporting. The Board encouraged Guinea EITI to deepen efforts in the disclosure of direct subnational payments, licence allocation, and quasi-fiscal expenditures by state-owned enterprises. It also encouraged stakeholders to strengthen the MSG’s follow-up on EITI recommendations and evaluation ofoutcomes and impact of EITI implementation.

The Board encouraged Guinea EITI to shift the focus from overseeing the preparation of EITI Reports to supporting changesto enable systematic and regular disclosure of EITI data through government systems; and to support the implementation of the new Local Economic Development Fund (FODEL).

The Board determined that Guinea will have 18 months, i.e. until 27 August 2020 before a second Validation to carry outcorrective actions regarding the requirements relating to industry engagement(1.2), MSG governance (1.4), license allocation (2.2), infrastructure agreements (4.3), direct subnational payments(4.6), quasi-fiscal expenditures (6.2), follow up on recommendations (7.3), and documenting outcomes and impact of implementation (7.4). Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, Guinea’sMSG may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 July 2018. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed by an Independent Validator, who submitted a draft Validation report to the MSG for comment. The MSG’s comments on the report were taken into consideration by the independent Validator in finalising the Validation report and the independent Validator responded to the MSG’s comments. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Guinea. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 27 June 2020:

1) In accordance with Requirement 1.2, the industry constituency should demonstrate that they are fully, actively and effectively engaged in the EITI process. In accordance with requirement 8.3.c.i, the industry constituency should develop and disclose an action plan for addressing the deficiencies in industry engagement documented in the Validator’s report within three months of the Board’s decision, i.e. by 27 May 2019 .

2) In accordance with requirement 1.4b, the MSG should update the 2012 Decree and Ministerial Order on MSG membership, and the June 2018 ToR to ensure that they align with the 2016 EITI Standard. The industry and civil society constituencies should develop, publish and implement procedures for an inclusive, fair, and transparent nomination of their representatives on the MSG. The MSG may also wish to consider options to broaden industry participation on the MSG. The MSG may wish to clarify the MSG governance framework, which is currently described over four different documents. It may wish in particular to combine the Ministerial Order on the composition of the MSG, the Internal Rules and the ToR into a single document.

3) In accordance with Requirement 2.2, Guinea should ensure that the detailed technical and financial criteria for both license awards and transfers be publicly accessible. In light of significant public concern over the legacy of non-trivial deviations from statutory licensing procedures, Guinea should ensure that its approach to publicly disclosing non-trivial deviations be commensurate with the number of licenses awarded and transferred in the year under review.

4) In accordance with Requirement 4.3, Guinea should assess the existence of infrastructure provisions during the scoping phase for its next EITI reporting cycle to ensure disclosure of any agreements, or sets of agreements involving the provision of goods and services (including loans, grants and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. Guinea should gain a full understanding of the terms of the relevant agreements and contracts, the parties involved, the resources that have been pledged by the state, the value of the balancing benefit stream (e.g. infrastructure works), and the materiality of these agreements relative to conventional contracts.

5) In accordance with Requirement 4.6, Guinea should ensure that information on extractives company direct payments to subnational governments, where material, be comprehensively disclosed and reconciled with each local government’s receipts of these payments.

6) In accordance with Requirement 6.2, Guinea should undertake a comprehensive review of all expenditures undertaken by extractives SOEs that could be considered quasi-fiscal and develop a reporting process with a view to achieving a level of transparency on all types of quasi-fiscal activities linked to extractives revenues commensurate with other payments and revenue streams. To strengthen implementation, Guinea is strongly encouraged to consider the extent to which routine publication of SOEs’ annual audited financial statements would help promote greater trust in the quality and comprehensiveness of public disclosures of quasi-fiscal expenditures.

7) In accordance with Requirement 7.3, the MSG should introduce a systematic and structured mechanism to track and follow up on recommendations, with a clear timeframe and clear responsibilities for following up. The MSG should also take a more proactive role in formulating its own recommendations. The MSG may also wish to include Validation, as a means of ensuring closer attention to implementation. The MSG may also wish to consider utilising the Supervisory Committee to follow-up on recommendations from past EITI Reports and Validation as a means of ensuring the sustainability and continued effectiveness of follow-up channels.

8) In accordance with Requirement 7.4, the MSG should consider using the annual progress report to evaluate the impact of the EITI, beyond describing outputs and outcomes of workplan activities. The MSG should also undertake an impact assessment with a view to identify opportunities for increasing the impact of implementation in Guinea. Greater effort could also be made to canvass the broader constituencies for input in assessing the outcomes and impact of EITI implementation through the annual progress report.

The government and the MSG are encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

The Government of Guinea committed to implement the EITI in April 2005 and was accepted as an EITI Candidate in September 2007. Guinea was declared compliant with the EITI Rules in July 2014.

Guinea’s Validation commenced on 1 July 2018. In accordance with the Validation procedures, an initial assessment [English | French] was prepared by the International Secretariat. The independent Validator reviewed the findings and wrote a draft Validation report [English | French]. Comments from the MSG [English | French] were received on 4 January 2019. The independent Validator reviewed the comments and responded to the MSG, before finalising the Validation report [English | French].

The Validation Committee reviewed the case on 6 February 2019. Based on the findings above, the Validation Committee agreed to recommend the assessment card and corrective actions outlined below. The Committee also agreed to recommend an overall assessment of “meaningful progress” in implementing the 2016 EITI Standard. Requirement 8.3.c. of the EITI Standard states that:

ii. Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard.

…

iv. Meaningful progress. The country will be considered an EITI candidate and requested to undertake corrective actions until the second Validation.

The Validation Committee agreed to recommend a period of 18 months to undertake corrective actions. This recommendation takes into account that the challenges identified are relatively significant and seeks to align the Validation deadline with the timetable for Guinea’s 2017 and 2018 EITI Reports.

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
There are regular, public statements of support from the government, a senior individual has been appointed to lead on the implementation of the EITI and senior government officials are represented on the MSG. Government representatives appear to play an active role within the MSG and the Supervisory Council.
1.2Company engagement
There appears to be a lack of engagement with industry beyond the MSG, and a general lack of engagement beyond the issue of EITI reporting. There also appears to be a limited implementation of laws (particularly Article 122 of the 2011 Mining code which requires all mining license-holders to participate in EITI reporting and respect the EITI principles).
1.3Civil society engagement
There are no suggestions of any barriers to civil society’s ability to engage in EITI-related public debate, to operate freely, to communicate and cooperate with each other, to fully, actively and effectively engage on EITI-related matters or in relation to the EITI process. CSOs can speak freely and ensures that the EITI contributes to public debate.
1.4MSG governance
The statutory rules for the MSG’s structure and membership are not clear and the lack of codification of nominations procedures and coordination mechanism for each constituency are a concern (see Requirements 1.2 and 1.3). The nominations procedures for industry and civil society are not publicly codified.
1.5Work plan
The 2018 Guinea EITI workplan is publicly accessible, produced in a timely manner and updated annually, with objectives aligned with national priorities. The workplan also includes specific activities to follow up on recommendations from EITI reporting. The three constituencies have consulted their broader stakeholder groups in preparing annual workplans since 2013.
Licenses and contracts
2.2License allocations
While the approach to assessing non-trivial deviations from statutory procedures for license awards is exemplary, significant concerns from industry and civil society stakeholders over the small sample size of license awards reviewed leads the International Secretariat to conclude that the broader objective of transparency in license allocations and transfers is not yet achieved, despite significant aspects of the requirement being met.
2.3License register
The 2016 EITI Report provides, for all mining licenses active at the end of 2016, the names of license-holders, dates of award and expiry as well as the commodity(ies) covered. Guinea’s online mining cadastre portal provides access to all information per Requirement 2.3 for mining licenses.
2.4Policy on contract disclosure
The 2016 EITI Report documents the government’s pro-disclosure policy and actual contract disclosure practice. While a more systematic review of contract disclosure practice would help clarify the existence of any gaps in the government’s disclosures of contracts and relevant amendments to date, the Secretariat’s view is that Guinea has gone beyond the minimum requirements.
2.1Legal framework
The 2016 EITI Report provides an overview of relevant laws and regulations, government entities and fiscal terms, including the degree of fiscal devolution, in the mining, oil and gas sectors as well as brief commentary on current reforms.
2.5Beneficial ownership	Not assessed
The Government of Guinea has enshrined its policy on beneficial ownership disclosure for mining companies in national legislation and the 2016 EITI Report provides the names of legal owners and their level of ownership for around half of the material companies.
2.6State participation
The 2016 EITI Report covers state participation in the upstream mining, oil and gas sectors, lists upstream state participation in 2016 and provides an overview of the financial relations, statutory and in practice, between SOEs and the government in the mining, oil and sectors. The report provides an overview of terms associated with state interests in the mining, oil and gas sectors.
Monitoring production
3.1Exploration data
The 2016 EITI Report provides an overview of the extractive industries, including significant exploration activities and informal mining.
3.2Production data
The 2016 EITI Report provides production volumes and values for all commodities (minerals) produced in the year under review.
3.3Export data
The 2016 EITI Report provides export volumes and values for the three (mineral) commodities exported from Guinea in the year under review.
Revenue collection
4.3Barter agreements
While there was consensus among stakeholders represented on the MSG that these agreements did not represent the provision of infrastructure in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities, the ambiguity in the 2016 EITI Report and complexity of the infrastructure agreements means that the broader objective of transparency in infrastructure provisions is not yet fully achieved.
4.6Direct subnational payments
While the MSG made attempts at reconciling land tax paid directly to local governments by material companies, it does not provide a detailed explanation for the selection of the Treasury (DNTCP) as the reporting entity on behalf of local governments. There are significant gaps in the comprehensiveness of the Treasury’s reporting of direct sub-national revenues, with discrepancies equivalent to more than one-third of direct sub-national payments reported by material companies. Finally, the results of reconciliation are presented in aggregate, while the dis-aggregated direct sub-national payments are presented only based on companies’ reporting, not the results of reconciliation.
4.7Disaggregation
Reconciled financial data in the 2016 EITI Report is presented dis-aggregated by company, revenue stream and collecting government entity. Reconciled financial data is not yet presented dis-aggregated by project.
4.9Data quality
The ToR for the IA was in line with the Board-approved template and the recruitment of the IA was approved by the MSG. There were no significant deviations from the IA’s ToR in practice, and the MSG approved reporting templates for the 2016 EITI Report as part of its approval of the scoping study.
4.1Comprehensiveness
The MSG has agreed materiality thresholds for selecting companies and revenue streams. The 2016 EITI Report lists and describes all material companies and revenue streams, names the three non-reporting companies and assesses the materiality of their payments, which was considered insignificant. The report also provides full government reporting of all material revenues from non-material companies.
4.2In-kind revenues	Not applicable
Despite not collecting in-kind revenues as a fiscal agent, the 2016 EITI Report describes SOGUIPAMI’s role as marketing agent for government and company shares of production. This requirement is not applicable in Guinea.
4.4Transportation revenues
While the MSG’s assessment of the materiality of transport revenues is not explicitly presented in the 2016 EITI Report, it is evident that the MSG has included transport revenues in the scope of reporting and the disclosure of infrastructure use payments to ANAIM is presented in the 2016 EITI Report, albeit not reconciled. Additional information on transportation arrangements, including the unit price of transit rights, is also provided.
4.5SOE transactions
The 2016 EITI Report discloses and reconciles extractives company payments to SOEs as well as transfers between SOEs and government. The exclusion of oil and gas company payments to ONAP from the scope of reconciliation is justified on materiality grounds (see Requirement 4.1).
4.8Data timeliness
The 2016 EITI Report was published within two years of the end of the fiscal period under review, in June 2018, and the MSG agreed the reporting period
Revenue allocation
5.1Distribution of revenues
The 2016 EITI Report explains how extractives revenues are recorded in the national budget and provides a. general description of the allocation of the small share of extractives revenues retained by individual government entities.
5.2Subnational transfers	Not applicable
The 2016 EITI Report describes statutory subnational transfers linked to mining revenues and provides the general formula for calculating transfers, while confirming that sub-national transfers were not effective in 2016 given the lack of implementing Ministerial Order. Nonetheless, the report provides calculations of the value of sub-national transfers that should have been executed in line with the revenue-sharing formula in 2016. Not applicable in Guinea
5.3Revenue management and expenditures	Not assessed
It is encouraging that the MSG has made some attempt at including information on the budget-making and government audit processes and revenue earmarks in the 2016 EITI Report.
Socio-economic contribution
6.1Mandatory social expenditures
The 2016 EITI Report confirms the existence of mandatory social expenditures and discloses the nature and value of mandatory social expenditures, including identifying the beneficiaries. While there is a case for arguing that Guinea has gone beyond the minimum requirements by providing additional information on discretionary social expenditures as encouraged by the EITI Standard, the gaps in two companies’ reporting of their mandatory social expenditures mean that the objective of the requirement has only been met, not exceeded.
6.2Quasi-fiscal expenditures
The 2016 EITI Report describes quasi-fiscal expenditures undertaken by one of the three extractives SOEs in Guinea and confirms the lack of such expenditures by the other two SOEs. The three types of quasi-fiscal expenditures described are presented dis-aggregated to a level commensurate with other payments and revenue streams. However, the report includes a description of another type of forgone revenue by one SOE, in repayment of a sovereign debt, that fit the description of quasi-fiscal expenditures in line with the definition in the IMF’s Fiscal Transparency Manual, although there is insufficient information in the public domain to assess this categorization. In light of significant public mistrust of certain extractives SOEs, the International Secretariat’s view is that while significant aspects of the requirement have been met, the broader objective of comprehensive transparency of quasi-fiscal expenditures linked to extractives revenues has yet to be fully achieved.
6.3Economic contribution
The 2016 EITI Report provides, in absolute and relative terms, the extractives contribution to GDP, government revenues, exports, and employment. An overview of the location of extractives activities is provided, alongside a description of informal activities in the extractive industries.
Outcomes and impact
7.2Data accessibility	Not assessed
EITI Guinea published a summary of the 2016 EITI Report. The government has adopted and published a clear policy on public access, release and re-use of EITI data. However there have been no concrete initiative to promote the use of EITI data among the Guinean open data community.
7.4Outcomes and impact of implementation
The MSG has reviewed progress and outcomes of implementation on a regular basis, including by publishing annual progress reports over the past five years. Guinea’s 2017 EITI annual progress report provided a summary of activities, an assessment of meeting and maintaining compliance with each requirement, an overview of responses to Validation and reconciliation recommendations, an assessment of progress in meeting workplan objectives, an evaluation of the implementation of the beneficial ownership roadmap and a narrative account of efforts to strengthen EITI implementation. It is the Secretariat’s view however that there has been no concerted effort to document and evaluate the impact of EITI since 2014.
7.1Public debate
Guinea’s EITI Reports are comprehensible and promoted through various channels, including print, online media, radio and TV. However, there is little evidence of specific EITI data points being used by journalists or academia. The EITI appears to have contributed nonetheless to the debate on subnational payments and transfers, local development, as well as discussions on contract disclosure, and licence allocation
7.3Follow up on recommendations
The MSG and the government have taken some steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and weaknesses of the EITI process. However, there is no evidence showing how the MSG discusses, prioritizes, and follows up on EITI recommendations. In the Secretariat’s view, however the MSG does not have a structured and systematic procedure to follow up on EITI recommendations.