Publisher: 
EITI
Published Date: 
February, 2019

The Board agreed that Ethiopia has made meaningful progress in implementing the EITI Standard.

Date: 27.02.2019

Reference: 2019-21/BM-42

Description: see below for the decision in full. PDF attached at bottom of the page.

Where: 42nd Board meeting in Kyiv, Ukraine

Based onRequirement 8.3 EITI Validation deadlines and consequences

Reference documents

Keywords: Validation; Ethiopia

Go to Board decisions overview

Decision in full

Following the conclusion of Ethiopia’s Validation, the EITI Board decided that Ethiopia has made meaningful progress overall in implementing the EITI Standard. In accordance with requirement 8.3c, Ethiopia will be requested to undertake corrective actions before the second Validation on 27 August 2020.

The Board congratulated the Government of Ethiopia and Multi-Stakeholder Group (MSG) on the progress made in improving transparency and accountability in the extractive industries. Ethiopia’s EITI implementation has targeted issues of national importance, such as artisanal and small-scale mining, social expenditures and mining licensing by different tiers of government. However, the focus on reconciliation, licensing and social expenditures has not been matched by an equivalent attention to detail in areas such as state participation or subnational transfers, despite public interest in such issues.

The strong country ownership on the part of the government has not been matched by an equivalent engagement from industry or civil society. The Board noted that, while trust has gradually been built amongst stakeholders directly involved in EITI implementation, divisions have emerged within civil society between those directly involved in EITI implementation and those outside.

Constraints on civil society operation in Ethiopia have weakened civil society engagement in EITI implementation. The Board took note of the Validator’s findings regarding requirement 1.3 on civil society engagement and adherence to the civil society protocol. The Board agreed that in the period between March 2014 - April 2018 there were significant legal and administrative constraints that impacted the ability of civil society organisations to operate and express themselves freely. The Board agreed to consider developments subsequent to the commencement of Validation, noting the efforts by the country’s new leadership to improve the space for civil society. The Board welcomed the government efforts to repeal or amend laws that restricted civil society’s freedom of expression, operation and association.

The Board commended ongoing reforms to shift the  mandate of government agencies from control and monitoring to supporting and enabling civil society to contribute in public debate. The Board called on the government and stakeholders to continue working together to improve civil society engagement in extractive sector governance. The Board has determined that Ethiopia will have 18 months, i.e. until 27 August 2020 before a second Validation to carry out corrective actions regarding the requirements relating to civil society engagement (1.3), MSG governance (1.4), license allocations (2.2), license register (2.3), policy on contract transparency (2.4), state-participation (2.6), export data (3.3), comprehensiveness (4.1), SOE transactions (4.5), direct subnational payments (4.6), data quality (4.9), subnational transfers (5.2), social expenditures (6.1), SOE quasi-fiscal expenditures (6.2), and documentation of outcomes and impact (#7.4), with the environment for and engagement of civil society and state participation being the main areas of concern. Failure to achieved 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, Ethiopia’s MSG 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 April 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. In addition, the Board considered an update from the International Secretariat on the engagement of civil society following the commencement of Validation. The final decision was taken by the EITI Board.

Corrective actions

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

  1. In accordance with Requirement 1.3.b, the government should ensure an enabling environment for civil society to freely express opinions with regards to natural resource governance. In accordance with Requirements 1.3.c and d, the government must ensure that there are no obstacles to civil society participation in the EITI process and must refrain from actions which result in narrowing or restricting public debate in relation to implementation of the EITI. In accordance with Requirement 1.3.a, civil society must demonstrate that it is fully, actively and effectively engaged in the EITI process. In accordance with requirement 8.3.c.i, the civil society constituency should develop and disclose an action plan for addressing the deficiencies in civil society engagement documented in the initial assessment and Validator’s report within three months of the Board’s decision, i.e. by <Board Decision + 3 months>.
  2. In accordance with Requirement 1.4, the MSG should ensure that each constituency has clear procedures for the selection of MSG members and channels of communication between the MSG representatives and their constituencies. The MSG could task each stakeholder group to clarify their internal nominations and representation procedures to improve the transparency and participation in the process. The MSG should also agree a process to ensure greater accountability of MSG representatives to the constituencies. This should include establishing mechanisms of consultation and reporting between MSG representatives and their wider constituencies.
  3. In accordance with Requirement 2.2, Ethiopia should clearly define the number of mining, oil and gas licenses awarded and transferred in the year(s) under review, describe the statutory allocation and award procedures, including specific technical and financial criteria, and highlight any non-trivial deviations in practice. In addition, Ethiopia may wish to comment on the efficiency of the current license allocation and transfer system as a means of clarifying procedures and curbing potential non-trivial deviations, particularly related to Regional Governments’ licensing activities.
  4. In accordance with Requirement 2.3, Ethiopia is required to maintain a publicly available register or cadastre system(s), including comprehensive information on all active oil, gas and mining licenses. In the interim, the MSG should ensure that information set out under Requirement 2.3.b be publicly-accessible for all mining, oil and gas licenses held by companies included in the scope of EITI reporting.
  5. In accordance with Requirement 2.4, Ethiopia should ensure that the government’s policy on contract disclosure is publicly clarified for both mining contracts and oil and gas PSAs. Where applicable, Ethiopia should provide an overview of the contracts and licenses that are publicly available, and include a reference or link to the location where these are published or guidance on how to access them.
  6. In accordance with Requirement 2.6, Ethiopia should disclose a comprehensive list of state participations in the extractive industries, including the terms associated with state equity, and publicly clarify the prevailing rules and practices regarding the financial relationship between the government and state-owned enterprises (SOEs), e.g., the rules and practices governing transfers of funds between the SOE(s) and the state, retained earnings, reinvestment and third-party financing. This should include a comprehensive overview of loans and guarantees extended by the state or SOEs to any extractives company.
  7. In accordance with Requirement 3.3, Ethiopia should ensure that the export volumes and values of each mineral commodity exported in the year(s) under review are publicly available.
  8. In accordance with Requirement 4.1, Ethiopia should ensure that future EITI reporting clearly explain all unreconciled discrepancy and provide a clear assessment of whether discrepancies materially affect the comprehensiveness of the reconciliation. In addition, Ethiopia should ensure that full unilateral government disclosure of material revenues, including from non-material companies, is provided disaggregated per material revenue stream.
  9. In accordance with Requirement 4.5, Ethiopia should ensure that all material company payments to SOEs and all transactions between SOEs and government entities be comprehensively disclosed and reconciled.
  10. In accordance with Requirement 4.6, Ethiopia should establish whether direct subnational payments, within the scope of the agreed benefit streams, are material ahead of future EITI reporting. Where material, the MSG is required to ensure that reconciled information on company payments to subnational government entities and the receipt of these payments be publicly accessible.
  11. In accordance with Requirement 4.9.a, the EITI requires an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. In accordance with requirement 4.9.b.iii and the standard Terms of Reference for the Independent Administrator agreed by the EITI Board, the MSG and Independent Administrator should:
    1. examine the audit and assurance procedures in companies and government entities participating in the EITI reporting process, and based on this examination, agree what information participating companies and government entities are required to provide to the Independent Administrator in order to assure the credibility of the data in accordance with Requirement 4.9. The Independent Administrator should exercise judgement and apply appropriate international professional standards in developing a procedure that provide a sufficient basis for a comprehensive and reliable EITI Report. The Independent Administrator should employ his/her professional judgement to determine the extent to which reliance can be placed on the existing controls and audit frameworks of the companies and governments. The Independent Administrator’s inception report should document the options considered and the rationale for the assurances to be provided.
    2. ensure that the Independent Administrator provides an assessment of comprehensiveness and reliability of the (financial) data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided.
    3. ensure that the Independent Administrator provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested information. Any gaps or weaknesses in reporting to the Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness and reliability of the report.
  12. In accordance with Requirement 5.2, Ethiopia is required to ensure that material subnational transfers of extractives revenues are publicly disclosed, when such transfers are mandated by a national constitution, statute or other revenue sharing mechanism. Ethiopia should also disclose any discrepancies between the transfer amount calculated in accordance with the relevant revenue sharing formula and the actual amount transferred between the central government and each relevant subnational entity. Ethiopia may wish to consider whether publishing the detailed calculations of subnational royalty transfers as a means of achieving this objective. Ethiopia is encouraged to reconcile subnational extractives transfers.
  13. In accordance with Requirement 6.1, Ethiopia should ensure that information on mandatory social expenditures, clearly disaggregated between cash and in-kind and by non-government beneficiary, is publicly accessible.
  14. In accordance with Requirement 6.2, Ethiopia should undertake a comprehensive review of all expenditures undertaken by extractives SOEs that could be considered quasi-fiscal. Ethiopia should develop a reporting process for quasi-fiscal expenditures with a view to achieving a level of transparency commensurate with other payments and revenue streams.
  15. In accordance with Requirement 7.4, Ethiopia should annually assesses and document progress made by Ethiopia against the EITI requirements or recommendations from the EITI 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