Mainstreaming transparency in Sierra Leone

Sierra Leone’s new electronic public administration system has improved transparency and raised revenue.

‘Transparent administration of mining’ is probably not what comes to mind when most people think of Sierra Leone. ‘Diamonds’ or ‘conflict’ are more likely contenders. However, in the past five years Sierra Leone’s government has reformed the administration of its mining sector by implementing an electronic mining cadastre system. Government revenue from the sector has increased, regulation of the sector has become more consistent and efficient, and stakeholders now have access to timely and accurate data. 

Government entities no longer operate in silos. As a result, we have seen government management of the mining sector become increasingly effective and efficient.
Thomas Scurfield, Co-Chair of the Extractive Industries Revenue Task Force of Sierra Leone (EIRTF)

2004: More than 50 % of diamond mining was unlicensed

Sierra Leoneans know the dangers of natural resources more than most. Minerals were a key source of revenue for the warring parties in the civil war that ended in 2002 and left over 50,000 dead.

It was therefore paramount for the peacetime government to bring order to the management of the country’s natural resources. That proved no easy task. Sierra Leone was rich in mineral resources, yet government received insignificant revenue from them. Gold, bauxite, rutile and iron ore were known to exist in large quantities, yet diamonds were by far the top product. From 2000 to 2004, diamond revenues resumed quickly and increased tenfold.

Nevertheless, the UN Secretary-General said in a report to the Security Council in 2005 that “more than 50 per cent of diamond mining still remains unlicensed and reportedly considerable illegal smuggling of diamonds continues”[i] and “expressed concern about the challenges that remain with regard to monitoring and enforcement capacity as well as regulation of the diamond sector”.

Mining in Sierra Leone was previously considered to be notoriously secretive. However, with recent improvements to regulatory compliance, the public can now directly access information relating to mining agreements and the production, revenues and locations of all mining operators.
Peter Bangura, Deputy Director, National Minerals Agency

Reforming the public administration of mining licenses

In November 2004, the Ministry of Mining and Mineral Resources (MMMR) carried out a ‘proof of concept’ pilot for an electronic mining cadastre system. Its regional office in Kono had a functional licensing system for artisanal mining operations by late 2005. This system helped prevent many disputes over industrial and small-scale mining plot boundaries, and resolved some on-going disagreements in this region. The Kono regional office continued for years to use their administrative system, without any support. The Ministry however, continued as before.

In December 2009 a new Mines and Minerals Act was passed by Parliament. During the development of this law, a more structured licensing process was designed. Further, the Revenue Development Foundation (RDF) and the MMMR formulated a new project to implement a nation-wide mineral rights administration system in May 2009.

This project has so far had three phases, with a fourth phase planned to commence October 2015.

A key difference between the approach that was piloted in Kono and the new approach in 2009 was an emphasis on long-term engagement and deep understanding of the challenges for government staff and public administration procedures. Crucially, the projects focused on ‘agile’ step-by-step improvements[ii], all while the software came free of any license costs.

2009: Introducing the system

Phase 1 of the project was to install RDF’s electronic cadastre software for industrial mining administration, which is called Mining Cadastre & Administration System (MCAS). It was installed in Freetown and in 2010 rolled out to regional offices that administers artisanal mining. The regional manager for Kono had by then been promoted to become Director, much because of the help he had with the old system in place. The team recorded all existing mineral rights applications in the system, and introduced a process for approving and issuing valid licenses. The approval process was designed to enforce the legal act and regulations.

2010-12: Scaling up, training and launching public portal

Phase 2 commenced late 2010, with the aim to solidify and scale up the system and ensure that it was used correctly. MCAS was expanded to include exporter’s and dealer’s licenses. Extensive training ensured that staff in MMMR was capable of managing the system. All regional offices now started using the system, and MMMR developed significant in-house capacity to train and manage their own staff to use the system and adhere to regulatory processes[iii].

The Mining Cadastre Administration System (MCAS) has made Mineral rights processing and management including revenue recording and reporting transparent and predictable. With the government of Sierra Leone Online Repository, transparency is taken to a new level by making information in MCAS available to the world in almost real time.
Eugene Norman, Manager Mining Cadastre Office, National Minerals Agency

In order to increase transparency of mineral rights, the data was also made available in a secure, web-based application that was available to the public. The Government of Sierra Leone (GoSL) Online Repository[iv] launched in January 2012, and was linked to from the SLETI as well as the MMMR website. The Online Repository is a public online portal that provides an overview as well as detailed and up-to-date information from the mining sector in both industrial and artisanal mining areas.

Finally, to improve inter-government collaboration, stakeholders established a Mining Working Group as well as a Mining Revenue Task Force, which later expanded and called the Extractive Industries Revenue Task Force (EIRTF)[v]. The Mining Revenue Integration Project (MRIP) supported this process, looking at how to integrate tax and non-tax data for all mining payments into the GoSL Online Repository. This integration enables stakeholders to strengthen their own analysis of the data by providing the information in one place. It also allows for more of an efficient process for EITI pre-reconciliation, as data collection can be dramatically simplified.

The EIRTF was initially poorly attended, struggled with limited understanding and experience of data sharing processes and compliance coordination within government, and had little buy-in from senior stakeholders. However, these obstacles were gradually overcome thanks to the new generation of officials at the NMA and the continued support from government partners and in particular from the Overseas Development Institute.

Meeting of of the EIRTF, 4 June 2015

2013-14: Using the system to compile EITI data, automatic publication of data

Phase 3 started in January 2013 and transitioned the system to the newly established National Minerals Agency (NMA), with funding from the GIZ Regional Natural Resource Governance Programme. The project focussed on enabling the NMA to better record and manage production, royalties and compliance of license holders. In collaboration with the National Revenue Authority (NRA) they planned to also include mineral royalties and other tax-related data.

Data from the electronic mining cadastre MCAS and the customs system was used to compile EITI pre-reconciliation data. This was done by RDF to prove the concept, but its methodology has since been adapted in an MoU between NMA and NRA.

With increasing awareness on transparency of revenues created by the EITI, the public now turn to the Online Repository to get up to date information that can only be found in EITI reports at a much later date.

Mina Horace, Sierra Leone EITI National Coordinator 

In late 2014, a new version of MCAS was introduced, which included automatic publication of the data to the GoSL Online Repository, as well as enabling raw data to be easily accessed directly from the software via a data exchange service (RDx). This new data service RDx allows third party systems query and retrieve data from repository directly.

2015 and ahead: The GoSL Online Repository in action

Over licenses and payments are published on the Online Repository, which can be accessed at sierraleone.revenuesystems.org. The Online Repository is up-to-date since it draws data directly from the MCAS license and payment system used by the National Minerals Agency. The Online Repository has over 2,000 registered users, mostly mining companies and investors. 

Sierra Leone’s Online Repository consists of four sectors

  • Industrial mining, with almost 300 companies holding over 700 licenses
  • Artisanal mining, with 5200 licenses
  • Exporter and dealers, with 1700 records
  • Forestry, with 350 licenses

In comparison, the latest SLEITI report[vi] has a much narrower scope with revenue data from 25 companies. In order to verify the data, the SLEITI report did carry out a reconciliation of the payments as reported by the companies and government. Further, it identified a set of weaknesses in the taxation framework, such as inconsistent payment procedures to local government. Finally, the SLEITI report disclose the equity owners of the companies, where this information has been provided.

See below screenshots from the Online Repository:

Screenshot from the Online Repository with an overview of license holders and status of the license.

 

Map from Online Repository, highlighting large scale licenses.

 

Map from Online Repository, highlighting active licenses.

 

The Repository has 700+ Industrial mining licenses in the Online Repository that have paid government a total of USD 136 million since it started up in 2010.

 

 

The 5200+ artisanal mining licenses in the Online Repository pay government a total of USD 16 million since it started up in 2010.

A Phase 4 is planned to start in October 2015, which will again focus on upgrading the regional offices and improve the monitoring of the minerals value chain.

Key outputs of Phase 4 will be to establish data reporting from regional offices to the head office, to improve field monitoring as well as to support inspections and management of production reports and royalty calculations. More broadly, this phase aims to improve communication and the flow of information between the government, mining companies and investors.

Evaluation of impact to date

While the effectiveness of the new system has not yet been comprehensively evaluated, stakeholders have already reported a wide range of benefits, including:

  1. Increased government revenues and decreased number of outstanding payments. The system ensures better that companies make payments in accordance with license requirements. The mining cadastre system includes a fee scheduler that gives companies sufficient warning time when a payment is due or outstanding and produces reminders or outstanding payment letters to be sent out in a timely manner. Subsequently, revenues have increased six-fold from USD 23,200 in 2010 to USD 146,800 in 2015, and the number of outstanding payments have decreased.
  2. Improved relationships with mining communities. The team carried out sensitisation training in all the regions. They engaged with the mining community to improve their understanding of government procedures and requirements, leading to fewer misunderstandings.
  3. Improved monitoring of the extractive sector. Reports in MCAS increase ability to review and analyse production, payment and export info, thereby allowing RDF and the NMA to better understand the sector. The fiscal terms of the industrial mining agreements have been entered into MCAS. As a result, users of the system can check whether companies have made all payments in accordance with the agreement. Improved monitoring has also led to more accurate calculation of royalties for iron ore exports, which has increased the revenue from these. The improved rate of  compliance has also led to to less speculation and more investment by serious actors.
  4. Reduced waiting time for companies applying for licenses. More efficient procedures associated with the administrative workflow have reduced the waiting time for clients. More clarity around processes and less confusion on both the client and NMA side.
  5. More accurate and auditable data. The electronic cadastre system improves validation of the data, which reduces errors. In particular, a mapping feature has reduced errors related to geographical information (GIS), which has made more areas available for exploration.
  6. Increased data transparency. The Online Repository allows public access to tax and non-tax mining data. Data is transparent and open to scrutiny. Over 2,000 users have registered with the Online Repository. The latest version of the system (MCAS 4.0) enables raw data to be easily accessed directly from the software via a data exchange service (RDx). This new data service RDx allows third party systems to query and retrieve data from repository directly.
  7. Combining mining data with other data. Data on Sierra Leone’s mining operations can be combined with data on other topics. For example, users may place mining data on a map of the country and combine it with other geospatial data such as on traffic, population, disease, or environmental protected areas.
  8. Inter-governmental coordination and cooperation has improved significantly. This is in large part a result of the gradual strengthening of the inter-governmental task force EIRT. The capacity of the EIRT to bring together government stakeholders and its partners to discuss and resolve issues on a regular basis increases the efficiency and effectiveness of government decision-making.
  9. More efficient production of the EITI Report. A clear demonstration of the efficiency of the system was its significant role in the production of Sierra Leone’s 2011 EITI Report[vii]. The EIRT, by providing a forum in which SLEITI and other government stakeholders could draw on the systems and support administered by RDF, was able to lead a successful scoping study and pre-reconciliation exercise. When producing the EITI Report, the Independent Administrator cross-checks the data reported by governments and companies with the data in the Online Repository. Sierra Leone went through EITI Validation after publication of this report, after which attained EITI compliance status.
  10. Access to more timely data. The Online Repository allows the public and civil society to get up to date information that can only be found in EITI Reports at a much later date.

Overcoming challenges by working together

There are also a number of ongoing challenges. One key challenge is working with other government entities that do not yet have fully computerised systems. The data from these entities in the Online Repository is subsequently less timely.

The National Minerals Agency (NMA) has identified a number of challenges, including the continued smuggling of stones, fraud regarding Kimberly Certification, inability to verify certain content on company invoices (e.g. grade of stone) and poor monitoring of shipments. NMA has currently limited capacity to engage in many of these areas.

The process has further unearthed a set of other issues in the government’s management of its natural resources. Due to a clause in the customs act that requires permission from the tax payer, import and export customs data cannot be published and integrated in the system. Further, there are some legal obstacles to publishing production figures, and disputes about which agency shall collect penalties from companies when they fail to pay or comply with regulations.

To date, the intra-governmental task force has been successful in overcoming the challenges. A key success factor has been the long-term presence by partners. This has ensured continuity and good lines of communication with senior stakeholders that has instrumental to finding solutions.

Mainstreaming transparency: Disclosure through public administration system in place of secondary reporting

The experiences from Sierra Leone illustrates that transparency directly from functional administrative systems has many benefits compared to secondary reporting. Several other EITI countries are moving in this direction (see box below).

Other countries

Other countries are also taking similar steps towards such computerised systems.

Liberia is implementing a similar project, and has also recently established a revenue task force between Ministry of Lands, Mines and Energy, the Liberia Revenue Authority and Ministry of Finance. They are about to sign a data sharing agreement and start working more coordinated - learning from the experience in Sierra Leone.

Mali started implementing a similar system late 2014, and Ghana started in April 2015.

Norway has for some time had had an electronic licence system which is open to the public, and launched a public portal[viii] covering “everything you need to know about Norwegian petroleum activities” in April 2015.

 

This transition has been described as “mainstreaming” or “embedding” the transparency required by the EITI Standard into the systems, workflows and daily operations in government ministries and agencies, and in corporate reporting.

While the efforts to strengthen public financial management systems are welcome, the EITI will continue to have an important role. The EITI process seeks to verify that the data is complete, including by examining whether the internal control and assurance systems are adequate. Not all of the data required by the EITI Standard is routinely available in Sierra Leone. However, this project illustrates the potential for moving information out of EITI reports and onto routine, online reporting systems.

 

This case study has been produced by the EITI International Secretariat with contributions from Revenue Development Foundation, Overseas Development Institute and Sierra Leone EITI. For further information about EITI in Sierra Leone, visit http://eiti.org/sierraleone.

 


[iii] During the second phase of the MCAP project, EC approved the use of a repaid loan to Sierra Rutile mining company for capacity development purposes. Part of this support was provided in the form of training eight Sierra Leonean students in Ghana, who returned as mines engineers in the Ministry of Mines and Mineral Resources. These engineers have been steadily given more responsibilities as the older generation retired. They constitute a force of change within the government administration. They are all experience MCAS trainers and prime users of the system in Freetown and the four regional offices.

[v] The EIRT is made up of over ten different government agencies: Ministry of Finance and Economic Development (MoFED), Ministry of Mines and Mineral Resources (MMMR), the Ministry of Agriculture, Forestry and Food Security (MAFFS) through the Forestry Division, the Petroleum Directorate, NRA, NMA, NMA PMT, SLEITI, RDF, Overseas Development Institute (ODI) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).