The Board agreed that Sierra Leone has made meaningful progress overall in implementing the 2016 EITI Standard.
The Board's decision
The Board came to the following conclusion regarding Sierra Leone's status:
The Board agrees that Sierra Leone has made meaningful progress overall in implementing the EITI Standard. In accordance with requirement 8.3c, Sierra Leone will be requested to undertake corrective actions before the second Validation on 17 December 2020.
The Board takes note of the Validation’s findings regarding Requirement 1.2 on industry engagement. The Board acknowledges that the Independent Validator and International Secretariat reached different assessments regarding the requirement. The Board considers that progress in meeting Requirement 1.2 has been meaningful, but emphasises its expectation that Sierra Leone demonstrates progress in addressing the corrective action related to industry engagement in its second Validation. The Board agrees to monitor progress with the corrective actions and revisit the issues following the next Validation.
EITI implementation in Sierra Leone has improved the availability of information and strengthened dialogue between stakeholders. The EITI Board commends the Government of Sierra Leone’s commitment to EITI implementation and Sierra Leone’s efforts to embed EITI provisions in national legislation. The Board encourages Sierra Leone to embed systematic disclosures of data required by the EITI Standard in routine government and company systems, building on companies’ current statutory reporting to government.
The Board considers that the government’s strong commitment to EITI implementation has not yet been matched by commensurate engagement by industry and civil society. The focus on reconciliation of extractives revenues collected at the national level has not yet been combined with efforts to clarify subnational revenue flows, both in terms of direct payments and transfers from the national government. The Board encourages Sierra Leone to clarify the status of government support for extractives companies, the existence of any barter or infrastructure arrangements and the scope of companies’ mandatory social expenditures.
There is potential for the EITI to contribute to an annual diagnostic of the management of licensing activities, clarifying the basis for official mineral production and export figures and supporting an evidence-based public debate on artisanal and small-scale mining. Sierra Leone is required to ensure that beneficial ownership data is made publicly available by 1 January 2020.
The Board has determined that Sierra Leone will have 18 months, i.e. until 17 December 2020 to carry out corrective actions regarding the requirements relating to industry engagement (1.2), civil society engagement (1.3), MSG governance (1.4), work plan (1.5), license allocations (2.2), state-participation (2.6), production data (3.2), comprehensiveness (4.1), barter and infrastructure arrangements (4.3), direct subnational payments (4.6), data quality (4.9), subnational transfers (5.2), social expenditures (6.1) and public debate (7.1), with industry engagement, MSG governance, barter and infrastructure arrangements, direct subnational payments, subnational transfers and social expenditures being the main areas of concern. 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, Sierra Leone’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 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.
The Government of Sierra Leone first announced its intention to join the Extractive Industries Transparency Initiative (EITI) in June 2006 and formed their first multi-stakeholder group (MSG), the Sierra Leone EITI Steering Committee (SLEITI), in June 2007. Sierra Leone became an EITI Candidate in February 2008 at the EITI Board’s meeting in Accra.
The Validation process commenced on 1 July 2018. In accordance with the Validation procedures, an initial assessment [English] was prepared by the International Secretariat. The MSG submitted comments to the initial assessment and the draft Validation report [English], together with comments from the company Sierra Rutile / Iluka Resources [English] on 4 April. The Validation report was subsequently finalised by the Validator [English | French].
The Validation Committee reviewed the case on 23 May 2019. Based on committee-members’ comments and deliberations, a revised paper was presented again on 29 May 2019 including more nuanced language regarding industry engagement in the EITI process in Sierra Leone. From 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, i.e until 17 December 2020 to undertake the 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 Sierra Leone’s upcoming EITI Reports.
The EITI Board agreed the following corrective actions to be undertaken by Sierra Leone. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 17 December 2020:
In accordance with Requirement 1.2, the industry constituency is required to ensure the MSG representatives and broader constituency is fully, actively and effectively engaged in all aspects of EITI implementation. To galvanise industry's attention, the constituency should formalise its consultative framework for industry, such as through revitalising the Chamber of Mines. The MSG may wish to ensure EITI implementation objectives are consistent with priorities of the industry constituency, and ensure that concerns of the industry are adequately reflected at the MSG and in EITI reporting.
In accordance with Requirement 1.3.a, all interested civil society stakeholders must be able to fully, actively and effectively engage in the EITI process. The constituency may wish to formalise further the constituency’s engagement in the EITI process, to strengthen coordination between MSG members and the broader constituency. The constituency is also encouraged to ensure that all agreed policies, rules and documents are publicised online and regularly shared with the wider constituency. They may wish to ensure communication channels are formalised and regularly monitored and refreshed.
In accordance with Requirement 1.4, the MSG should ensure its updated MoU and Internal Rules clearly cover all provisions of Requirement 1.4.b and that any deviations from these rules in practice are publicly noted and addressed. Civil society and industry constituencies should formalise channels for wider constituency engagement, including by developing, agreeing and publishing procedures for nominating and changing MSG representatives in an open and transparent manner. The MSG is also encouraged to consider keeping public attendance records and publishing MSG minutes online, to ensure greater transparency of the MSG’s discussions and decisions.
In accordance with Requirement 1.5, Sierra Leone must ensure that its EITI workplan is updated annually and may wish to employ the most recent guidance to ensure recent developments and all required aspects of the EITI Standard are incorporated. In doing so, the MSG must consult a wide range of stakeholders, including those not directly represented at the MSG.
In accordance with Requirement 2.2, Sierra Leone should publicly disclose the procedures for awarding and transferring all extractives licenses, including specific technical and financial criteria and any non-trivial deviations from the applicble legal and regulatory framework.
In accordance with Requirement 2.6.b, Sierra Leone should ensure that where the government and SOE(s) have provided loans or loan guarantees to mining, oil and gas companies operating within the country, details on these loans and guarantees are clarified, as well as any details on transactions related to them. Sierra Leone is urged to revisit such issues annually, to ensure comprehensive reporting of the state’s participation in the extractive sector.
In accordance with Requirement 3.2, the Government of Sierra Leone should ensure that all production volumes and values, including for the ASM subsector, is publicly accessible and reported on.
In accordance with Requirement 4.1.a, Sierra Leone should ensure that all significant payments made by extractive companies are considered in determining material revenue streams. Any omissions should be documented and justified. It should only exclude entities where payments are demonstrably not material, in accordance with Requirement 4.1.c. The MSG should also ensure that the government unilaterally reports all government revenues from the extractive sector, by individual revenue stream, regardless of its inclusion in the reconciliation exercise as per Requirement 4.1.d.
In accordance with Requirement 4.3, Sierra Leone is required to consider whether any agreements, or set of agreements, involve the provisions of goods and services (including loans, grants and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production rights. To do so, the MSG and the Independent Administrator needs to gain a full understanding of the terms of any relevant agreement and contracts between the state and other parties involved, the value of such agreements, and the materiality of such agreements relative to conventional agreements. Where such agreements are material, the MSG and Independent Administrator should ensure that EITI Reports provide a level of detail and transparency commensurate with disclosures and reconciliation of other payments and revenue streams.
In accordance with Requirement 4.6, Sierra Leone should undertake a comprehensive review of which direct taxes and levies extractive companies are subject to at subnational level. Sierra Leone should ensure that reporting mechanisms are established which allow for estimation of total subnational payments in Sierra Leone, to determining whether payments are material. The MSG should provide a comprehensive explanation of how such payments are determined, paid, and managed. Where material, the Sierra Leone should ensure that reconciled information on all companies’ payments to subnational government entities and the collection of payments are publicly accessible.
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:
Agree on reporting templates ahead of data collection
Ensure that the Independent Administrator provides a clear and categorical assessment of comprehensiveness and reliability of the (financial) data presented.
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.
In accordance with Requirement 5.2, Sierra Leone should ensure that subnational transfers of extractive sector revenues are publicly disclosed, when such transfers are mandated by national law or other revenue sharing mechanism. In addition, Sierra Leone should publish the detailed transfer amounts calculated in accordance with the relevant revenue formulas to each subnational entity under both the Diamond Area Community Development Fund (DACDF) and surface rent payments that are distributed by central government agencies. Lastly, Sierra Leone should ensure actual transfers are disclosed in detail and summarised, highlighting any deviation from statutory calculations.
In accordance with Requirement 6.1, Sierra Leone should ensure mandatory social expenditures, such as expenditures under Community Development Agreements, are comprehensively disclosed each reporting year. For all material mandatory social expenditures, companies are required to disclose the nature and value of transactions, whether in cash or in kind, and ensure that disclosures be disaggregated by non-government beneficiary with information on the names and functions of third-party beneficiaries. Sierra Leone is encouraged to reconcile mandatory social expenditures and consider disclosing information on companies’ voluntary social expenditures.
In accordance with Requirement 7.1, Sierra Leone should ensure timely dissemination of EITI data and findings as well as effective outreach to key stakeholders. It should also ensure that the SLEITI open data policy is implemented in practice. To strengthen implementation, Sierra Leone may wish to ensure that realistic workplan activities related to dissemination and outreach are duly implemented. Sierra Leone is encouraged to explore creative ways to disseminate EITI data to strengthen the EITI’s contribution to public debate. There were evidences of CSOs using data from the EITI reports in the past to launch reports. However, these reports are not recent, indicating that the CSOs activities in the extractive sector in Sierra Leone have slowed down.
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 reporting on progress.