Madagascar has made meaningful progress in implementing the 2016 EITI Standard, with considerable improvements.
The Board's decision
The Board came to the following decision:
The EITI Board agrees that Madagascar has fully addressed seven of the fifteen corrective actions from the country’s first Validation. Consequently, Madagascar has made meaningful progress overall in implementing the 2016 EITI Standard, with considerable improvements across several individual requirements.
The Board congratulates the Government of Madagascar and the multi-stakeholder group (MSG) for improving transparency in areas of public interest. The EITI has shed light on challenges resulting from the moratorium on the award of new mining licenses. Reporting and dissemination of findings related to subnational transfers of mining revenues to communities, including of largest mining projects Ambatovy and QIT Madagascar Minerals, remains a core strength of EITI implementation. In addition to catalysing the publication of financial statements of all state-owned enterprises (SOEs) and independent government agencies, Madagascar’s EITI reporting increases public understanding about complex transactions such as the creation of the Kraoma Mining joint-venture. The EITI is a key source of public information on extractive companies’ social expenditures and SOEs’ quasi-fiscal expenditures, and constitutes the only source of publicly available information on extractive companies’ beneficial and legal ownership data. The Board also acknowledges that Madagascar is establishing best practices amongst EITI implementing countries in reporting on environmental monitoring and gender-related issues in extractives, including gender-disaggregated employment data and promoting inclusive participation in debate at the local level.
The Board recognises that gaps remain in disclosures related to issues such as license allocation and state participation and urges the government to take concrete steps towards contract transparency ahead of the 1 January 2021 deadline established in the 2019 EITI Standard. Further efforts should be made to ensure that significant improvements in disclosures are matched by efforts to strengthen the multi-stakeholder nature of EITI implementation and the sustainability of the process. The Board encourages the MSG to ensure that the broader government and civil society constituencies participate actively in all aspects of implementation, This will enable the EITI to contribute to the government’s domestic resource mobilisation and anticorruption programmes and to a broader public understanding of the extractive industries.
The Board takes note of Madagascar’s plans to transition to systematic disclosures through government and company systems. There is scope for EITI Madagascar to build on its close collaboration with key government entities to ensure systematic disclosures of licensing data, subnational transfers of mining administration fees, and extractives production and export data, and to draw from the industry constituency’s strong engagement to enable systematic disclosures of payments data and audited financial statements. Progress on systematic disclosures would enable the MSG to focus on the use and analysis of EITI data.
The Board has determined that Madagascar will have 18 months before a third Validation, i.e. until 9 December 2021, to carry out corrective actions regarding government engagement (Requirement 1.1), civil society engagement (Requirement 1.3), MSG oversight (Requirement 1.4), license allocations (Requirement 2.2), contract disclosure (Requirement 2.4), state participation (Requirement 2.6), data disaggregation (Requirement 4.7), and subnational transfers (Requirement 5.2).
Failure to achieve satisfactory progress in the third Validation will result in temporary suspension in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, Madagascar’s MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.
Madagascar joined the EITI in 2008. On 29 June 2018, Madagascar was found to have made meaningful progress in implementing the 2016 EITI Standard. Madagascar’s second Validation against 2016 EITI Standard commenced on 29 December 2019. The EITI International Secretariat has assessed the progress made in addressing the 15 corrective actions established by the EITI Board following Madagascar’s first Validation. The corrective actions are related to:
- Government engagement (Requirement 1.1)
- Civil society engagement (Requirement 1.3)
- MSG governance (Requirement 1.4)
- License allocations (Requirement 2.2)
- Contract disclosure (Requirement 2.4)
- State participation (Requirement 2.6)
- Data comprehensiveness (Requirement 4.1)
- Transportation revenues (Requirement 4.4)
- Direct subnational payments (Requirement 4.6)
- Data disaggregation (Requirement 4.7)
- Data quality and assurance (Requirement 4.9)
- Distribution of extractive industry revenues (Requirement 5.1)
- Subnational transfers (Requirement 5.2)
- Quasi-fiscal expenditures (Requirement 6.2)
- Outcomes and impact of implementation (Requirement 7.4).
The Board asked Madagascar to address these corrective actions to be assessed in the second Validation. Madagascar has undertaken a number of activities to address the corrective actions:
- The publication of the 2015, 2016, 2017 and 2018 EITI Reports over the span of 18 months;
- The publication in 2018 of thematic reports on, respectively, the impact of a decade of EITI implementation, subnational payments and transfers, and beneficial ownership disclosures;
- The publication in 2018 of guides to help citizens, companies and parliamentarians read EITI Reports and use EITI data;
- The signature of a memorandum of understanding in December 2018 between the EITI Madagascar and the Supreme Audit Institution, la Cour des Comptes, for the certification of government data disclosed through the EITI;
- Several capacity building and consultation workshops with MSG members, government, company and CSO representatives, including in March 2019 on the 2017-2018 Annual Progress Report;
- Outreach and dissemination in Fort Dauphin, Toliara, Moramanga and Tamatave, regions affected by extractive activities, in May and June 2019, to share findings from EITI reporting on revenue allocation and management at the local level;
- The adoption of action plans to strengthen engagement in the EITI process by the government and civil society constituencies in 2019;
- The publication of the audited financial statements of OMNIS, BCMM and ANOR for the fiscal years 2017-2018, for the first time.
Madagascar’s second Validation commenced on 29 December 2019. The Secretariat assessed the progress made in addressing the 15 corrective actions established by the EITI Board. Subject to the EITI Board's consideration of new information published after the commencement of Validation (in particular related to Requirements 4.9 and 6.2), the EITI International Secretariat’s assessment is that Madagascar has fully addressed seven of the 15 corrective actions and has achieved “satisfactory progress” on the corresponding requirements.
The draft assessment was sent to the MSG on 19 March 2020. Following MSG comments received on 22 April 2020, the assessment was finalised for consideration by the EITI Board. The Validation Committee reviewed the case on 20 May 2020 and agreed the recommendation.
The EITI Board agreed the following corrective actions to be undertaken by Madagascar. Progress in addressing these corrective actions will be assessed in a third Validation commencing on 9 December 2021:
In accordance with Requirement 1.1.c, the government must demonstrate full, active and effective engagement in all aspects of EITI implementation in Madagascar. The government should contribute to the functioning of the national secretariat, as well as other EITI activities as per the MSG’s work plan, through sustainable funding. The government should ensure that all its representatives are nominated on the MSG and participate actively to all aspects of EITI implementation, including through increasing awareness amongst relevant government agencies. To strengthen implementation, the government is encouraged to draw on the EITI Madagascar platform for multi-stakeholder consultations in the development of key legal and regulatory reforms, such as the revision of the Mining Code. The government may also wish to leverage the EITI platform to sustain direct dialogue with industry, civil society and partners around the management of the sector and the latter’s contribution to government revenues. The government is encouraged to draw on strategic recommendations from Validation related to Requirements 2-6 to transition towards systematic disclosures of data required by the EITI Standard through routine government systems in a timely, reliable and disaggregated manner.
In accordance with Requirement 1.3.a, civil society must demonstrate full, active and effective engagement in all aspects of EITI implementation, including outreach to civil society organisations outside the capital city and dissemination of EITI findings. Civil society should ensure that all its representatives are nominated on the MSG and participate actively to all aspects of EITI implementation. Civil society representatives should ensure that they undertake effective fundraising activities to ensure adequate technical and financial capacities for their full, active and effective participation in EITI activities. All stakeholders, including development partners, are encouraged to ensure that representatives of the civil society constituency benefit from available capacity-building on EITI-related issues. To strengthen implementation, civil society is encouraged to consistently document activities undertaken by CSOs in communities affected by extractive activities. Civil society is strongly encouraged to capitalise on the EITI Madagascar multi-stakeholder consultation infrastructure, including MSG meetings and consultations with communities affected by extractive activities, to discuss issues around the management of the extractive industries of high public interest. Civil society may wish to leverage new provisions under Requirements 6.1 and 6.4 in the 2019 EITI Standard on the environmental impact of extractive activities to ensure greater transparency around environmental payments by companies, industry practices related to environmental management and the role and activities of relevant government agencies.
In accordance with Requirement 1.4.b.vii, the MSG should ensure that there is sufficient advance notice of meetings and timely circulation of documents prior to their debate and proposed adoption, to ensure that MSG members have the capacities to carry out their duties. In accordance with Requirement 1.4.b.viii, the MSG must keep written records of its discussions and decisions. To strengthen implementation, the MSG is encouraged to make these records publicly available on its website. The MSG might wish to ensure that its meetings are planned in advance, held at a reasonable frequency and address key issues in the oversight of EITI implementation. The MSG is encouraged to ensure that deviations from their Terms of Reference are recorded and transparent. Government and civil society constituencies are encouraged to ensure that their representatives’ attendance at MSG meetings is consistent and of sufficiently high level to allow the MSG to take decisions and follow up on them. Company representatives might wish to consider reviewing the positions representing the oil and gas sub-constituency on the MSG to ensure that they reflect the industry.
In accordance with Requirement 2.2, Madagascar should disclose information on the statutory process for transferring licenses in the oil and gas sector, as well as an assessment on potential non-trivial deviations in practice in the transfer of both oil and gas and mining licenses. Madagascar might wish to prioritise systematically disclosing such information through the OMNIS and BCMM websites. To strengthen implementation, Madagascar might wish to draw from EITI reporting and recommendations to improve the management of mining licenses, including in setting standard, clear and publicly available technical and financial criteria in the award and transfer of licenses. The MSG is encouraged to consider the findings and conclusions of the upcoming Transparency International study on corruption risks in licensing to formulate recommendations to address such risks.
In accordance with Requirement 2.4, Madagascar should clarify and document the government’s policy on disclosure of contracts and licenses. To strengthen implementation, Madagascar is encouraged to disclose the full text of all extractive contracts and licenses. The government may wish to include contract disclosure provisions in its review of sector legislation and companies operating in Madagascar are encouraged to adhere to the EITI supporting companies’ expectations in demonstrating support for contract disclosure. In line with the 2019 EITI Standard and particularly given the lack of clarity of the government’s policy, the MSG is expected to include plans for disclosing contracts with a clear timeframe for implementation in its work plan, ahead of the 1 January 2021 deadline. Madagascar might wish to systematically disclose the full text of mining licenses through the BCMM register, including the decree awarding and transferring licenses and the terms and conditions (“cahier de charges”) to which companies subscribe, as well as the full text of oil and gas PSCs on the OMNIS website.
Madagascar should agree a definition of SOE for EITI reporting purposes that is in line with the definition in Requirement 2.6.a.i, namely “a wholly or majority government-owned company that is engaged in extractive activities on behalf of the government.” In accordance with Requirement 2.6.a.ii, Madagascar should ensure that a comprehensive description of the terms associated with state participation in the extractive industries is publicly accessible on an annual basis, including equity interests held by SOEs’ subsidiaries, joint ventures and affiliates. To strengthen implementation, Madagascar could consider ways of systematically disclosing information on the statutory financial relations between KRAOMA, OMNIS and the state, by publishing the SOEs’ statutes and all other relevant laws, regulations and decrees codifying the financial relations between extractives SOEs and the state. Madagascar is encouraged to explore ways of systematically disclosing information on the financial relations in practice between extractives SOEs (KRAOMA and OMNIS) and the state, for instance through routine publication of their audited financial statements on their respective websites, with additional narrative describing each SOE’s practices of distributing profits, retaining earnings, reinvesting in their operations and third-party financing in accordance with Requirement 2.6.a.i. Madagascar may wish to ensure that a description of any changes in state participation be systematically disclosed through government and SOE systems annually, including the terms of each transaction.
In accordance with Requirement 4.7, Madagascar should ensure that it publishes EITI data disaggregated by each individual project, for impositions that are levied at a per-license basis (e.g. non-tax). Madagascar is required to ensure that its definition of project is consistent with that in Requirement 4.7, namely that as “operational activities that are governed by a single contract, license, lease, concession or similar legal agreement, and form the basis for payment liabilities with a government.”
In accordance with Requirement 5.2, Madagascar should disclose discrepancies between statutory shares of mining administration fees (FAM) and ristournes and effective transfers disaggregated by local government unit, for all extractive companies. To strengthen implementation, Madagascar might wish to consider systematically disclosing information about subnational transfers of FAM on the BCMM website, including the decrees that determine the computations for transfers to each local government unit. Stakeholders are encouraged to use EITI data on subnational transfers to promote debate at the subnational level and strengthen the management of extractive revenues by local authorities, to ensure the sector’s contribution to more inclusive and sustainable local development.
Madagacar is encouraged to also consider the strategic recommendations in the Secretariat’s assessment.