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The EITI Board agreed that São Tomé and Príncipe has made meaningful progress in implementing the 2016 EITI Standard

Outcome of the Validation of São Tomé and Príncipe.

Decision number
2020-38
Decision basis
EITI Articles of Association 2019-2021, Article 12.1. ix)
10 July 2020

Board decision

The Board came to the following decision:

The EITI Board agrees that São Tomé and Príncipe has not addressed the corrective actions from the country’s third Validation. Consequently, São Tomé and Príncipe has made meaningful progress overall in implementing the 2016 EITI Standard.

The Board recognises that São Tomé and Príncipe has maintained a high level of disclosures that contribute to public understanding on issues such as oil revenue management and social payments. The government is encouraged to address remaining gaps in disclosures related to licenses and data quality.

São Tomé and Príncipe is urged to consider a more sustainable and proportionate approach to EITI implementation that would reflect the fact that the petroleum sector is in exploration phase and revenues are modest. The government is encouraged to fully transition to routine disclosures of EITI data through government websites, engage with the Auditor General (Tribunal de Contas) to strengthen data quality and embed the EITI national secretariat into government structures.

The Board has determined that São Tomé and Príncipe will have 12 months before a fourth Validation, i.e. until 9 July 2021, to carry out corrective actions regarding license allocation (Requirement 2.2), license register (Requirement 2.3) and data quality (Requirement 4.9). The fourth Validation will also assess progress in meeting EITI Requirement 2.5 on beneficial ownership, as well as new provisions of the 2019 EITI Standard. The Board decided that STP should not be suspended given the number and nature of remaining gaps and the MSG’s good faith efforts to address these requirements.

Failure to achieve satisfactory progress in the fourth Validation will result in delisting in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, STP’s MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by São Tomé and Príncipe. Progress in addressing these corrective actions will be assessed in a fourth Validation commencing on 9 July 2021:

  1. In accordance with Requirement 2.2, ANP should disclose the process for awarding petroleum licenses including the technical and financial criteria and an explanation of any non-trivial deviations from the legal framework governing the award and transfers of petroleum licenses in the year under review.  To strengthen implementation, ANP is encouraged to ensure that information about the process for awarding and transferring licenses, as well as actual awards and transfers is comprehensively disclosed in a timely manner on the government websites, such as that of the ANP. The MSG is encouraged to use the EITI reporting to aggregate and analyse publicly accessible information that is already systematically disclosed.

  2. In accordance with Requirement 2.3.b, São Tomé and Príncipe is required to maintain a publicly available register or cadastre system, including timely and comprehensive information on the date of application for each of the licenses of companies covered in the EITI Report. ANP is expected to implement its plan to overcome practical barriers to the disclosure of application dates. São Tomé and Príncipe is encouraged to engage with the Joint Development Authority (JDA) to ensure that comprehensive license information for the Joint Development Zone is publicly available.
  3. In accordance with Requirement 4.9, São Tomé and Príncipe should demonstrate that the Independent Administrator’s ToR is aligned with the standard ToR and that MSG was adequately involved in the design of the EITI Report. The Independent Administrator should provide a clear statement related to the comprehensiveness and reliability of the reconciled financial data, in accordance with Requirement 4.9.a and the standard ToR for Independent Administrators To strengthen the implementation of Requirement 4.9, São Tomé and Príncipe is encouraged to seek to strengthen the auditing policies and practices of government entities and extractive companies, with a view to developing credible, routine, independent audit, applying international auditing standards, as a means of transitioning to systematic disclosures of payments and revenues.

Background

São Tomé and Príncipe (STP) was admitted as an EITI Candidate in 2008. The second Validation of STP against the EITI Standard commenced on 8 March 2018. On 29 June 2018, the EITI Board found that STP had made “meaningful progress with considerable improvements” in implementing the 2016 EITI Standard. Three corrective actions were identified by the Board to be assessed in a third Validation commencing on 29 June 2019. These related to:

  1. License allocation (Requirement 2.2)
  2. License register (Requirement 2.3),
  3. Data quality (Requirement 4.9).

STP has undertaken the following activities to address the corrective actions:

  • On 22 February 2019, the 2016-2017 EITI Report was published.
  • On 13 December 2019, a pre-validation workshop was organised to discuss progress in addressing the corrective actions.[1]
  • On 14 December 2019, the MSG met to discuss progress on addressing the corrective actions from the second Validation.
  • On 27 December 2019, the MSG shared a response received from ANP on addressing corrective actions on Requirements 2.2 and 2.3.

São Tomé and Príncipe’s third Validation commenced on 29 December 2019. The Secretariat assessed the progress made in addressing the three corrective actions established by the EITI Board. The EITI International Secretariat’s assessment is that São Tomé and Príncipe has not addressed the three corrective actions. The draft assessment was sent to the Multi-Stakeholder Group (MSG) on 1 April 2020. Following comments received on 11 May 2020, the assessment was finalised for consideration by the EITI Board.

Scorecard for São Tomé and Príncipe: 2019

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

The government is fully, actively and effectively engaged in the design, implementation, monitoring and evaluation of the EITI process. Government representatives are taking part in outreach and efforts to promote public debate. While there has been continued and consistent support expressed by the government, challenges remain with respect to obtaining data on the Joint Development Zone with Nigeria from the Joint Development Authorities.

1.2Industry engagement

Companies with presence in the country are actively and effectively engaged in the EITI process. There has been a positive step to expand company representation on the multi-stakeholder group (MSG), but there are also limitations in engaging any companies within the Joint Development Zone. Companies can also be more proactive particularly in outreach and information dissemination for their constituency and with other stakeholder groups.

1.3Civil society engagement

The active involvement of some civil society organisations in São Tomé and Princípe EITI demonstrates that civil society are fully, actively and effectively engaged in the design, implementation, monitoring and evaluation of the EITI process. There is however a continuing need for greater capacity and knowledge regarding the oil sector and transparency, as well as financial resources to support their operations.

1.4MSG governance

The MSG approved a revised ToR in 2017, defining the MSG’s roles and responsibilities in accordance with Requirement 1.4.b. The MSG has initiated a renewal of its membership, ensuring that all constituencies are adequately represented and qualified. Internal nominations procedures for selecting MSG representatives have been codified.

1.5Work plan

In accordance with requirement 1.5, the MSG approved an updated fully-costed work plan in October 2017. The objectives are in harmony with national priorities and outline plans for addressing capacity constraints that could form obstacles to EITI implementation. The work plan addresses the scope of EITI reporting.

Licenses and contracts

2.1Legal framework

The 2014 EITI Report contains an overview of the legal framework and fiscal regime governing the extractive sector.

2.2License allocations

The 2016 – 2017 EITI Report provide information about the process for awarding and transferring licenses. Information about the recipients of licenses awarded and transferred in the period under review is available in the EITI Report and the ANP website. However, information about the process for awarding contract and transfers are not publicly available

2.3License register

Legal or practical barriers preventing the disclosure of application dates are not explained in the 2016-2017 EITI Report or in other publicly available sources, and there is no indication of the government attempting to record and disclose application dates following the second Validation. However, the MSG feedback on the Secretariat’s draft assessment includes ANP’s explanation of practical barriers to disclosures and a plan to overcome these.

2.4Policy on contract disclosure

Building on its clarification of the government’s policy on contract disclosure in previous EITI Reports, the MSG has worked with relevant stakeholders to publish all active oil and gas contracts, aside from the PSC for Block 2 concluded with Sinoangol, as encouraged by the EITI Standard.

2.5Beneficial ownership

The multi-stakeholder group has initiated discussions related to disclosure of beneficial owners of companies operating in both the J Joint Development Zone and the Exclusive Economic Zone, and is considering to request beneficial ownership information in forthcoming EITI Reports. Disclosure of beneficial ownership is also an objective in the 2016 work plan.

2.6State participation

The 2014 EITI Report describes the participation of the government in production sharing agreements in the Exclusive Economic Zone and details this block-by block. The report explains that holdings are monitored by the National Petroleum Agency and sets out the terms of state participation. Until production, the company covers all costs. Accordingly, to date, state participation has not led to any revenues or costs.

Monitoring production

3.1Exploration data

The 2015 EITI Report provides an overview of the extractive industries in STP, including significant exploration activities in the EEZ. Gaps in coverage of activities in the JDZ are not assessed in terms of compliance with Requirement 3.1, given the Board’s prior approval of adapted implementation for the 2015 and 2016 EITI Reports.

3.2Production data

Not applicable

There is no production in the Exclusive Economic Zone and the Joint Development Zone. The requirement on production data is therefore not applicable to São Tomé and Princípe.

3.3Export data

Not applicable

There being no production, there are no exports from the Exclusive Economic Zone or the Joint Development Zone. The requirement on export data is therefore not applicable to São Tomé and Princípe.

Revenue collection

4.1Comprehensiveness

The multi-stakeholder group has agreed a clear definition of materiality and materiality thresholds for company and government reporting, and the rationale is documented. Revenue flows are mapped out and all payments by companies (and receipts by government) from the Exclusive Economic Zone are included in the report and there were no financial flows from the Joint Development Zone in 2014

4.2In-kind revenues

Not applicable

There is no production and thus no in-kind revenue collected by the government. The requirement on in-kind revenues is therefore not applicable to São Tomé and Princípe.

4.3Barter agreements

Not applicable

There is no evidence suggesting that infrastructure provisions and barter arrangements exist. The requirement on infrastructure provisions and barter arrangements is therefore not applicable to São Tomé and Princípe.

4.4Transportation revenues

Not applicable

There is no indication that revenues from the transportation of commodities would constitute one of the largest revenue streams. The requirement on transportation revenue is not applicable to São Tomé and Princípe.

4.5SOE transactions

Not applicable

There is no extractive sector state-owned enterprise in São Tomé and Princípe. The requirement on transactions between state-owned enterprises and government is therefore not applicable.

4.6Direct subnational payments

Not applicable

There are no provisions on direct subnational payments and no indication that extractive companies make payments to sub-national levels of government. The requirement on subnational direct payments is therefore not applicable to São Tomé and Principe.

4.7Disaggregation

The 2014 EITI Report presents revenue data by individual company and revenue stream, and revenue is also presented by individual government entity.

4.8Data timeliness

The 2014 EITI Report was published in October 2015, less than one year after the end of the financial year.

4.9Data quality

The 2016-2017 EITI Report documents the audit policies and practices of reporting entities and provides recommendations to address weaknesses. Compliance with MSG-agreed assurances is documented and discrepancies were investigated. The report does not include a clear statement from the IA on the comprehensiveness and reliability of reconciled financial data.

Revenue allocation

5.1Distribution of revenues

Extractive revenues that are not recorded in the budget and their relation to the national budget are explained in the 2015 EITI Report. The detailed description of off-budget revenues and the reconciliation of transfers from the national oil account to the budget demonstrates that STP has gone beyond Requirement 5.1.

5.2Subnational transfers

Not applicable

Sub-national transfers are disclosed in the 2014 EITI Report. The legal provision related to subnational transfers of oil revenues is referenced, and the revenue sharing formula explained. There is no explanation for how the revenues are shared among the municipalities. Discrepancies between calculated and actual transfers are disclosed. Subnational transfers since the establishment of the Exclusive Economic Zone are reported by year, as absolute figures, share of the state budget and share of oil revenues.

5.3Revenue management and expenditures

The report describes all income to the National Oil Account from the Joint Development Authority and companies in the Exclusive Economic Zone and transfers to the treasury since 2005, and reconciles the transfers from the Central Bank (National Oil Account) to the treasury for 2003-14. The report also documents whether transfers were in line with the law. The report also includes the annual budgets of the Joint Development Authority for 2003-2014, and the contributions to the budget made by companies and governments.

Socio-economic contribution

6.1Mandatory social expenditures

The 2015 EITI Report clearly distinguishes between mandatory and voluntary social expenditures. It discloses comprehensive information on mandatory social contributions by companies in accordance to the PSCs, disclosures of mandatory social expenditures by companies disaggregated by project, beneficiary and between cash and in-kind expenditures.

6.2Quasi-fiscal expenditures

Not applicable

The 2016 EITI Report describes the MSWG’s definition of quasi-fiscal expenditures (consistent with the EITI Standard’s), its assessment of their materiality and reporting of SOEs’ unilateral disclosures of material quasi-fiscal expenditures in 2016.

6.3Economic contribution

The 2014 EITI Report includes, in absolute and relative terms, the contribution of the extractive industries to government revenue, exports and employment. GDP and other general information on the economy are presented in the report, but the contribution of the oil sector is not mentioned. With no production this is likely to be negligible.

Outcomes and impact

7.1Public debate

The MSG has sought to ensure the EITI Reports are comprehensible, written in a clear style and actively promoted. The reports include information of national relevance that goes beyond the EITI Requirements and provides facts for public debate on the management of oil revenue, social projects and the management of the Joint Development Zone. Media references to the findings of the EITI Reports have been relatively few but have clearly resulted from outreach activities by São Tomé and Princípe EITI.

7.2Data accessibility

EITI data is accessible, machine-readable and actively disseminated, both in print and summarised formats. There is no reference to national revenue classification systems or international standards in the EITI Reports.

7.3Follow up on recommendations

The 2016 annual progress report and 2015 EITI Report detail the MSG’s follow-up on recommendations of STP’s EITI Reports and Validation. The MSG has actively followed up on past recommendations and the 2017-18 work plan has been updated with specific objectives and activities related to follow-up on EITI recommendations.

7.4Outcomes and impact of implementation

The 2016 annual progress report has been made publicly available and provides a summary of the MSG’s follow-up on past EITI recommendations, as well as a narrative account of efforts to strengthen implementation and general observations on the impact of EITI implementation.