Ghana has made meaningful progress in implementing the 2016 EITI Standard.

Outcome of the Validation of Ghana

Decision reference: 2020-85 / BC-299
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

1 December 2020

Board decision

The Board came to the following conclusion:

The EITI Board agrees that Ghana has made improvements in meeting the two corrective actions since the country’s second Validation. The Board also finds that Ghana has achieved meaningful progress on four other requirements of the EITI Standard. Consequently, Ghana has made meaningful progress overall in implementing the 2016 EITI Standard.

The Board congratulates the Government of Ghana and the multi-stakeholder group (MSG) for continuing to use the EITI process to address issues of national importance to stakeholders. The government and stakeholders have made efforts to improve regular and timely disclosures of information, including on beneficial ownership, state participation, contracts, licenses and commodity sales. The Board further commends the MSG’s efforts to use the EITI process to undertake analysis of revenue forecasting, inform a gender policy for the extractive industries, and support local stakeholder participation in natural resource governance.

Some aspects of the EITI Standard related to comprehensiveness and quality of revenue disclosures, quasi-fiscal expenditures by state-owned enterprises, and subnational transfers have not been fully achieved, while there is scope for progress on new EITI Requirements such as beneficial ownership and project-level reporting. The Board recognises the challenges in achieving comprehensive disclosures by companies and the MSG’s efforts to overcome these. The Board commends the government efforts in establishing a legal framework for beneficial ownership transparency and encourages the MSG to publicly assess disclosures to date as a basis for ensuring comprehensive and reliable disclosures of beneficial ownership data. Continued progress on these aspects of the EITI Standard will be important ahead of the next Validation.

The Board encourages the MSG to consider how EITI reporting can be designed to ensure that it complements the government’s efforts to improve accountability in the governance of the extractive industries. Measures agreed by the Board to encourage implementing countries to tailor their approach to reporting to their national contexts may be useful to the MSG.

The Board has determined that Ghana will have 18 months before a fourth Validation under the 2019 EITI Standard, i.e. until 1 June 2022, to carry out corrective actions regarding beneficial ownership (Requirement 2.5), comprehensiveness (Requirement 4.1), project-level reporting (Requirement 4.7), data quality (Requirement 4.9), subnational transfers (Requirement 5.2) and quasi-fiscal expenditure (Requirement 6.2).

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, Ghana’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 Ghana. Progress in addressing these corrective actions will be assessed in a fourth Validation commencing on 1 June 2022:

In accordance with Requirement 2.5 and the Board-agreed framework for assessing progress, Ghana is required to disclose the beneficial owners of all companies holding or applying for extractive licenses by 31 December 2021.
In accordance with Requirement 4.1, Ghana is required to ensure that revenues and payments are comprehensively disclosed in line with the MSG’s materiality decisions.
In accordance with Requirement 4.7, Ghana is required to apply the definition of ‘project’ set out in the Standard and disaggregate EITI data by each individual project.
In accordance with Requirement 4.9 and the Terms of Reference of Independent Administrators, Ghana should ensure that EITI Reports provide a clear statement on the reliability and comprehensiveness of reconciled financial data.
In accordance with Requirement 5.2, Ghana should publish the detailed subnational transfers calculated in accordance with the relevant revenue formulas to each subnational entity under both the ground rent distributions of the Office of the Administrator of Stool Lands and for mineral royalty distributions that are distributed from the Mineral Development Fund. Lastly, Ghana should ensure actual transfers are disclosed in detail and summarised, highlighting any deviation from statutory calculations.
In accordance with Requirement 6.2, Ghana should ensure that the MSG agrees a definition of quasi-fiscal expenditures in accordance with the IMF’s definition and discuss this with Ghana National Petroleum Corporation (GNPC), Ministry of Finance and the Public Interest and Accountability Committee (PIAC) to ensure that there is common understanding of the nature of these expenses and that possible quasi-fiscal expenditures are comprehensively and consistently covered in disclosures by the GNPC, the government PIAC or GHEITI.

Background

Ghana joined the EITI in February 2007. Ghana’s second Validation under the 2016 EITI Standard concluded on 27 February 2019. The EITI Board found that Ghana had made ‘meaningful progress’ in implementing the EITI Standard, with considerable improvements across several individual requirements. Two corrective actions were identified by the Board, to be assessed in a third Validation commencing on 27 February 2020. The two corrective actions related to:

Comprehensive disclosure of taxes and revenues (Requirement 4.1);
Quasi-fiscal expenditures (Requirement 6.2)

Ghana’s third Validation commenced on 27 February 2020. The third Validation was conducted on the basis of the 2016 EITI Standard in accordance with the transitional arrangements, given that its latest EITI Report (covering 2017-2018) was published prior to 1 January 2020. The Secretariat assessed the progress made in addressing the two corrective actions established by the EITI Board following Ghana’s second Validation in 2019. Progress in implementing Requirement 2.5 on beneficial ownership as well as Requirement 4.7 on disaggregation were also assessed. The International Secretariat’s assessment is that Ghana has not fully addressed the two corrective actions and has made “meaningful progress” with considerable improvements in meeting Requirements 4.1 and 6.2. The International Secretariat’s assessment found evidence to suggest progress has fallen below the required standard on Requirements 4.9 and 5.2, and warrant consideration by the EITI Board for downgrade to “meaningful progress”. Finally, the International Secretariat’s assessment is that Ghana has made “meaningful progress” on Requirements 2.5 and 4.7.

The draft assessment was sent to the Ghana EITI MSG on 27 March 2020. Following MSG comments received on 13 May 2020, the assessment was finalised for consideration by the EITI Board.

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 and the government appears to have a strong commitment to the implementation of EITI in Ghana. The attendance of the Chair is less frequent than that of other MSG members, but this does not seem to reflect a lack of government engagement on the whole.
1.2Company engagement
Companies are actively engaged with EITI implementation and see value and tangible outcomes resulting from their participation in the process, citing in particular an improvement in their relationship with communities. The more limited participation by companies from the oil/gas sector beyond those represented on the MSG reflects the relatively recent emergence of the sector and lack of organisation among petroleum companies in the country.
1.3Civil society engagement
Civil society stakeholders are actively engaged in the EITI process. There is an enabling environment for civil society participation in Ghana, and civil society representatives have been key drivers of the EITI process and implementation. There seem to be some challenges related to communicating and consulting with all interested civil society stakeholders during the EITI reporting cycle, and not only after the publication of reports, which might be related to limited capacity on both sides.
1.4MSG governance
Stakeholders are adequately represented on the multi-stakeholder group (MSG). The MSG has a chair and co-chair and meets regularly to review and guide implementation in the country. They have also participated in ad hoc meetings and have established sub-committees tasked with specific aspects of EITI implementation. There seem to be some issues and practices of the MSG that would need to be clarified in the Ghana EITI Bill.
1.5Work plan
The work plan has clear objectives linked to national priorities for the extractive sector, as well as detailed actions and timelines, although it does not reflect the full scope of GHEITI’s work. Costing is missing for some items, and implementation is slightly behind schedule. In particular missing funds for the 2015 GHEITI report is of concern.
Licenses and contracts
2.2License allocations
The 2017 -2018 EITI Reports comprehensively disclose the respective process for awarding licences.The processes, technical and financial criteria for awarding oil, gas and mining licenses are either systematically disclosed or captured in EITI reporting. A complete list of all oil, gas and mining licenses including awards granted before 2017 are systematically disclosed on the Ghana Petroleum and Mining Registers.
2.3License register
Despite gaps and inconsistencies in the 2016 EITI Reports, Ghana’s Petroleum Register and Online (mining) Repository provide all information required by Requirement 2.3.b for all active mining, oil and gas licenses.
2.4Policy on contract disclosure
The government’s policy of not publishing contracts is clearly described in the 2014 EITI Reports. The report also describes the actual practice of publishing certain contracts. The reports have recommended to make contract public.
2.1Legal framework
The legal framework and fiscal regime governing the extractive industries are described in different sections of the 2014 EITI Reports. Information on the roles and responsibilities of the relevant government agencies is included in the reports, as is information on reforms of the system.
2.5Beneficial ownership
Significant elements of the initial criteria for assessing Beneficial ownership disclosure have been met. A clear government policy and legal basis have been given to beneficial ownership disclosure in Ghana. All material companies have been requested to disclose information based on a comprehensive template, that includes assurance mechanism. Actual disclosures show progress, albeit existing gaps and missing data points. While efforts have been undertaken to promote effective disclosures, there remain substantial gaps. No evidence exists of the MSG’s assessment of comprehensiveness and reliability as well as plans to overcome gaps or weaknesses in reporting
2.6State participation
There were no material revenues related to SOEs in mining in 2017-18. The 2017-18 EITI Report confirms the materiality of state participation in oil and gas, and comprehensively lists all state participations upstream. The government systematically discloses equity interests and terms associate with GNPC’s interests in contract areas and GNPC’s published 2017-18 audited financial statements
Monitoring production
3.1Exploration data
The 2014 EITI Reports contain informative overviews of both the oil/gas and mining sectors and broad information on exploration activities.
3.2Production data
The 2016 EITI Reports provide official production volumes and values for all six key extractives commodities produced in 2016.
3.3Export data
The 2016 EITI Reports provide official export volumes and values for each of the five extractives commodities exported in 2016.
Revenue collection
4.3Barter agreements	Not applicable
The requirement on infrastructure provisions and barter arrangements is not applicable to Ghana.
4.6Direct subnational payments
Subnational direct payments exist in the mining sector, and the 2014 EITI Report adequately explains direct payment of property rates by mining companies to District Assemblies.
4.7Disaggregation
The 2017 -18 mining and petroleum EITI Reports disaggregate financial data by company, central government agency and revenue stream. While Ghana has begun its efforts to consider project-level disclosures, as required for all fiscal years ending on or after 31 December 2018, EITI reporting to date at a project level has been partial.
4.9Data quality
Aspects of the requirement have been adequately implemented: there is MSG oversight in the procurement of the IA and agreeing measures to ensure adequate data quality and assurances in accordance with the standard procedures endorsed by the EITI Board. However, there is no evidence to suggest an independent assessment of data reliability in the oil and gas EITI Report, which lacks a clear statement from the IA confirming the comprehensiveness and reliability of the overall data presented.
4.1Comprehensiveness
The 2017 -18 EITI Report provide a definition of the materiality thresholds for selecting companies and revenues. All government entities reported comprehensively, despite the continuous efforts by the MSG to ensure comprehensive disclosures by companies, non-reporting companies accounted for 5.3% of the total government revenue from oil and gas for 2018. One of the non-reporting companies, Anadarko, accounted for at least 3% of government extractive revenues, which represents a significant gap in the reconciliation of company payments and government revenues.
4.2In-kind revenues
There are no in-kind revenues in mining. In oil and gas. The 2017-18 EITI Report discloses oil sales disaggregated by date, field, and per individual buying company, though not disaggregated by individual revenue stream. The report also provides volumes collected and volumes sold for both the state’s natural gas in-kind revenues as well as GNPC's equity natural gas revenues, albeit without disaggregation between the two.
4.4Transportation revenues	Not applicable
No evidence that such revenues exist in Ghana. The requirement on transportation revenue is therefore not applicable to Ghana.
4.5SOE transactions
There were no material SOEs in mining in 2017-18. The 2017 - 18 EITI Reports indicate that GNPC’s transfer of proceed from oil and gas sales form part of SOE transactions, but furthermore does not identify other material transactions between SOEs, nor between SOEs and government. However, GNPC’s transfers to the PHF, which amounted to USD 814m in 2018, are reconciled, as are GNPC’s receipts of in-kind revenues from companies.
4.8Data timeliness
The 2014 EITI Reports were published on 18 January 2016, about one year after the end of the financial year covered.
Revenue allocation
5.1Distribution of revenues
The 2014 EITI Report on mining gives a clearer picture of the distribution of revenue than the oil and gas report. The latter report contains much institutional detail and quantitative information on revenue flows but fails to pull this information together into a clear picture of the distribution of revenue, in particular of the streams channelled to/through the Ghana National Petroleum Corporation (GNPC).
5.2Subnational transfers
Subnational transfers are not applicable in the oil and gas sector. The 2017 -18 EITI report indicates applicable subnational transfers in the mining sector and discloses the statutory and actual distributions according to the formula for some regions. However, District Assemblies or other entities located in several regions are not reported for in terms of ground rent and mineral royalties, even if material companies did operate in the regions
5.3Revenue management and expenditures	Not assessed
The 2014 EITI Reports contain helpful information on Ghana’s budget and auditing process. Information on expenditures from extractive sector revenues is reported in considerable detail across some institutions, but could be more useful if it were complete and presented in a broader budgetary context.
Socio-economic contribution
6.1Mandatory social expenditures	Not applicable
The 2014 EITI Reports explain that there are no mandatory social expenditures in Ghana. The 2014 EITI Reports contain descriptions and some figures of voluntary corporate social responsibility projects by some companies, without being consistent and comprehensive across each sector.
6.2Quasi-fiscal expenditures
The GHEITI Report confirm that no quasi-fiscal expenditures by SOEs occured in the mining sector in 2018. The 2017-2018 oil and gas report indicates that quasi-fiscal expenditures did not occur in 2017 and 2018. However, the inconsistency in information on QFEs provided in EITI Reports compared to other reliable source (such as PIAC and IFS) raises concerns on the comprehensiveness of QFE disclosures in GHEITI reporting.
6.3Economic contribution
The 2014 EITI Report includes, in absolute and relative terms, the contribution of the extractive industries to GDP, government revenue, exports and employment. The only small exception is information on key regions of non-gold production in the mining report.
Outcomes and impact
7.2Data accessibility	Not assessed
The EITI Reports are accessible in print and summarised formats. They are not machine readable, although key information is available from the Ghana EITI open data dashboard. The data is from the 2012/13 reports and do not include 2014 data.
7.4Outcomes and impact of implementation
The annual progress report 2015 was submitted within the deadline and adequately reflects Ghana EITI’s main activities and progress made during 2015. The report and the completion of a formal impact assessment demonstrates openness to public scrutiny.
7.1Public debate
Ghana EITI has made various efforts to ensure that EITI disclosures are actively promoted. Ghana EITI appears to maintain a high level of dissemination and outreach activities. Public events and roundtables have also been organised to discuss issues such as beneficial ownership, transfer pricing and artisanal and small-scale mining. Some stakeholders find that reports can be made more comprehensible to the public.
7.3Follow up on recommendations
The multi-stakeholder group has taken steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies, and to develop and follow up on policy and sector relevant recommendations for improvements in the EITI Reports. Ghana EITI have implemented several of the recommendations to improve sector governance.