The Board agreed that Zambia has made meaningful progress with considerable improvements in implementing the 2016 Standard.

Outcome of the Validation of Zambia

Decision reference: 2019-71 / BC-282
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

1 December 2019

Board decision

The Board came to the following decision:

The EITI Board agrees that Zambia has partly addressed the corrective actions from the country’s first Validation. Consequently, Zambia has made meaningful progress overall in implementing the EITI Standard, with considerable improvements across several individual requirements.

The Board is delighted that the Government of Zambia has improved its ability to monitor production data. The improvement in coordination between government agencies and companies is an important step to improving the accuracy of production statistics and related mineral royalty calculations. The Board commends Zambia EITI for more systematic follow-up on findings and recommendations from EITI reporting to drive broader reforms in extractives governance, while encouraging Zambia to further enhance the documentation of its follow-up on EITI recommendations.

The Board takes note of Zambia’s plans to build on capacities of the Office of the Auditor General to improve the reliability of government’s EITI reporting. Zambia is encouraged to continue progressing towards routine systematic disclosures of EITI data supported by robust audit and assurance practices. The Board recommends that Zambia pursues its efforts to improve the availability of license allocation information as a means of further enhancing the efficiency of the country’s management of extractives licenses.

The Board recognises that gaps remain in disclosures related to license allocations, which may also be of greater significance in the petroleum sector in future. Further efforts are also required to ensure the reliability of data on payments and revenues related to the extractive industries.

The Board has determined that Zambia will have 12 months before a third Validation, i.e. until 2 December 2020, to carry out corrective actions regarding license allocations (2.2) and on data quality (4.9). Failure to achieve satisfactory progress in the third Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, Zambia’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 Zambia. Progress in addressing these corrective actions will be assessed in a third Validation commencing on 2 December 2020:

In accordance with Requirement 2.2, Zambia should ensure that all relevant laws and regulations governing mineral rights allocations are adequately referenced and publicly available. With this availability they should confirm the statutory procedures, as well as technical and financial requirements, for mining license awards and transfers. Future EITI reporting should clarify the existence of non-trivial deviations from statutory procedures of license transfers and awards. Lastly, Zambia should ensure that the full list of bidders for each license awarded through competitive bidding is publicly disclosed.
In accordance with Requirement 4.9.b, and the Standard Terms of Reference for the Independent Administrator agreed by the EITI Board, Zambia should ensure that the Independent Administrator provides a clear assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested quality assurances for their EITI reporting. Zambia should ensure that the Independent Administrator provides an assessment of comprehensiveness and reliability of the (financial) data presented. 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.

Zambia is encouraged to also consider the strategic recommendations in the Secretariat’s assessment.

Background

Zambia joined the EITI in 2009 and was declared compliant with the EITI Rules in September 2012. Zambia’s second Validation commenced on 25 April 2019. The EITI International Secretariat has assessed the progress made in addressing the four corrective actions established by the EITI Board following Zambia’s first Validation in 2017. The corrective actions related to:

License allocations (Requirement 2.2),
Contract disclosure (Requirement 2.4),
Production data (Requirement 3.2),
Follow up on recommendations (Requirement 7.3).

The Board asked Zambia to address these corrective actions to be assessed in the second Validation. Zambia has undertaken a number of activities to address the corrective actions:

In July 2017, Zambia EITI (ZEITI) launched a new website where information on the extractive sector is published alongside EITI reports.^{^[1]}
On 14 December 2017, Minister of Mines and Minerals Development Chris Yaluma published a press release commenting on the corrective actions, calling for a detailed action plan.
In March 2018, Zambia EITI conducted a workshop for the multi-stakeholder group on mainstreaming EITI disclosures, focusing on the corrective actions.
In July 2018, the Zambia EITI Council (ZEC) published their 2017 ZEITI Annual Progress Report (APR), containing the action plan called for by the Minister.
ZEC approved the ToR for the 2016 EITI Report and the MSG appointed Moore Stephens as the Independent Administrator (IA) in June 2018.
On 27 September 2018 the MSG approved the IA’s scoping report, and the inception report in December 2018.
The MSG approved and published the 2016 EITI Report on 31 December 2018.
In December 2018 and early 2019, Zambia EITI coordinated a financial modelling workshop to build capacity in government agencies (Ministry of Mines and Minerals and Zambia Revenue Authority) and help inform public debate and government policy on taxation in the mining industry.
On 25 July 2019, the Minister of Mines Richard Musukwa clarified the government’s policy on disclosure of the full-text of licenses and their additional documentation, which was published on ZEITI’s website.^{^[2]} The speech took place after the commencement of Validation, however, the Board decided to consider this additional information as it satisfied the criteria agreed in February 2019.^{^[3]}

Zambia’s second Validation commenced on 25 April 2019. The Secretariat assessed the progress made in addressing the four corrective actions established by the EITI Board, as well as progress in meeting Requirement 4.9 related to data reliability. The EITI International Secretariat’s assessment is that Zambia has fully addressed three of the four corrective actions, with significant improvements on one other outstanding requirement. Progress in meeting Requirement 4.9 on data reliability has declined from ‘satisfactory progress’ to ‘meaningful progress’.

The draft assessment was sent to the Multi-Stakeholder Group (MSG) on 17 July 2019. Following MSG comments received on 19 August 2019, the assessment was finalised for consideration by the EITI Board.

The Validation Committee reviewed the case on 17 October and 7 November 2019 and agreed to consider the MSG’s submission of new information subsequent to the commencement of Validation, clarifying the government’s policy on the disclosure of licenses and addressing outstanding gaps related to Requirement 2.4. The Committee upgraded the assessment of Requirement 2.4 to “satisfactory progress”.

^{^[1]} Zambia EITI (2019), Zambia EITI website. Accessed on 14 June 2019, available at: http://zambiaeiti.org

^{^[2]} Speech of Minister of Mines Richard Musukwa (July 2019), Speech, accessed in August 2019. Available at: http://zambiaeiti.org

^{^[3]} EITI (2019), ‘The Board adopted criteria to consider developments and information disclosed after the commencement of Validation’. Available at: https://eiti.org/BD/2019-15

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
A broad range of government agencies are represented on the multi-stakeholder group (MSG), government representatives regularly attend meetings. The attendance of the MSG Chair has been less frequent, but this does not seem to reflect lacking government engagement on the whole. Zambia EITI has also engaged several key government agencies and high-level officials beyond the MSG in the EITI implementation and outreach activities. Government commitment at the higher political level will be important going forward.
1.2Company engagement
Companies are fully and effectively engaged in the EITI process. The government has ensured an enabling environment for company participation.
1.3Civil society engagement
Civil society is fully and actively engaged in Zambia EITI process and able to speak freely on transparency and natural resource governance issues. The government has ensured that there is an enabling environment for civil society participation and made several efforts to engage civil society beyond the multi-stakeholder group in the design and implementation of the EITI.
1.4MSG governance
It was evident during the stakeholder consultations that multi-stakeholder group (MSG) members have a clear understanding of the Terms of Reference for the MSG and appointment of representatives. Decision-making is conducted in an inclusive way which treats each constituency as a partner. The Terms of Reference for the MSG are followed and the invitation to participate in the group is open and transparent, with stakeholders being adequately represented.
1.5Work plan
Zambia EITI’s work plan is a result of consultations with key stakeholders and endorsed by the multi-stakeholder group (MSG), and is made publicly available.
Licenses and contracts
2.2License allocations
The 2016 Report and other public sources disclose license allocations in 2016, statutory rules and procedures, and criteria for 2016 petroleum bidding rounds. Bidders for a petroleum license (block 54) was not available. Existence of award criteria in the mining license process was not sufficiently clear, nor were regulations introduced in 2016. The report does not include an assessment of non-trivial deviations statutory procedures for 2016 mining license awards.
2.3License register
Comprehensive information on the licenses held by material and non-material companies is included in the mining cadastre. Data on the date of application / submission of bid is not available for petroleum licenses, althouh this is not sufficient for the requirement to be unmet.
2.4Policy on contract disclosure
A public speech by Minister of Mines Richard Musukwa in August 2019 clarified the lack of publicly accessible extractive licenses during Validation, while maintaining that the government’s policy is to publish the full text of mining and petroleum licenses, including their associated annexes, addendums or amendments. The speech is available through Zambia EITI's website.
2.1Legal framework
The 2015 EITI Report describes the legal framework and fiscal regime governing the extractive industries including the level of fiscal devolution, an overview of the relevant laws and regulations, and information on the roles and responsibilities of the relevant government agencies. There are parts of the report that refer to laws that have been replaced, such as the MMDA 2008.
2.5Beneficial ownership	Not assessed
Implementing countries are not yet required to address beneficial ownership and progress with this requirement does not yet have any implications for a country’s EITI status. The multi-stakeholder group published its roadmap by the deadline of 1 January 2017 as required.
2.6State participation
The EITI Report provides an overview of state participation in the sector including level of ownership held by Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH) in mining companies, changes in the level of ownership and funding arrangements provided to by the ZCCM-IH to mining companies. ZCCM-IH’s annual audited financial reports are publicly available and include information on the rules and practices regarding transfer of funds between the ZCCM-IH and the state, licenses held, reserves, licenses held, the names of operating companies, royalties and dividends. There is limited information on the recently established Industrial Development Corporation (IDC) and how dividends collected fromthe mining sector are managed, although state asset management companies do not fall under the scope of Requirement 2.6.
Monitoring production
3.1Exploration data
The EITI Report provides an overview of the extractive sector, including exploration activities and estimates of mineral reserves.
3.2Production data
While the 2016 EITI Report provides production volumes and values for only some minerals, while the Zambia EITI website published production volumes and values for all mineral commodities produced in 2016, ahead of Validation commencement.
3.3Export data
The EITI Report discloses total export values by commodity, and export volumes are disclosed for each of the major commodities exported.
Revenue collection
4.3Barter agreements	Not applicable
EITI Requirement 4.3 on barter and infrastructure transactions is not applicable to Zambia.
4.6Direct subnational payments
Direct payments made by companies to subnational government entities are reconciled in the EITI Report. These payments consist of property rates and annual business fees paid by companies directly to local councils.
4.7Disaggregation
Direct payments made by companies to subnational government entities are reconciled in the EITI Report. These payments consist of property rates and annual business fees paid by companies directly to local councils.
4.9Data quality
According to documentation, ZEITI altered their procedures for data quality assurances, after data collection was completed. The Independent Administrator then documents their assessment that reconciled financial data is comprehensive, but this statement is not extended to data reliability. It is thus not possible to conclude that the overall objective of data reliability has been achieved.
4.1Comprehensiveness
The multi-stakeholder group (MSG) has documented its discussions and rationale for selecting a materiality threshold which has resulted in comprehensive reconciliation of the payments and revenues in the extractive sector.
4.2In-kind revenues	Not applicable
EITI Requirement 4.2 on in-kind revenues is not applicable in Zambia.
4.4Transportation revenues	Not applicable
EITI Requirement 4.4 on transport revenues is not applicable to Zambia.
4.5SOE transactions
The rules and practices regarding transfer of funds between the Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH) and the state are disclosed. There is limited information on the recently established Industrial Development Corporation (IDC) and how dividends are managed, although this does not fall under the scope of Requirement 4.5 as IDC is a state-owned asset management company.
4.8Data timeliness
The 2015 EITI Report was published one year after the end of the financial year covered by the report, well ahead of the two-year deadline.
Revenue allocation
5.1Distribution of revenues
The EITI Report describes the distribution of revenues and explains that only revenues collected by local councils are not deposited into the consolidated account.
5.2Subnational transfers	Not applicable
EITI Requirement 5.2 on sub-national transfers is not applicable in Zambia.
5.3Revenue management and expenditures	Not assessed
The EITI Report includes some information on the budget-making process. Reporting on revenue management and expenditures is encouraged but not required by the EITI Standard and progress with this requirement will not have any implications for a country’s EITI status.
Socio-economic contribution
6.1Mandatory social expenditures	Not applicable
There are no mandatory social payments from the extractive sector in Zambia. Requirement 6.1.a is therefore not applicable. The EITI Report discloses voluntary Corporate Social Responsibility payments per company, both in cash and in-kind.
6.2Quasi-fiscal expenditures	Not applicable
The SOE operating in the mining sector, Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH), does not appear to make material quasi-fiscal payments. There is only evidence of smaller social contributions being made, which are disclosed in the company’s annual financial report.
6.3Economic contribution
The 2015 EITI Report provides a brief overview of the contribution of the extractive industry to the economy and provides key figures on contribution to GDP, government revenues, exports and employment.
Outcomes and impact
7.2Data accessibility	Not assessed
The multi-stakeholder group (MSG) has made attempts to make EITI data accessible to the public, produced brief summary reports and is now planning thematic reports to attract audiences. Some capacity building efforts and trainings have been undertaken to increase awareness of the EITI process, improve understanding of information and data from the reports, and encourage use of the information by citizens, the media and others.
7.4Outcomes and impact of implementation
The multi-stakeholder group (MSG) has reviewed the outcomes and impact of EITI implementation on natural resource governance through the production of annual progress reports, agreed by the MSG and made publicly available.
7.1Public debate
There is ample evidence that a country-wide dissemination campaign has been made and that EITI Reports have been actively promoted. The multi-stakeholder group has agreed on a policy to the access, release and reuse of EITI data.
7.3Follow up on recommendations
Zambia EITI has taken steps to act on lessons learnt to strengthen impact of EITI implementation, with a mechanism in place for consistent follow up. The EITI Board recognises the more systematic follow up, while encouraging further enhancement of documentation of these activities.