Guidance on state-owned enterprises (2.6)

Where state participation in the extractive industries gives rise to material revenue payments, implementing countries must disclose information on the financial relationship between the government and the state-owned enterprise, as well as the level of ownership in the company (requirement 2.6).

The MSG must ensure that the reporting process comprehensively addresses the role of state-owned enterprises (SOEs) (requirement 4.5).

When to consider SOEs

Scoping phase

  1. Identify SOEs and their subsidiaries. 
    According to requirement 2.6.a): 
    For the purpose of EITI reporting, a SOE is a wholly or majority government- owned company that is engaged in extractive activities on behalf of the government.
    Based on this, the multi-stakeholder group is encouraged to discuss and document its definition of SOEs taking into account national laws and government structures.
     
  2. Explain the financial relationship of each SOE and the government (the rules as well as the practice), e.g. transfers of funds, retained earnings, reinvestment and third-party financing. 

    - Map the information that each SOE already publishes, e.g. annual financial statements or other unilateral disclosures. The EITI Report can then refer to those disclosures.
    - Map the laws, regulations establishing the relationship
     
  3. Provide a fully comprehensive list of SOEs and their subsidiaries, and their ownership in mining and oil and gas companies (see requirement 2.6.b), as well as any changes of participation in the year(s) under review. 
     
  4. Where there are changes to government or SOE participations in the year under review, the terms of transactions need to be described (2.6.b)
     
  5. 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 transactions should be disclosed (2.6.b).
     
  6. Assess the materiality of payments of companies to SOEs and SOEs to government. Make a list of all those payments, include them in the reporting template (requirement 4.5).

EITI Report

  • Document available information on SOEs (requirement 2.6)
  • Complement gaps in publicly available information vis-à-vis what is required in the Standard (requirement 2.6)
  • Disclose and reconcile all payments from companies to SOEs, and payments from SOEs to the government (requirement 4.5)

Annual progress report

  • If the EITI Report identifies recommendations with regards to SOEs, how are they being addressed? If substantial action is required, this can be reflected in work plans. 

Country examples

Ghana

The country is an interesting example for an oil and gas SOE.

  • Ghana was found to have made meaningful progress on 2.6. in its 2016 Validation.
  • The 2014 oil and gas report contains interesting information about the role of Ghana National Petroleum Corporation’s (GNPC) and its operations, but is missing information on own account and as conduit for government revenue. Its financial relationships with the government are not clear, and the requisite quantification cannot be traced.
  • See the 2016 Report on initial data collection on Ghana by the International Secretariat, pp.41, available here, including recommendations on how to address existing shortcomings (p. 44)

Liberia

The country is an interesting example for an oil and gas SOE.

  • Liberia was found to have made inadequate progress on 2.6. in its 2016 Validation.
  • The Report on initial data collection found that while the 2014 EITI Report described the SOE in the oil and gas sector, NOCAL, as well as the general rules related to its financial relations with the government, it did not clarify the level of state ownership in either NOCAL or in mining projects like ArcelorMittal’s. The EITI Report did not cover changes in government ownership in the period under review, the rules and practices related to reinvestment and third party financing, nor the existence of any loans or loan guarantees from the government or NOCAL to any extractives companies.
  • See the 2016 Report on initial data collection on Liberia by the International Secretariat, pp.55, available here, and recommendations on how to address shortcomings (p. 60).

Nigeria

The country is an interesting example with regards to loans and loan guarantees.

  • Nigeria was found to have made meaningful progress on 2.6. in its 2016 Validation.
  • In oil and gas, the MSG has undertaken significant efforts over the past ten years to disclose information on the operation of Nigerian National Petroleum Corporation’s (NNPC, a state-owned enterprise) and its subsidiaries. The 2013 EITI Report states that state-owned enterprises (SOEs) made material payments to government and provides information on some SOEs, the rules governing financial relations between the state and SOEs both statutorily and in practice, some information on changes in state ownership and on loans contracted by SOEs. The 2013 EITI Report provides information on the transfers of NNPC shares in joint venturelicenses prior to 2013. However, the list of SOEs does not appear to be comprehensive and the report does not address any loans or loan guarantees extended by the government or SOEs to oil and gas companies.
  • See a detailed analysis of Nigeria's progress on requirement 2.6 in the 2016 Report on initial data collection and stakeholder consultation, available here (pp. 78). Recommendations on how to address shortcomings can be found on p. 92.

Mauritania

The country is an interesting example for a mining SOE.

  • Mauritania was found to have made inadequate progress on 2.6. in its 2016 Validation.
  • While the 2014 EITI Report listed two extractives companies in which the state holds majority equity and some of the rules and practices governing financial transfers between SOEs and government, including relevant laws and practices related to dividends and third-party lending, it did not clarify whether there were any changes in ownership of extractives SOEs or their subsidiaries in 2014 and it remains unclear whether disclosures of loans or loan guarantees are comprehensive. The terms associated with government equity in each company were not disclosed, and the rules and practices governing SOEs’ retained earnings and reinvestment were not described.
  • See a detailed analysis of Mauritania's progress on requirement 2.6 in the 2016 Report on initial data collection and stakeholder consultation, available here (pp. 55). Recommendations on how to address shortcomings can be found on p. 63 (recommendation 1. 

Mongolia

The country is an interesting example for mining SOEs.

  • Mongolia was found to have made inadequate progress on 2.6. in its 2016 Validation.
  • The 2014 EITI Report lists 21 extractives companies in which the state holds majority equity, some of the rules and practices governing financial transfers between government and SOEs and some details of loans and loan guarantees. However, the rules and practices related to SOEs’ retained earnings and reinvestment are not described. The report does not clarify any changes in ownership of extractives SOEs or their subsidiaries in 2014 and it remains unclear whether disclosures of loans or loan guarantees are comprehensive. 
  • See a detailed analysis of Mongolia's progress on requirement 2.6 in the 2016 Report on initial data collection and stakeholder consultation, available here (pp. 51). Recommendations on how to address shortcomings can be found on p. 55, recommendation 4.