Decisions on EITI Validation of Mozambique, Tanzania, Zambia

 

The international EITI Board has declared that MozambiqueTanzania, and Zambia have made “meaningful progress” in their implementations of the EITI. This follows EITI Validation Reports that concluded that most, but not all of the validation indicators had been met. They set out recommendations for strengthening the EITI process.

In each case, the Board found that five indicators were not met (9, 11, 13, 14, and 15). In summary, these relate to materiality, auditing standards and coverage. Accordingly, the Board has set out five corrective actions that need to be addressed in order to achieve EITI Compliant status. All three countries are embarking on their next EITI reconciliation reports taking into account these required actions. The full decisions from the Board can be found below.

In accordance with the transition procedures for the EITI Rules 2011 edition, all three countries have had their EITI Candidate status renewed for 18 months to 15 February 2013.

For further information about EITI implementation in Mozambique, Tanzania and Zambia, please contact EITI Deputy Head Eddie Rich.

 

 

The Board's decision on Mozambique

The Board concludes that Mozambique has made meaningful progress in implementing the EITI. The Board agreed that Mozambique would retain its status as a Candidate country, subject to a clearly defined and agreed work plan for achieving Compliant status, including a schedule for its next Validation.

The Board congratulates the government, companies and civil society organisations in Mozambique for the progress made in implementing the EITI. It especially notes the production of the first MEITI Report in January 2011. The Board also wishes to congratulate the validator and all stakeholders involved in the validation process on a clear and comprehensive validation report.

The validator found that Mozambique has not met a number of the validation indicators. The validator expresses concerns about the lack of an updated workplan, lack of civil society engagement and lack of disclosure of government revenues to the reconciler.

In all decisions on Validation the Board places a priority on the need for comparable treatment between countries and the need to protect the integrity of the EITI brand. The Board reviewed the validator’s report in detail. On several issues, the Board shares the validator’s concerns. However, the Board also disagreed with some of the validator’s assessments. The Board agreed that indicators 9, 11, 13, 14, and 15 are unmet, and agreed the following corrective actions needed in order for Mozambique to achieve compliance:

  1. The MSG should agree a clear definition of “material payments and revenues” and incorporate this definition into the reporting templates and reconciliation process for the second EITI Report (indicator 9). This should specifically address the question of the participation of small companies and social payments.
  2. The second EITI Report should clearly demonstrate that all entities that make or receive material payments are participating in the reporting process (requirement 11).
  3. As per the Indicator Assessment Tool for Indicator 13, the government and MSG should take steps to ensure that government disclosures to the reconciler are based on audited accounts to international standards and agree a strategy for addressing these issues in accordance with the requirements as specified in Validation IAT 13. 2
  4. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining payments by companies to government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 14).
  5. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining revenues received by the government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 15).

The Board recommends that the MSG should agree a comprehensive (time-bound and costed) work plan that: (1) covers the publication and dissemination of the second EITI report and steps toward regular and timely EITI reporting thereafter; (2) addresses on the recommendations from the first reconciliation report and from the validator; and (3) addresses the corrective actions highlighted above.

In developing the workplan, the Board also recommends that the government and the MSG formally assesses whether there are any barriers to achieving compliance (including capacity constraints, and any legislative or regulatory barriers). Furthermore, it is suggested that the MSG revises its Terms of Reference based on the lessons learned from the first EITI Report and the validation process in order to secure effective governance and oversight of the MEITI process.

In accordance with the transition procedures, the Board agreed that Mozambique will have its candidacy renewed for 18 months (i.e. until 15 February 2013), by the end of which it must have completed a Validation that demonstrates compliance with the 2011 edition of the EITI rules. If Mozambique does not achieve compliant status by this deadline it will be de-listed.

The MSG may request a waiver from the requirement to undergo a second Validation on the grounds that the remedial actions necessary for achieving compliance are not complex and can be undertaken quickly. It will be within the discretion of the Board to determine whether to grant the waiver request. If the waiver request is made in 2011 and subsequently granted, the secretariat review will be conducted in accordance with the old rules regardless of the date of the Board decision.

The Board's decision on Tanzania

The Board concludes that Tanzania has made meaningful progress in implementing the EITI. The Board agreed that Tanzania would retain its status as a Candidate country, subject to a clearly defined and agreed work plan for achieving Compliant status, including a schedule for its next Validation.

The Board congratulates the government, companies and civil society organisations in Tanzania for the progress made in implementing the EITI. It especially notes the production of the first TEITI Report in February 2011. The Board also wishes to congratulate the validator and all stakeholders involved in the validation process on a clear and comprehensive validation report.

The validator found that Tanzania has not met a number of the validation indicators. Given the significant discrepancies identified in the first TEITI report, the validator expressed concern regarding the reconciliation process, notably the insufficient planning and consultation with reporting entities, lack of collaboration by some companies and the reliability of data reported by the government. The validator also noted that the lack of a legal basis for TEITI poses a question of sustainability.

In all decisions on Validation the Board places a priority on the need for comparable treatment between countries and the need to protect the integrity of the EITI brand. The Board reviewed the validator’s report in detail. On several issues, the Board shares the validator’s concerns. However, the Board also disagreed with one of the validator’s assessments, taking into account supplementary information provided by the EITI International Secretariat. The Board agreed that indicators 9, 11, 13, 14, and 15 are unmet, and agreed the following corrective actions needed in order for Tanzania to achieve compliance:

  1. The MSG should agree a clear definition of “material payments and revenues” and incorporate this definition into the reporting templates and reconciliation process for the second EITI Report (indicator 9). This should specifically address the question of the participation of small companies and payments by companies to local government authorities.
  2. The second EITI Report should clearly demonstrate that entities that make or receive material payments are participating in the reporting process (requirement 11).
  3. As per the Indicator Assessment Tool for Indicator 13, the government and MSG should take steps to ensure that government disclosures to the reconciler are based on audited accounts to international standards and agree a strategy for addressing these issues in accordance with the requirements as specified in Validation IAT 13.
  4. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining payments by companies to government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 14).
  5. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining revenues received by the government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 15).

The Board also calls on MSG to ensure that the recommendations of the CAG report relating to the clarification of discrepancies are taken into account for future reconciliations.

The Board agreed that Tanzania will have its candidacy renewed for 18 months (i.e. until 15 February 2013), by the end of which it must have completed a Validation that demonstrates compliance with the 2011 edition of the EITI rules, including requirement 5(e) regarding regular and timely reporting. If Tanzania does not achieve Compliant status by this deadline it will be de-listed.

The MSG may request a waiver from the requirement to undergo a second Validation on the grounds that the remedial actions necessary for achieving compliance are not complex and can be undertaken quickly. It will be within the discretion of the Board to determine whether to grant the waiver request. If the waiver request is made in 2011 and subsequently granted, the secretariat review will be conducted in accordance with the previous edition of the EITI Rules regardless of the date of the Board decision.

The Board's decision on Zambia

The Board concludes that Zambia has made meaningful progress in implementing the EITI. The Board agreed that Zambia would retain is status as a Candidate country, subject to a clearly defined and agreed work plan for achieving Compliant status, including a schedule for its next Validation.

The Board congratulates the government, companies and civil society organisations in Zambia for the progress made in implementing the EITI. It especially notes the production of the first Zambia EITI Report in March 2011, and the subsequent publication of an accessible summary report. The Board also wishes to congratulate the validator and all stakeholders involved in the validation process on a clear and validation comprehensive report.

The validator found that Zambia has not met a number of the validation indicators, particularly related to the scoping of the process.

In all decisions on Validation the Board places a priority on the need for comparable treatment between countries and the need to protect the integrity of the EITI brand. The Board reviewed the validator’s report in detail. On several issues, the Board shares the validator’s concerns. However, the Board also disagreed with some of the validator’s assessments. The Board agreed that indicators 9, 11, 13, 14, and 15 are unmet, and agreed the following corrective actions needed in order for Zambia to achieve compliance:

  1. The MSG should undertake an improved scoping and clarification of the receipts/payments to be included in future EITI reconciliations including a clear definition of “material payments and revenues” and incorporate this definition into the reporting templates for the second EITI Report (indicator 9). This should specifically address the question of the reporting of oil and gas signature bonuses, and the reporting procedures for ZCCM-IH.
  2. The second EITI Report should clearly demonstrate that all entities that make or receive material payments are participating in the reporting process (requirement 11).
  3. As per the Indicator Assessment Tool for Indicator 13, the government and MSG should take steps to ensure that government disclosures to the reconciler are based on audited accounts to international standards and agree a strategy for addressing these issues in accordance with the requirements as specified in Validation IAT 13.
  4. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining payments by companies to government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 14).
  5. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining revenues received by the government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 15).

The Board recommends that:

  1. the MSG should agree a comprehensive (time-bound and costed) work plan that: (1) covers the publication and dissemination of the second EITI report and steps toward regular and timely EITI reporting thereafter; (2) addresses on the recommendations from the first reconciliation report and from the validator; and (3) addresses the corrective actions highlighted above;
  2. a review of the governance arrangements of the ZEC to ensure its smooth on-going functioning is undertaken; and
  3. the procurement procedures and ZEC oversight should be strengthened for future reporting cycles.

In accordance with the transition procedures, the Board agreed that Zambia will have its candidacy renewed for 18 months (i.e. until 15 February 2013) by the end of which it must have completed a Validation that demonstrates compliance with the 2011 edition of the EITI rules. If Zambia does not achieve compliant status by this deadline it will be de-listed.

The MSG may request a waiver from the requirement to undergo a second Validation on the grounds that the remedial actions necessary for achieving compliance are not complex and can be undertaken quickly. It will be within the discretion of the Board to determine whether to grant the waiver request. If the waiver request is made in 2011 and subsequently granted, the secretariat review will be conducted in accordance with the old rules regardless of the date of the Board decision.