Opening up state-owned enterprises and commodity trading
Triggered by disclosure requirements, data on transactions between governments, state-owned enterprises and commodity traders are now being published
Understanding the responsibilities of state-owned enterprises in each country is critical for sound public financial management, as they can play a critical role in exploiting natural resources and managing the extractive sector.
Many countries receive a share in the commodities extracted, either in addition to or in place of tax revenue. These “in-kind” revenues occur when governments opt to receive products instead of cash, or loans in return for assured trades. Governments can then choose to use their resources domestically or to sell them
on the international markets, often through commodity traders.
These transactions are high value. The average cargo size is around 900,000 barrels, which in the case of crude oil is worth USD 45 million at a price of USD 50 per barrel. These transactions pose a high risk for mismanagement.
The role of the state-owned enterprise represented above by a national oil company in the contracting, selling and refining of the state’s share of oil, gas and minerals. Revenues from the sale go to the government.
Working together with governments, commodity traders and civil society
In 2015, the EITI established a multi-stakeholder Working Group to advise and guide the EITI’s efforts to improve the disclosures on “first trades”. Albania, Cameroon, Chad, Côte d’Ivoire, Ghana, Indonesia, Mauritania and Nigeria participated
in a targeted effort to produce new guidance. This was endorsed by companies, civil society groups and governments and included a reporting template allowing for effective collection, interpretation and use of first trade data.
Opportunities and challenges
The experiences of this working group and pilots in implementing countries have also resulted in clarifications to EITI Requirements. These significantly improve the usefulness
of the information published by state-owned enterprises. Future data will help reveal the use of resource-backed loans and pre-payment deals which are becoming an increasingly significant source of finance for some countries, but can
be a source of high risk when commodity prices are volatile.