São Tomé and Príncipe 2016 Validation

São Tomé and Príncipe's Validation commenced on 01 July 2016.

On 8 March 2017, São Tomé and Príncipe was validated against the 2016 Standard

Validation is the EITI's quality assurance mechanism and measures the progress countries have made in meeting the requirements of the EITI Standard. For more information about the country, visit the country page on eiti.org.

The Board's decision

On 8 March 2017, the EITI Board came to the following decision on São Tomé and Príncipe's status: 

The Board agrees that São Tomé and Príncipe has made meaningful progress overall in implementing the 2016 EITI Standard. The Board’s determination of São Tomé and Príncipe’s progress with the EITI’s requirements is outlined in the assessment card, below.

The EITI Board agreed that São Tomé and Príncipe had not made satisfactory progress on requirements 1.4, 1.5, 2.2, 2.3, 3.1, 4.6 4.9, 6.1, 7.3 and 7.4. The major areas of concern relate to MSG governance (#1.4), work plan (#1.5), license allocation (#2.2), license register (#2.3)), exploration data (#3.1), direct sub-national payments (#4.6), data quality (#4.9), mandatory social expenditures (#6.1.a), follow-up on recommendations (#7.3), outcomes and impact (#7.4).

Accordingly, the EITI Board agreed that São Tomé and Principe will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second validation commencing on 8 March 2018. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, the São Tomé and Príncipe Extractive Industries National Stakeholder Group may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 July 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed an Independent Validator, who submitted a Validation Report to the EITI Board. The São Tomé and Príncipe Extractive Industries National Stakeholder Group was invited to comment on the findings throughout the process. The national secretariat’s comments on the report were taken into consideration. The final decision was taken by the EITI Board.

São Tomé and Príncipe's progress by requirement

The EITI Board agreed the following assessment card:

Corrective actions

The EITI Board agreed the following corrective actions to be undertaken by São Tomé and Príncipe. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 8 March 2018:

  1. In accordance with Requirement 1.4.a, the government should ensure that all constituencies are adequately represented in the MSG. Requirement 1.4.b.i further requires that members of the MSG have the capacity to carry out their duties. MSG members should ensure that they are able to perform their duties in accordance with their own Terms of Reference. In accordance with Requirement 1.4b.vi, the MSG should agree and publish its procedures for nominating and changing representatives. This should include ensuring that there is a process for changing group members that respects the principles set out in Requirement 1.4.a.
     
  2. In accordance with Requirement 1.5, the MSG is required to maintain a current work plan, fully costed and aligned with the reporting and Validation deadlines established by the EITI Board. The work plan must set implementation objectives that are linked to the EITI principles and reflect national priorities for the extractive industries (Requirement 1.5a) and assess and outline plans to address any potential capacity constraints in government agencies, companies and civil society that may be an obstacle to effective EITI implementation (Requirement 1.5.c.i). It should also address the scope of EITI Reporting, including plans for addressing technical aspects of reporting such as comprehensiveness and data reliability (1.5.c.ii). It is also required that the work plan identify and outline plans to address any potential legal or regulatory obstacles to EITI implementation, including any plans to incorporate the EITI Requirements within national legislation or regulation. (Requirement 1.5.c.iii). Lastly, it should outline the SIESNG’s plans for implementing the recommendations from Validation and EITI Reporting (Requirement 1.5.c.iv).
     
  3. In accordance with Requirement 2.2, São Tomé and Príncipe is required to disclose the (i) the technical and financial criteria used  in awarding licenses, (ii) information about the recipient(s) of the license that has been transferred or awarded, including consortium members where applicable, and (iii) any non-trivial deviations from the applicable legal and regulatory framework governing license transfers and awards related to the award or transfer of licenses pertaining to the companies covered in the EITI Report during the accounting period covered by the EITI Report.
     
  4. In accordance with Requirement 2.3.b, São Tomé and Príncipe is required to maintain a publically available register or cadastre system(s) with the following timely and comprehensive information regarding each of the licenses pertaining to companies covered in the EITI Report: (i) license holder(s), (ii) where collated, coordinates of the license area, (ii) date of application, date of award and duration of the license, (iv) in the case of production licenses, the commodity being produced. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them.
     
  5. In accordance with Requirement 3.1, the EITI Report must provide an overview of the extractive industries, including any significant exploration activities.
     
  6. In accordance with Requirement 4.6, the MSG should establish whether direct payments, within the scope of the agreed benefit streams, from companies to subnational government entities are material. Where material, the MSG is required to ensure that company payments to subnational government entities and the receipt of these payments are disclosed and reconciled in the EITI Report.
     
  7. In accordance with Requirement 4.9.a, the EITI requires an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. The MSG should comply with the following:
     
    1. Payments and revenues should be reconciled by a credible, independent administrator, applying international auditing standards, and with publication of the administrator’s opinion regarding the reconciliation including discrepancies, should any be identified (#4.9b)
       
    2. The reconciliation of company payments and government revenues must be undertaken by an Independent Administrator applying international professional standards (#4.9.b.i)
       
  8. In accordance with Requirement 6.1.a, São Tomé and Príncipe must disclose and, where possible, reconcile social expenditures. Where such benefits are provided in-kind, it is required that São Tomé and Príncipe disclose the nature and the deemed value of the in kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary be disclosed. Where reconciliation is not feasible, the MSG should provide unilateral company and/or government disclosures of these transactions.
     
  9. In accordance with Requirement 7.3, the MSG is required to take steps to act upon lessons learnt; to identify, investigate and address the causes of any discrepancies; and to consider the recommendations resulting from EITI reporting.
     
  10. In accordance with Requirement 7.4, the annual activity reports (APR) should be made publically available, and include an overview of their responses to and progress made in addressing the recommendations from reconciliation and Validation in accordance with Requirement 7.3.i. Where the government or MSG has decided not to implement a recommendation, it is required that the MSG documents the rationale in the annual progress report. The APR should also include an assessment of progress with achieving the objectives set out in its work plan, including the impact and outcomes of the stated objectives (Requirement 7.4.a.iv).

The MSG is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report.

Next Validation date

A second Validation will commence on 8 March 2018.

Impact of EITI in São Tomé and Príncipe

Taken from section 7.5 of the initial data collection

All stakeholders interviewed for this assessment considered that EITI is relevant for STP despite the lack of production and the low level of activity in the extractive sector. The first EITI Report was published in December 2014 and much of the potential impact of the EITI is yet to be realised. Concrete impact to date relates to increasing public understanding of the oil sector, indirectly improving information management in government agencies, deepening collaboration between sectors and identifying governance challenges especially related to the JDZ and social expenditure.

Tracking the status of implementation of social projects has led to clear gaps being identified in the management and monitoring of these contributions. Projects are delayed as companies and the government are not always able to agree on the content of the project. Both company and civil society representatives noted the need for clear guidelines and better monitoring. A government representative recognised that the publication of information on social projects in EITI Reports had created an external pressure that had made the ANP, which monitors social projects, more accountable.

Both the 2003-2013 and 2014 EITI Reports go beyond minimum requirements in publishing information about the management of revenues. Stakeholders noted that it was common that citizens had an inaccurate understanding of the volume and use of oil revenue and that the EITI helped clarify these issues and show that revenue allocations followed fiscal rules. The 2014 EITI Report documents transfers from the central government to the autonomous region of Príncipe and to municipalities. In a media interview, the president of the regional government, Tozé Cassandra, noted that the EITI helped clarify the misunderstanding that transfers from the central government were very large[1]. Currently the most significant barrier to achieving the work plan's objective of transparent use of petroleum revenue is the lack of such revenue. The EITI however helps to consolidate the basis for sound revenue management in preparation for future oil revenue and helps track the utilisation of sporadic revenue, such as signature bonuses.

Considering the current revenue from the sector and reliance on external funding, there are legitimate concerns that the EITI is not viable in its current form. Government agencies reported that EITI had already led to them identifying the need to improve information management systems to ensure that data was readily available when requested. STP has relatively strong institutions for transparency, and much of the information featured in EITI Reports could be published regularly on the GRIP and ANP websites. ANP is already preparing to add license information on its website and the Ministry of Finance and the central bank have discussed the possibility of publishing National Oil Account transactions monthly on the GRIP website. This would save annual data collection costs. The recently developed and still unpopulated STP-EITI website could also be used for disclosing data online.

The 2003-2013 and 2014 EITI Reports contain information about the budget and funding of the JDA. The JDA's high expenditures have provoked criticism, and civil society representatives noted that they were going to use the findings from EITI Reports to advocate that the management of the JDZ be revisited. Prime Minister Trovoada recently discussed the future of the JDZ with the Nigerian President Buhari and the press reported following the meeting that the management of the zone would be reviewed[2]. The EITI is informing public discussion on the topic. The 2014 EITI Report found that the JDA is not compliant with the Abuja Declaration on Transparency and Good Governance. The declaration requires that the JDA discloses much of the information required by the EITI on its website. By bringing this into public knowledge, the EITI puts pressure on the governments of Nigeria and STP to ensure that JDA discloses the required information. An MSG member suggested that the Government of STP raises the issue in the next meeting of the inter-ministerial council. Very good discussion

The government has requested a grant from the World Bank to strengthen the capacity of the ANP and to revise the strategy and legal framework for the oil sector. The 2014 EITI Report contains recommendations related to this. For the information and recommendations to lead to improved governance, the MSG needs to consider and address them. For the EITI to reach its potential impact, the 2016 work plan should reflect the MSG's positions towards the recommendations and outline activities for furthering the agreed objectives.

The AfDB is funding a scoping study on including fisheries in EITI reporting which is being finalised. This increases the chances of the EITI maintaining its relevance even if commercial oil discoveries are not made.  Integrating into the process a sector that is inherently different from the oil industry and involving a new set of actors in the MSG’s work may prove to be challenging. As none of the CSOs represented on the MSG focus specifically on the extractive sector, there is potential for the MSG to become a wider platform for dialogue on budget transparency and the management of natural resources beyond oil.