Extractive Industry Transparency Initiative (EITI) (MW0005)

Status quo: Improving transparency and accountability and following the money from the extractive industry - (Mining, Oil and Gas) sector

Main objective: To ensure transparency and accountability in the collection and management of revenue from the extractive industry sector and natural resources in Malawi

Brief description: The extractive industry sector and natural resources has been associated with a curse instead of a blessing for a lot of African countries and thus partly because of lack of transparency in the sector. To make sure that revenue from the industry contributes to sustainable development, there is need for a tool that tracks revenue collection and where such revenue goes. EITI is such a tool as it provides information to different stakeholders and citizens. Availability of information on revenue transparency will help citizens appreciate how much money the government receives from the sector and how that money contributes to national budget and translating to service delivery.

Challenges: Open contracts and revenue transparency in the extractive industry sector

Intended results: Make all rules and regulations for natural resource licenses and concessions available in a public database. This will also involve harmonizing with other laws like the taxation Act, freedom of information and Reviewing of the mineral legislation
Publish timely, comprehensive reports on oil, gas and mining operations, including detailed revenue and contracts which government has entered with the industry

5. Extractive Industries Transparency Initiative- (EITI)

Commitment Text:

The extractive industry sector and natural resources has been associated with a curse instead of a blessing for a lot of African countries and thus partly because of lack of transparency in the sector. To make sure that revenue from the industry contributes to sustainable development, there is need for a tool that tracks revenue collection and where such revenue goes. EITI is such a tool as it provides information to different stakeholders and citizens. Availability of information on revenue transparency will help citizens appreciate how much money the government receives from the sector and how that money contributes to national budget and translating to service delivery.

Milestones:

5.1. Establishment of the Multi-stake holder Grouping

5.2. Submission of EITI application

5.3. Establishing the EITI secretariat

5.4. Recruitment of staff to work at the secretariat

Responsible institution: Ministry of Finance, Economic Planning and Development

Supporting institutions: Ministry of Energy and Natural Resources, Office of the President and Cabinet (OPC), Malawi Revenue Authority (MRA), and Reserve Bank of Malawi, Citizens for Justice (CFJ), ActionAid, Council for Non-Governmental Organizations of Malawi (CONGOMA), Catholic Commission for Justice and Peace (CCJP), Institute for Policy Interaction (IPI), Foundation for Community Support Services (FOCUS), Paladin Energy Ltd, Mkango Resources Limited and Globe Metals Ltd, Shayona Cement Limited, and Malawi Chamber of Commerce and Industry

Start date: Not specified

End date: Not specified

Context and Objectives

Although extractive industries currently constitute less than 1 percent of Malawi’s GDP, the government is promoting investment in the extractive industries to reach 20 percent of GDP by 2025.[77] This commitment calls on Malawi to begin the process of joining the Extractive Industries Transparency Initiative (EITI), a global standard to promote open and accountable management of natural resources, as proposed in the country’s Mines and Minerals Policy of 2013.[78] EITI countries are required to adopt the EITI Standards by:

1)  Establishing a national multi-stakeholder group (MSG) that includes government, companies and civil society to decide how the EITI process should work in that country,

2)  Reporting annually on the key information about the governance of the extractives sector, such as the allocation licenses, tax and social contributions companies pay, and where this money ends up in the government at the national and regional level, as well as recommendations on how to improve the sector’s governance, and

3)  Disseminating the findings and recommendations in the EITI reports to the public.[79]

Upon completion of these steps, candidate countries submit their EITI Candidature Application to the EITI Board, which makes a final decision on the candidate country’s status. If admitted, the candidate country is given a deadline to provide its first annual EITI report.[80]

Adopting the EITI principles requires consistent reporting on information pertaining to the extractives sector and disseminating the information to the public, thus making the commitment relevant to the OGP value of access to information. Also, the involvement of civil society in the multi-stakeholder group would allow civil society to directly influence the way in which EITI is implemented in Malawi, thus making the commitment relevant to the OGP value of civic participation. The commitment’s milestones are straightforward and pertain to the application of EITI participation, such as the establishment of the multi-stakeholder group and the EITI Secretariat. However, because they lack clear timeframes and details on the size and structure of these initiatives, the commitment’s specificity is marked as medium.

Malawi’s interest in EITI comes at a time when extractive industries are expected to become major sources of revenue for the country. Civil society groups view compliance and implementation of the EITI Standard as a way for Malawi to avoid the “resource curse” that prevents many developing countries from benefiting from the revenue from their abundant natural resources.[81] Human Rights Watch has reported on numerous human rights and health risks affecting rural communities near coal and uranium mining sites around Lake Malawi, that could be exacerbated by the recent issuing of licenses and contracts to explore for oil and gas extraction.[82] The publication of EITI reports would provide greater transparency on the allocation of these licenses and contracts, as well as providing valuable information on the environmental impact of extractive industries and the payment of taxes by companies.[83] However, the commitment does not call for additional transparency or consultation activities beyond those required for EITI Candidate status. Had the commitment gone further to outline clear steps to take Malawi from EITI Candidacy to EITI Compliance, the commitment’s potential impact might have been higher. However, given the absence of additional activities, the commitment’s potential impact is assessed as minor.   

Completion

The milestones for this commitment were completed in 2015 and 2016, prior to the period covered in the first action plan. A three-year (2015-2017) work plan for implementing EITI requirements was developed and published in January 2015.[84] Malawi established the multi-stakeholder group in February 2015. The multi-stakeholder group is chaired by the Director of Revenue of the Ministry of Finance, Economic Planning and Development of Malawi and comprises 23 representatives: seven from Government Entities, eight from the extractive companies, and eight from civil society. Malawi submitted its application for EITI Candidature status in July 2015,[85] and was formally admitted as an EITI Candidate country in October 2015.[86] Initially, an interim EITI Secretariat was formed in July 2015, including one representative from the German Corporation for International Cooperation (GIZ), and three from the Ministry of Finance. Three members (a Technical Manager, a Communications and Engagement Officer and a Project Accountant) were recruited in July 2016 to oversee the day-to-day activities of EITI in Malawi, as part of the permanent EITI Secretariat, and an office was established within the Revenue Policy Division at the Ministry of Finance.[87]

During the first year of action plan implementation, Malawi further pursued compliancy with the EITI. Moore Stephens submitted Malawi’s first EITI report in April 2017 for the period from July 2014 to June 2015.[88] In accordance with EITI open data requirements, the report was also published in open data format (Excel). The report covered the oil, gas, mining and forestry sectors, and included 13 recommendations to improve the EITI process. In accordance with EITI compliancy requirements, Malawi has developed a Beneficial Ownership Disclosure Roadmap[89] and an Open Data Policy (both published in January 2017).[90] There is also a detailed work plan for 2018.[91] In February 2017, a delegation from Malawi EITI (MWEITI) visited Nigeria to study how Malawi can emulate the successes of Nigeria’s implementation of EITI principles.[92] It should be noted, however, that the EITI Board has yet to officially assess Malawi against the 2016 Standard (this is scheduled to take place in September 2018).[93] 

Early Results  

The EITI process has already led to preliminary improvements in transparency around the extractives sector in Malawi. Currently, five contracts are published in full on ResourceContracts.org, a global repository of extractive sector contracts (for Nyala Mines, Paladin Limited, Pacific Oil Limited, and two for RAK Gas MB45).[94] The Ministry of Natural Resources, Energy and Mining (formerly the Ministry of Mining) and the Trimble Land Administration have developed an interactive mining map (Mining Cadastre Portal) for the Malawi EITI website, showing the geographical area of the country divided into “blocks” for different types of mining licenses.[95]

Next Steps

Obtaining EITI candidacy status is an important first step towards greater transparency in the extractives sector. As the EITI process moves forward, the multi-stakeholder group and the EITI Secretariat should work diligently to address the 13 recommendations outlined in the first EITI report. Future action plans could try to move Malawi from candidacy to full compliance with the 2016 EITI Standard. This is especially important because the EITI Board will begin assessing Malawi’s compliance with the Standard in September 2018. This could involve commitments pertaining to the implementation of Malawi’s Open Data Policy and Beneficial Ownership Disclosure Roadmap (mentioned in the Completion section above). Malawi’s Open Data Policy outlines specific policy objectives and activities to achieve them, including:

1)  Ensuring enhanced accessibility and communication of EITI data;

2)  Ensuring regular reconciliation of payments by companies and receipts by government entities.[96]

Because of their clear relevance to OGP values as written in the Open Data Policy, future action plans could incorporate these policy objectives and their corresponding implementation activities as the specific milestones in a new commitment.

Public participation and accountability are important elements to ensure transparency in the extractives sector. Malawi is currently in the process of reforming its Mines and Minerals Act of 1981. The draft bill calls for “grievance mechanisms to address concerns and issues related to license holder’s operations and the process to be used in addressing these concerns and issues.”[97] The IRM considers the creation of these grievance mechanisms, as well as the necessary support for citizens to make use of them, as important potential initiatives in order to provide the public with a means to hold mining and petroleum companies accountable based on the information made available from EITI activities.

Furthermore, civil society groups in Malawi (such as PWYP-Malawi), as well as the multi-stakeholder group, believe that passing EITI legislation it important to provide the legal enforcement for the country’s adherence to EITI principles and standards, and to address delays in government entities and extractive companies submitting their reporting templates.[98] Malawi’s first EITI report noted that neither government entities nor extractive companies submitted their reporting templates by the stipulated deadline.[99] Additionally, by establishing a legal framework for EITI activities, Malawi would join a growing number of countries that have enacted specific legislation regarding EITI, such as Nigeria, Tanzania, and Liberia.[100] Civil society also noted that the findings of future EITI reports could be disseminated using more understandable formats for communities and citizens to use the information.