How can the EITI become more relevant to people’s lives?

This week board members of the EITI (Extractives Industry Transparency initiative) will be meeting in Oslo to discuss how to strengthen the initiative so that it meets its aim of increasing transparency, public debate and accountability over the management of oil, gas and mining resources. Key questions will be discussed, such as whether to require extractive industry companies to disclose contracts, project level information the beneficial owners of licences, as well as how to ensure this information is presented in a way that reaches the right audiences in an accessible and understandable way.

In the light of these debates, Revenue Watch Institute, Paz y Esperanza and Tearfund have recently published a report into the use of EITI information in Peru published through its first report.

Women in Vinchos Community, Ayacucho at information meeting by mining company

Women in Vinchos Community, Ayacucho at information meeting by mining company

The EITI is now implemented in 37 countries and EITI reports present information on payments by oil, gas and mining companies, as well as the receipts by governments, and try to reconcile any differences. The subsequent dissemination of the results aims to enhance transparency, public debate and accountability over use of extractive industry revenues.

The research found that there had been little impact in Peru so far. Various reasons were given and are covered in detail in the report, but below I mention just three clear suggestions for change given by the potential users of the information.

1. Provide information that is relevant to people’s lives

The overwhelming response from local communities was the desire to know what impact the revenues from extractive industries were having on their daily lives. Put simply – what money was paid for the mining project in their community, what reached the district and what was it being spent on. The other main demand – more at national level – was to know the terms and conditions of contracts, with concerns that many of these were not negotiated in the interests of the country, but had been the result of underhand political deals. Both are needed to make the EITI relevant.

2. Work with ‘info-mediaries’ to interpret the information

Many of those interviewed complained that the information they received – particularly in long reports – was too complicated and difficult to understand. Others said that they wanted additional information on the full ‘extractive revenue routes’ from contracts through revenue payments to government spending and impacts.

Recommendations were for groups such as NGOs, media organisations and universities to act as ‘info-mediaries’ (information intermediaries) to interpret complex information and present it in a way that is understandable and relevant to different audiences. There is a role here for greater support from EITI national secretariats as well as donor agencies, and it should also be considered as part of the G8’s transparency agenda.

3. Analyse the context and link to wider social and political processes

The context in Peru is one of rapid development and expansion of oil, gas and mining activity, which has been accompanied by increased social conflicts. In December 2012, the government’s Ombudsman recorded approximately 230 conflicts, more than half of which were related to the exploration and exploitation of minerals. The most high profile case is the ongoing conflict over the Conga mine in Cajamarca, which has paralysed operations for over a year.

The country is largely divided into ‘pro’ and ‘anti’ mining camps and this affects any work by the EITI, with it being seen by some as a government initiative and therefore ‘pro’ mining and not to be trusted.

Although the EITI is not a panacea to resolve all of Peru’s problems, it needs to link closely to the dominant political issues such as environmental protection and local development planning if it is to remain relevant and contribute to better natural resource management and wider reforms. As one respondent from Cajamarca commented:

‘The EITI only plays a role of] informing and disseminating, but many people ask us what use this reconciliation is if it goes no further than making recommendations. A number of people have asked us what point there is in Peru being a compliant country if this has no impact on conflict resolution.’

 [A version of this article was first published on the EITI website and reproduced with kind permission]

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Can Tanzania break their deadlock on Olympic gold?

Tanzanian runner Samson Ramadhani is aiming for gold in the men’s marathon on Sunday, but the 2006 Commonwealth Champion is up against stiff competition in a discipline that East Africans have dominated since Abebe Bikila of Ethiopia won barefoot in 1960 – then repeated the feat (with shoes) four years later. Kenya are current champions when Samuel Wansiru smashed the Olympic record in Beijing.

Samson Ramadhani, Commonwealth Champion 2006

However (tenuous link from Olympics to mining), it may be better for Tanzania that they don’t bring gold home as the promised benefits have not always come to bear from this precious metal.

Gold mining has been intensive since the start of the 1980s and global companies such as African Barrick Gold (Canada), Ashanti Gold (South Africa) and Resolute mining (Australia’s third largest gold producer) own or have significant shares in the mines. According to the latest EITI report, gold accounts for almost two thirds of mineral production and exports earned these companies $1.076 bullion in 2009.

But in the same year Tanzania only earned $57 million from mining royalties.

What can be done?

This is something that is currently being addressed and there are some encouraging developments.

A new Mining Act was passed in 2010, which increases gold royalties from 3-4% and calculates payments based on gross as opposed to net revenues. This could double annual royalties to the Tanzanian government. However (in what is known as a grandfathering clause), the royalties only apply to new contacts, so the challenge is to get companies with existing contracts to move to this new regime. This is not just a pipe dream as one company has already done so. Others must now follow suit.

Secondly, the latest EITI report from May this year (pp20-21) includes vital information such as production volumes, which will enable the Tanzanian Revenue Authority to verify that companies are paying the right amount of royalties on the amount of minerals extracted. The report also includes details of direct payments to local governments as well as payments according to specific projects, which will allow local communities to track payments and ensure that the money ends up where it should and contributes towards development.

Many challenges still remain, as Bishop Munga, member of the EITI Multistakeholder Group told me:

“We still need increased transparency in contracts and licences, information broken down according to all projects and the material presented in a way that local communities can understand and engage with.”

These will need to be addressed in subsequent reports and should be covered in a new EITI law that is planned for next autumn. Tearfund, as part of the Publish What You Pay Coalition, is calling for proposed changes to EU Transparency legislation to address these issues and make sure that the information about payments is relevant and useful to local communities.

However, by far the biggest challenge – and opportunity – comes from elsewhere.

Gas boom

Vast reserves of off-shore gas have recently been discovered, with estimates at 28.7 trillion cubic feet of gas reserves, which, according to the UK government, is more than known UK reserves.

This is predicted to lead to a rapid growth in this sector over the next ten years, potentially bringing in revenues of billions of dollars.

Various licences have already been granted for gas and oil exploration, including to the UK’s BG Group, Ophir Energy, Royal Dutch Shell, Irish exploration firm Aminex Plc and Brazil’s Petrobras.

One government official I spoke to sounded a warning bell about the future:

“Everybody understands that we made a mistake when we entered into agreements with the mining companies in that we provided incentives that were too generous. For oil and gas we need to negotiate a better deal for Tanzania.”

There is the chance to get a better deal for Tanzania, but the window of opportunity is small – maybe only a few weeks.

Tanzania has no current gas laws in place. There are plans to produce a new framework policy in September this year. At the same time the government is also keen to press ahead as quickly as possible with exploration and exploitation, as next month they also plan to launch a new licensing round in Houston, Texas.

Energy and Minerals Minister Sospeter Muhongo has gone on record to say that the new law would increase royalties on gas production from 12.5 percent to an unspecified level and the new signing fee would be introduced. These developments are to be welcomed, but are not enough.

Civil society groups that I met on my trip last month highlighted key issues such as the need for contract transparency on all new licences, including a debate in parliament before approval. In this way ordinary Tanzanians can see if they are getting a good deal for the oil and gas that is extracted.

There also needs to be more attention paid to how the oil, gas and mining industries can bring greater economic benefits to local communities – not only though the direct revenue payments but through supporting Tanzanian businesses as service providers – local economic linkages.

Tanzania may not be bringing any gold medals home, but they still have a chance to win a medal for their gas industry. Will they do it? In four years time at the Olympic Games in Rio, we will have an answer, but the hard work needs to start now.