EITI AND MINING SECTOR GOVERNANCE IN GHANA

1
EITI AND MINING SECTOR GOVERNANCE IN GHANA

• Lessons for the oil sector
• Steve Manteaw (ISODEC / PWYP-Ghana)

2
OUTLINE

• GHEITI framework and achievement
• The sub-national innovation
• GHEITI implementation challenges
• Lessons for the Oil sector
• Conclusion

3
GHEITI Implementation and matters arising

• The GHEITI Objective as a benchmark of success
  revenue maximization, leak detection and
  prevention, optimum use of benefits
• First report a far cry from the objective
• TOR did not require the aggregator to
  investigate the basis and the correctness of the
  computations, as a result, the appropriateness of
  the revenues received as mineral royalty,
  dividends and tax on profit could not be
  determined. The aggregator did not also analyze
  the tax deductions claimed by the companies for
  the purpose of identifying any improper
  claims. The case of the MDF, Aggregators
  inability to access contract documents
• However, something to be said about stakeholder
  dialogue, process audit, and sub-national EITI

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Stakeholder dialogue

• GHEITI - A framework for dialoguing on how Ghana
  can maximize benefits from its natural resources
  reduced incentive for taking to the streets
• Civil Society views respected, which makes for
  constructive engagement.
• Decision-making on basis of consensus

5
GHEITI exposes weaknesses in Mining Sector
Governance

• Absence of inter agency collaboration, as in the
  case of the internal revenue service and the
  Minerals commission
• Eroded capacity of IRS in appreciating the
  financial intricacies of mining operations
  following the abolition of the special mining
  desk and replacement by the Large Tax Payers Unit
• Excessively long stay of customs officials at
  particular mines
• EITI has helped identify inefficiencies in our
  national tax policies and its administration
  huge capital allowances deducted up-front and
  balances carried over stability agreements
  explain why many companies are not paying
  royalties and corporate taxes these are
  currently being looked at.

6
GHEITI exposes weaknesses in Mining Sector
Governance

• Delays in transfers of communities share of
  benefits inhibits planning This is being
  addressed
• Transfers from Regional OASL to districts not
  accompanied by advice
• Ground rent not collected and not paid.

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Sub-national EITI to Improve Governance at the
District Level

• Premise
• Formulae
• Instances of misapplications exposed
• Poorly designed CSR programmes
• Reports empowerment tool for demanding
  accountability e.g. sub-national
  multi-stakeholder collaboration to reverse the
  local resource curse i.e. revenue tracking,
  community-based planning, citizens monitoring,
  linking CSR with district plans

8
EITI Implementation in mining sector - Challenges

• Difficulty in accessing contracts / data
• Identifying and preventing the incidence of
  transfer pricing, and other tax avoidance, as
  well as tax evasion practices
• The need to address the potential for role
  conflict at the secretariat, and to secure the
  independence of the MSG
• The need to ensure the sustainability of the
  initiative

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EITI, Mining Sector Gov.and Lessons for the Oil
sector

• The natural resource balance sheet incomplete
  without social and environmental accounting
• Poor sequencing of the policy, legal, and
  regulatory frameworks.
• Avoid creating enclave economies in the natural
  resource sector

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EITI, Mining Sector Gov.and Lessons for the Oil
sector (Contd.)

• Create opportunities for legitimate, and active
  participation of citizens through strong and
  effective local content provisions
• Promote budget transparency at both national and
  community levels by creating opportunities for
  citizens participation in the budget process
• Legislate the principles and formulae for benefit
  transfers to natural resource host communities
• Manage expectations

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EITI, Mining Sector Gov.and Lessons for the Oil
sector (Contd.)

• We need to have an inventory / database of our
  natural resource endowment, their quality and
  rate of attrition to guide us in our negotiations
• We must have clear principles and guidelines for
  applying future oil revenues
• We must see our natural resource as an
  opportunity for asset transformation and not as
  merely income to be consumed, as has happened in
  the gold sector

12
EITI, Mining Sector Gov.and Lessons for the Oil
sector (Contd)

• We must review our tax rates regularly and bring
  them abreast with the times. At no time should
  the cost of collecting a tax be more than the tax
  itself.
• We must stay away from stability agreements in
  the oil sector if we can, if not, we must make
  them two-way street.

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Conclusion

• Next critical steps Expansion of the MSG,
  template development, stakeholder sensitization
  and consultations on templates, revision of
  country work plan, ToR for data capture and audit
  of payments, assign aggregator, receive first oil
  EITI audit report, outreach.
• Citizens groups are key to the development
  processes in our countries. After all, natural
  resources are held in trust for them. Let us
  therefore resolve to continue working together in
  a true multistakeholder spirit to turn our newly
  found resource wealth into a blessing for us all.
  
• THANK FOR YOUR ATTENTION!!!