EITI AND MINING SECTOR GOVERNANCE IN GHANA Lessons for the oil sector Steve Manteaw (ISODEC / PWYP-Ghana)

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

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, Aggregator’s inability to access contract documents However, something to be said about stakeholder dialogue, process audit, and sub- national EITI

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

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.

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.

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

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

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

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

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

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.

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!!!