Ensuring mineral wealth is owned by the people – EITI in Mozambique

Mozambique still has a long way to go to avoid the resource curse. Unfortunately, a new law under discussion now will do little to ensure the equitable distribution of the country’s vast underground and offshore wealth because it will still allow companies and the government to keep information about contracts secret.

This goes against the new tougher standards of transparency in the extractive industry that are being introduced this week in Sydney at a meeting of the Extractive Industries Transparency Initiative (EITI), a group of governments, companies and civil society organisations seeking ways to ensure countries rich in mineral wealth use those resources to help their citizens (see below).

Mozambique is often cited as the perfect example for why EITI is needed. As a newcomer to the energy sector that only recently started to exploit natural gas, Mozambique has the opportunity to develop the industry in a way that benefits its citizens and not fall foul of the resource curse. Committing to EITI was a good start but commitments urgently need to be turned into binding laws.

In the coming weeks the parliament of Mozambique will be discussing revised draft of energy industry regulations that are not in line with what EITI encourages relating to the disclosure of information. It gives both the government and the companies it contracts the ability to be selective about the type of information published.

Contract transparency is becoming the norm rather than the exception. Instead of calling for full disclosure, the law calls for the publication of the ‘principal terms’ of any contract and not ‘all’ the relevant documents. It does not define in detail what ‘principal terms’ includes. This leaves the door open for debate and obfuscation; it leaves the door open to corruption.

On 22 May 2013 the Centre for Public Integrity (CIP), Transparency International’s chapter in Mozambique and OpenOil, a research organisation, wrote to the resource minister of the country calling on the minister to make the law definitive, transparent and enforceable – in line with Mozambique’s commitments to EITI.

Last week, delegates from around the world – including numerous representatives from Transparency International – met in Sydney, Australia to discuss the importance of EITI and a new, updated EITI standard.

EITI is an essential starting point that, if adequately implemented, can help ensure citizens get the full benefit of the mineral wealth contained in their country. It provides a platform for dialogue between civil society, companies and government on how mineral wealth is taxed, spent and managed.

EITI enables citizens to know how much their government is getting for the extraction of oil, gas, or minerals. This helps them to ask informed questions to hold the government to account for the use of revenues.

Extractives are a sensitive and strategic sector in many countries. For instance, 10 years ago, talking about governance in oil, gas, and mining was taboo in many countries. Last week representatives from across the globe took to the stage in Sydney to proclaim the benefits of transparency in their oil, gas and mining sectors.

Governments in all parts of the world should be talking about it. Government revenues from natural resources—a combination of tax and non-tax payments, including royalties and profit sharing—accounted, on average, for 45 per cent of total general government revenues in resource-rich countries in 2011. In this context, developed countries, as much as anyone, need to promote transparency and dialogue around the extractives industry and how its profits contribute to society.

For companies EITI creates a level playing field and contributes to better relationships with the communities where they operate. It helps governments to understand whether or not they are getting a fair deal for their resources. Companies must lead by reporting on their global operations transparently; increasingly the law requires them to disclose more about what they pay and how they profit in the sector.

Benefits of transparency

In Sydney the EITI Board officially launched the new EITI standard. It strengthens previous rules and introduces new reporting requirements in a number of areas including what kind of information must be published, license holder identity, project by project reporting, and social payments. In addition, the standard encourages countries to disclose contracts and ultimate beneficial ownership, a key concern of leaders around the world in the war on illicit financial flows.

The new standard is a result of a compromise between companies, government and civil society. If well implemented, the new standard could provide smarter and better data to transparency advocates. The new standard is aligned with the recently passed European Union and US rules on country-by-country reporting.

While everyone welcomes the provision of more and better data, EITI will only be seen to deliver on its development and accountability promises if poverty levels fall and the inequality gap narrows in resource rich countries where too many people struggle to simply survive. This will continue to require the joint efforts of government and business. Just ask Mozambique.