Ghana and the EITI Standard: Charting a Course Toward Continued Compliance
Ghana is seeking to increase the information available to citizens on mining, oil and gas extraction activities. The West African nation, which has the continent's second largest gold output as well as valuable undersea oil and gas deposits, already makes information available within the framework of the Extractives Industry Transparency Initiative (EITI); however, the upcoming publication of its report covering 2012 will cover more areas.
The EITI is a global coalition of governments, companies and civil society organizations working together to improve openness and accountable management of revenues from natural resources. Its new standard adopted in 2013 requires that reporting countries not only detail payments and receipts between companies and governments, but also specifics of the activities in the sector (such as licensing processes and production figures) as well as distribution of revenues by the government. These reports are typically published annually.
Ghana was one of the first countries declared compliant under the initiative in 2010, and has already published reports covering eight fiscal years (2004-2011). The Ghanaian government exceeded previous minimum requirements of the EITI by providing information requested by citizen groups, on topics such as the transfer and utilization of mineral royalty revenues to mining districts. In its report covering petroleum revenues in 2011, the government also provided information on crude production and the transfer of money to the national savings fund. The preparation of EITI reports in Ghana (and other countries) is overseen by a multi-stakeholder group made up of civil society, companies and government representatives.
The expanded scope of reporting required under the new EITI standard is particularly relevant as the country's petroleum revenues are expected to increase dramatically in coming years and as such is the subject of great public expectations for national development. In light of these expectations, an effort is being made to revise the Exploration and Production Law, and in 2013 local content regulations were issued for increased clarity around production and operations in the oil industry. The Petroleum Revenue Management Act (PRMA), passed in 2011, spells out how revenues from oil and gas should be spent and includes transparency provisions for reporting by government agencies, as well as an independent oversight group, the Public Interest and Accountability Committee (PIAC). In doing so, it has also initiated discussions around the introduction of similar legislation to cover mineral receipts. A bill that would make EITI disclosures mandatory is being reviewed by different stakeholders. In the future, the greater scope of EITI reports will assist the public in understanding the operations, revenues and allocations of the oil, gas and mining sectors.
To that end, last year the Natural Resource Governance Institute (formerly the Revenue Watch Institute – Natural Resource Charter) conducted a gap analysis that charts what Ghana must do to meet the new EITI reporting requirements. In December the results (summarized below) were presented to a range of stakeholders, including the country's EITI national steering committee, and in April 2014 we worked with the multi-stakeholder group to assist them in preparing detailed guidelines for the administrator who will prepare the 2012/2013 report.
Also in December 2013, NRGI collaborated with Publish What You Pay (PWYP) Ghana to organize a workshop for civil society actors on the new standard. Almost 30 members of PWYP Ghana and the Civil Society Platform on Oil and Gas attended. During the two-day workshop, participants scrutinized the draft EITI bill and agreed that it should be revised to take into account the provisions of the EITI standard. A presentation of past analysis of EITI reports by PWYP Ghana framed the discussion and identified outstanding areas for future progress.
Meanwhile, Ghana's parliament is working to review a petroleum exploration and production bill that, once passed, will replace an outdated 1984 law. At a workshop RWI facilitated a workshop in December for members of the parliamentary mines and energy committee to analyze the proposed bill. Moderators shared the EITI gap analysis to facilitate understanding of how provisions of the bill could precipitate future reporting, enabling Ghana to remain compliant with the EITI.
There is good reason to believe that Ghana will remain EITI compliant, yet what remains to be seen is whether the country will continue to lead by pushing the boundaries and once more exceeding the minimum requirements of the initiative.
Findings of NRGI 's Gap Analysis
- Information on the allocation of rights is neither covered by the EITI reports nor disclosed elsewhere. In order to comply with the standard, Ghana EITI (GHEITI) must work with the Minerals Commission and Petroleum Commission to create a publicly available license registry. For the registry information to be comprehensive, information on beneficial ownership should be included. NRGI strongly advocates for the full disclosure of contracts, as encouraged by the standard.
- Ghana has provided some information on production and export figures in previous reports, but it is not always clear if the volumes are independently verified or based on figures used by companies to calculate royalty liabilities. Future reports should provide comprehensive figures on annual quantities extracted by license area. The Ghanaian authorities should also include clearly presented production values and the value and volumes of mineral and petroleum exports in future GHEITI reports to meet the new standard.
- Previous reports feature varying degrees of disaggregation. Mining revenues are broken down by company, government entity, and revenue stream, while the petroleum portion of the reports provides company-by-company revenue data for only a few companies. Revenues are not disaggregated by receiving government entity. Future GHEITI reports should compile the data from reporting templates into detailed tables comparing each company's payments to government receipts foreach revenue stream, receiving government entity, and project.
- The Ghana National Petroleum Corporation (GNPC) is a fully state-owned entity. It sells approximately 18 percent of production from the Jubilee oil fields, a major source of revenue for the country. To comply with the new standard, future EITI reports must include information beyond the company's upstream holdings and associated cost obligations. GHEITI must provide information on GNPC' operations, finances and assets. The new standard requires that this include information on quasi-fiscal expenditures.
- Under the new standard, countries' EITI reports must include information on the absolute amount of extractive sector employment and its percentage of total employment. In light of Ghana's new local content regulations, GHEITI may wish to report more widely on this area and in more detail than total figures for the whole sector. This information has not previously been included in Ghana's EITI reports.
- Past GHEITI reports do not contain much information on social payments. Some companies choose to report these unilaterally. Under the new standard, material social expenditures that are mandated by law or by contract must be disclosed and, where possible, reconciled. GHEITI should decide whether to also request reporting from companies about non-mandatory social payments.
- The EITI standard requires that reports describe how extractive revenues are distributed and explain which extractive revenues do not go into the national budget. Previous GHEITI reports have provided information on the distribution and transfer of revenues. Future reports should elaborate on how the allocation amounts are determined and whether portions are earmarked for specific expenditure areas.
- The current reports do not cover any deal in which Ghana exchanged extractive sector opportunities for various goods or services, including the provision of infrastructure and credit. Under the new standard any such deal must be included in reports. In Ghana, it would seem necessary to cover various petroleum-related deals which have arisen, such as a 2011 $3 billion Chinese loan for the construction of gas infrastructure, with an offtake agreement between GNPC and UNIPEC Asia for the sale and purchase of crude oil to support repayment of the loan. Given the high level of public interest in these deals, it is important to detail in future reports the amounts owed and disbursed, interest and government counterpart financing obligations, the advantages given to Chinese (or other counterpart) entities, and the progress of the associated infrastructure.
Emma Tarrant Tayou is NRGI's Africa regional associate.
