One-fifth of enforcement actions under the US Foreign Corruption Practices Act originate from oil, gas and mining. The prevalence of corruption in the sector is an unfortunate reality. But 2021 brings better news.
Publishing the terms of extractive contracts is a powerful antidote to corruption for resource-rich countries. Contract transparency is rapidly becoming the norm and, from 1 January 2021, all 55 countries implementing the extractive industries transparency initiative (EITI) are required to publish all new contracts and contract amendments.
East Africa is rich in extractive resources. To withstand the impact of Covid-19 and volatile commodity prices, it must build a resilient and accountable extractive sector that benefits citizens and communities. Progress has been made on contract transparency across the region and there are good examples of how contract information has been used towards this goal.
In 2019, civil society in Mozambique used the disclosed 2006 exploration and production concession contracts for the Rovuma Basin to conduct an independent government revenue forecast. Governments that depend on natural resources need to understand the impact of price volatility on resource revenues. Sharing this information with stakeholders helps align expectations on the fiscal benefits that extractive projects can deliver.
In Malawi, a 2017 report by civil society organisations analysed the terms of disclosed production sharing agreements and inconsistencies with the model production sharing agreement (PSA). Elsewhere, Africa Energy Tanzania has used its disclosed PSAs to explain the terms of its contract and its implications through a public FAQ. Tanzania has introduced a contract disclosure law. The EITI’s requirement offers an opportunity to move from policy to practice.
These East African producer countries are members of the EITI, the global benchmark for transparency in the extractive industries. In Uganda – a fledgling EITI member – disclosures could help inform public debate on technical taxation questions that have delayed planned extractive projects.
In Kenya – a country that is not yet a member of the EITI – companies and the president are calling for the publication of oil contacts as a means of resolving reported disputes with companies over cost recoveries.
In the run-up to 2021, we are asking governments, companies, civil society and sector stakeholders to take three steps towards greater sector transparency.
Firstly, to publish all contracts and licenses that are granted, entered into or amended from January 2021. We believe this is best achieved through government platforms, ensuring access to data for all and the routine publication of contracts as they are concluded.
Use the information
Secondly, use contract information. Legal experts and media outlets need not be the sole beneficiaries of this data. Contracts yield valuable information to communities who wish to see how revenue from their resources flows to regional or local governments. They can help citizens understand and monitor performance on the obligations placed on companies, including measures to protect communities and the environment, make social payments, provide local employment or use local suppliers.
Finally, contracts should inform dialogue and debate on key decisions and policy options. Multi-stakeholder groups in the 55 countries implementing the EITI standard promote inclusive dialogue. A key part of their role is to ensure that data required by the EITI standard – including contract information – can inform debate and decision-making.
These goals are within reach and we stand ready to support all stakeholders in achieving them. Doing so will help improve extractives governance and combat corruption. This is a good reason to look forward with confidence to the year ahead.