REPORT OF THE GHEITI PRE-



REPORT OF THE GHEITI PRE-

VALIDATION WORKSHOP HELD ON THE

18TH APRIL, 2009 AT THE FOREST

HOTEL, DODOWA

1.0 INTRODUCTION

The National Steering Committee (NSC) in conjunction with the German Technical Cooperation (GTZ) held a pre-validation workshop to discuss issues relating to the implementation of EITI in Ghana and the preparations towards the validation exercise in March 2010.

The workshop was attended by members of the NSC, Civil Society Organizations, Mining Companies, World Bank, EITI International Secretariat in Oslo, the Media and the GTZ.

1.1 Objectives of the Workshop

The objective of the pre-validation workshop was to:

a) Create an avenue for members of the NSC to dialogue with key stakeholders on Ghana’s preparedness to undergo the validation process in early 2010; and

b) Establish an opportunity for stakeholders to reach a common country position.

1.2 Opening

The workshop was opened by Mr. Franklin Ashiadey on behalf of the Chief Director and chairman of the Ghana EITI. He stressed the importance of transparency in the payments and receipts of revenues in the extractive sector and that government and for that matter the NSC was fully committed to the EITI process. He added that Ghana has made a lot of progress in the EITI implementation and mentioned that Ghana since signing up for the initiative in 2007 has chalked some successes among which include the publication of three reports on the extractive sector (mining sector), the establishment of guidelines regarding the utilization of mineral royalties, the formation of Revenue Task Force for the Forestry and Mining sectors, to mention but a few. It was also noted that plans were far advanced to include the oil and gas sector in the EITI.

On their part, Mr. Kwabena Oku-Afari, Director of Policy Analysis and Research Division at the Ministry of Finance and Economic Planning and Mr. Elis P. Atiglah, Technical Director at the Ministry of Lands and Natural Resources delivered the key note addresses on behalf of the Hon. Ministers of Finance, and Lands and Natural Resources respectively. They indicated that the Hon. Ministers would have wished to personally take part in the workshop but they were engaged in other important assignments. They both emphasized the fact that government recognized the critical role the extractive industries play in the development of the nation in the area of employment, foreign exchange and contribution to the nation’s GDP among others.

They acknowledged the need to fully integrate the activities of the mining sector into the economy as has been done in the case of South Africa. They also urged the public to take the publication of issues on EITI more serious. Such publications according to them will not only lead to poverty reduction through good governance of resources in the extractive sector but will also inform and deepen the public’s understanding on EITI issues to demand accountability and transparency from both government and industry in the management and utilization of the country’s resources.

The two ministries (MoFEP and MLNR) involved in the EITI process affirmed government’s commitment to provide the necessary political direction and leadership to ensure the successful implementation of the initiative.

2.0 PRESENTATIONS

The workshop was moderated by Dr. Gad Akwensivie of Office of Administrator of Stool Lands and facilitated by a team of resource persons drawn from the World Bank, GTZ-Ghana, International EITI Secretariat and NSC. It is worth to note that the major topics treated by the facilitators included:

• Overview of the validation process

• EITI Implementation in Ghana

• Role of Civil Society in promoting EITI in Ghana

• Overview of GHEITI 2004/05 reports and updates on recommendations

• EITI validation – Implications for Ghana

• Expectation for self Assessment

Below is the summary of presentations made at the workshop.

2.1 Overview of the Validation Process

Participants were taken through the validation overview by Eddie Rich of EITI International Secretariat. He stated that EITI provides a Forum for dialogue and a platform for broader reforms and that the key issues to be considered by countries implementing EITI were:

1. Country Ownership

2. Multi-stakeholder focus

3. Disclosure of Company Payments and Government Receipts

4. Validation

Validation is a critical step in the EITI process which seeks to promote transparency in resource management through the provision of an independent assessment of the progress on the implementation of EITI activities in participating countries. According to Mr. Rich, EITI implementing countries are expected to undergo five key processes in the cycle of EITI implementation. These processes include, signing up, preparation, disclosure, dissemination and finally validation. Ghana had successfully undergone the first four processes and was about to undertake the final process namely validation.

He added that validation is an essential element of the EITI process, and central to the initiative’s status as an international standard. The objective of validation is to provide an independent assessment of the progress achieved by implementing countries and to make recommendations on how the process can be enhanced at the country level and to provide an absolute assessment of whether a country is or is not with the EITI principles and criteria i.e. moving from ‘candidate’ to ‘compliant’.

He referred to the guidance note approved by the EITI Board in February 2008 a section of which states that;

“Validation will be done by a validator selected by the multi-stakeholder group in the country being validated, from a list of suitable organizations or individuals pre-approved by the International EITI Secretariat and the EITI Board. Validation will be paid for by the country being validated”.

He told participants that the EITI Board provided guidance on the validation process to among other things, safeguard the quality, independence and transparency of the process; enhance country ownership and capacity; keep the costs and administrative burden manageable; establish a sustainable solution for the long term; and to provide clear, unambiguous guidance to implementing countries.

2.2 Implications for Countries undertaking Validation

It was further revealed that there is the need for countries that signed up for EITI to demonstrate enough commitment to the process to ensure that they meet the validation deadline. He added that countries faced being delisted from the process if any of the following situations:

• When validation has not commenced before the two year deadline

• Validation started but not completed

• Validation completed but no meaningful progress made

However, in situations where meaningful progress is made or is even close to compliance, the candidature of such countries can be renewed through an application of the multi-stakeholder group (MSG) or the compliant status can be reviewed by the EITI Secretariat.

2.3 EITI Implementation in Ghana

In making a presentation on the overview of EITI implementation status in Ghana, Mr. Amponsah Tawiah, a member of MSG indicated that Ghana signed on to the EITI in 2003 with the view to improving upon its Public Financial Management Reforms through the promotion of good governance, accountability and transparency.

It was noted that government by adopting the initiative seeks to achieve the following objectives among others:

• Ensure openness and transparency to promote good governance and accountability in the extractive industry

• Institute proper tracking mechanism to capture payments and receipts by the extractive industry and government respectively to ensure efficient utilization for sustainable development particularly in the local communities

• Develop and implement a communication strategy to engage the relevant stakeholders, build the capacities of the stakeholders and put in place the necessary legislation to back the process.

The implementation of EITI in the country is entrusted to a 16-member multi-stakeholder body made up of representatives of the following agencies:

• The Ministry of Finance and Economic Planning

• The Ministry of Lands and Natural Resources

• The Ghana Chamber of Mines

• Civil Society Groups, represented by ISODEC

• Internal Revenue Service

• The Minerals Commission

• Representative of District/Municipal Assemblies

Some of the many challenges critical to the smooth implementation and sustainability of EITI were highlighted during the presentation. For instance, the issue of non-institutionalization of the EITI in Ghana according to the presenters still remains a serious challenge. It was, therefore, advocated that efforts be made to consider giving the EITI process an appropriate legal backing. This will not only ensure its sustainability but will also result in compliance by companies.

In view of the above, it was proposed that a comparative workshop could be held to discuss the EITI legal framework per the two studies commissioned by the CSO and GTZ drawing in the new Parliament to determine the direction of the initiative.

2.4 Civil Society and EITI Implementation in Ghana

On the issue of civil society organization involvement in Ghana EITI, Dr. Steve Manteaw of ISODEC indicated that the CSOs have been part of the EITI tri-partite process right from the genesis of the initiative up to this level and they participated in all the key decisions taken in implementing the process so far. He added that CSOs for instance have made inputs into the design, finalization and adoption of templates. Other specific inputs made by CSOs included; development of the Ghana EITI work program, drafting of the Aggregator’s ToR, participated in the selection and interview of EITI aggregator as well as discussions around audit reports to mention but a few demonstrate the full involvement of CSOs and other key stakeholders in EITI process.

He also highlighted the impact the activities of CSOs have had on EITI process in Ghana resulting in an increased awareness and a galvanized community support for EITI implementation in the country. He added that the development of draft social and environmental impacts of mining as well as others for capturing revenue flows to the districts as positive and called for more engagements of government, CSOs and private sector.

In spite of the above progress made so far in the process, there are still some critical challenges that need to be considered as a matter of urgency.

• The issue of extending EITI to include other sectors such as forestry, oil and fisheries need to be pursued

• The need to expand the MSG, particularly additional representation from CS and industry while ensuring that it does not become unwieldy

• The need to address the potential role of conflict among Secretariat staff, and to secure the independence of the MSG

• The need to ensure the sustainability of the initiative to give a legal backing to the process.

2.5 Overview of GHEITI 2004/05 Reports: Update on Recommendations

Touching on the overview of GHEITI 2004/05 reports and update of the recommendations contained in the reports, the EITI Aggregator, Mr. K. Boa-Amponsem stated that the object was to collect, analyze and aggregate payments made by mining companies to government of Ghana; reconcile mining companies’ submissions of mining benefits payments to those received by government; utilize the lessons learnt from the exercise with the viewing to enhancing the transparency in payments, receipts, disbursements and utilization of these benefits.

The aggregator further took the opportunity to share the findings of the audit reports for the benefits of the participants. He numerated issues such as lack of independent check on the fineness of the minerals, no guidelines for establishing the prices of minerals won, royalty payment at the minimum 3% threshold, low corporate tax payment, low ground rent, non payment of capital gains tax, lack of guidelines for the utilization of royalty receipts at the District Assemblies among others as some of the findings that need to be reviewed.

On the basis of the aforementioned findings, the aggregator proposed some recommendations for the consideration and implementation of the NSC as captured in the report. He advocated for instance, the assay results of mining companies be compared to that of independent assayers, formula for computing the operational ratio be amended to deal with the issue of capital allowance in particular. He added that guidelines for pricing gold be established, ground rent should also be reviewed upwards and that clear guidelines for the utilization of mineral royalty receipts by the District Assemblies be established.

The aggregator mentioned that some critical challenges he encountered in the course of undertaking the 2004/05 aggregation and reconciliation exercise include:

• Different expectations from the various stakeholders (Government, CSO, mining companies);

• Lack of legal backing of EITI; and

• Lengthy processes required in amending or enacting legislation.

2.6 EITI Validation: Progress against Country Work Plan and Way Forward

On his part, Mr. Boubacar Bocoum, a Senior Mining Specialist at the World Bank Office in Washington indicated that given the work plan for 2006 – 2008, it was observed that Ghana has made tremendous progress in implementing most of the activities in the work plan. He cited for example, successes chalked in areas such as the successful conduct of an independent audit of the mining sector, publication and dissemination of EITI reports, capacity building and awareness creation as well as legislation of EITI as very impressive.

On the way forward, he admitted that despite of very good progress in implementation, there is the need to focus more on capacity building of the Secretariat, CSO, chiefs, parliamentarians, unions, and mining communities on issues concerning EITI including oil and gas.

He added that it is also critical for the SC to embark on outreach and communication roll-out to sensitize the public on EITI process and validation exercise saying that all these could be easily attained when the pre-validation plan is strictly implemented.

2.7 Self – Assessment as part of the Pre-validation in Ghana

The importance of self-assessment as part of the pre-validation process cannot be emphasized. According to Dr. David Nguyen-Thanh, Head of Good Financial Governance at GTZ, that it is absolutely crucial for all stakeholders to have a deeper understanding of validation process as well as the roles of the actors involved.

It was noted that self assessment offers an opportunity for stakeholders to increase their awareness and understanding on EITI validation process, build their capacities to participate effectively in the process, assess the country’s readiness to the undertake the validation exercise as well as identify and address implementation gaps, challenges, obstacles and any other thorny issues likely to derail the validation process.

He added that in preparation of the next steps for the self assessment, there is an urgent need to critically consider the following issues:

• Define clear Terms of Reference for the validator with respect to his negotiation margin, and put in place a control mechanism to minimize the risk of excessive subjectivity;

• Establish a common understanding of the indicators in such a way they reduce the margin of interpretation; and

• GHEITI must take into account the divergent interests of the actors involved when selecting a Validator.

3.0 COMMENTS AND CONTRIBUTIONS OF PARTICIPANTS

a) Payment of validation: On the issue of candidate countries having to pay for the validation, it was unanimously agreed that since Ghana had made several contributions to the EITI program including paying for the production and publication of the EITI reports. This means Ghana has shown enough commitment to the process. It was therefore, prudent and fair for Ghana to be exempted from paying for the full cost of the validation. It was decided that the SC should prepare a paper or letter to the International EITI Secretariat stating Ghana’s position on the issue. It is worth to note that, a draft letter on this issue has already been prepared by the SC for the consideration and signature of the Chief Director/Chairman of the Ghana EITI.

The Director of Policy Analysis and Research Division in re-echoing the sentiments expressed by the SC for lack of flexibility on the part of the International EITI, particularly for the validation payment, indicated that government has made a lot of payments to the process and proposed that monies in the Trust Fund account be used to pay for the validation by Ghana as advocated by SC on 17th April 2009 meeting. He therefore, asked that Mr. Eddie Rich being part of the International EITI Secretariat should make a special case for Ghana to be exempted from paying the full cost which is said to be in the region of US$ 75,000.00.

Furthermore, Ghana EITI according to Mr. Amponsah Tawiah, Ghana was denied the use of the trust fund to pay for the reports by the international EITI because the former opted to use a local aggregator and urged the international EITI to tread cautiously since conflict of interest can arise when countries have to pay for examination by independent validators.

b) More representation of CSO/Industry on the SC: The need to ensure a balanced representation on the SC was discussed. The Coordinator indicated that in principle it was a good idea to have more representation from CS and industry but he drew the attention of participants to the fact that the civil society (ISODEC) representation on the SC was done through a coalition of CSO called GAPVOD whiles the mining companies were represented by the Chamber of Mines. He added government representation on the SC was quite more perhaps these individuals came from different MDAs which are key stakeholders in the process. That not withstanding, it was suggested that the number of representation from CS and industry be increased.

Eddie Rich of International EITI explained that the international validators will not be interested in the number of representation from government on the SC but what they will be interested in is whether CS and companies are represented on the SC.

c) Decisions taken on the SC: Dr. Steve expressed disappointment about how certain decisions are taken on the SC which do not necessarily reflect the views of majority of the members. He therefore, called for more consultations and consensus building on the Committee. He added that he has been mandated by the his colleagues to review the current structure of the SC to meet the emerging demands and challenges of the time bearing in mind such an expanded structure will not affect decision making on the Committee.

d) Workshop to discuss the legislative instruments: There was the need to organize a workshop with the parliamentarians to discuss the two separate reports of the studies conducted by the GTZ and ISODEC regarding the legislative instruments to run the EITI in order to give proper direction to its implementation.

e) Sustainability of EITI: Since EITI is currently a voluntary issue, it was important to consider giving it a legal backing to ensure its sustainability and compliance by companies.

f) Relationship between NREG and EITI: Stating his position on some of the issues discussed, Mr. Boubacar explained that technically NREG and EITI issues are intertwined and so activities of EITI could be funded using NREG funds.

g) Capacity building and communication: On the issue of capacity building and communication, the general consensus was that there is the need to build capacities of the stakeholders including the local communities in the wake of increasing demands and challenges of the process. To ensure that the people understand and participate effectively in EITI, it is crucial to disseminate more information through regular interactions with the public and media, durbars, information services van, NCCE etc.

h) Beyond the Validation: Some members of the SC expressed the need to focus on critical issues for a successful validation process for now, and that the end result of the exercise should be tailored towards improving the system of transparency and good governance of revenue in the country.

4.0 CONCLUSION

Government and for that matter the NSC recognizes the critical role the extractive industry has played in contributing to the growth of the economy through improving our GDP, revenue mobilization, employment in the country over the years and therefore, places a high premium on issues of transparency and good governance that will ultimately promote development outcomes of the sector to benefit the country.

It is worth to note that government is genuinely committed to the validation in particular and EITI in general and will continue to support the process to ensure its success. However, it is the wish of the SC that some of the concerns raised by the participants especially those regarding further assistance and the payment for the validation be given serious consideration by the appropriate authorities.

The Coordinator on behalf of the SC took the opportunity to thank all the participants for their interventions, comments and contributions during the workshop particularly, the GTZ, Mr. Boubacar Bocoum, World Bank Office in Washington, Mr. Eddie Rich, EITI Secretariat, Oslo, the other facilitators and the Press.

The workshop closed at 5:30 pm.

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