Extractive Industries Transparency Initiative: Why Ugandans should pay attention

SPECIAL SERIES: Uganda and Extractives

Explainer 2

Highlights

• Extractive Industries Transparency Initiative (EITI) is an international standard that promotes openness around the management of oil, gas, and mineral resources. It requires the disclosure of information by governments and companies at all stages of an oil or mining project.
• Citizens can get involved by asking questions and demanding answers about the money their government receives from natural resources and whether it is used to benefit them.
• As of 2021, EITI is being implemented in 55 countries, 26 of which are African. Uganda is one of the latest countries to join EITI following its admission in August 2020. 
• Uganda’s EITI membership is anchored within its oil and gas policy, whose sixth objective seeks to “ensure collection of the right revenues and use them to create lasting value for the entire nation”.
• The deadline for Uganda to submit its first report was this month — February 2022. It has sought an extension to June because of Covid-induced delays.
• One of the key benefits of EITI membership is that Ugandans will know who exactly owns which company is involved in the petroleum and mining businesses in the country.

What is the Extractive Industries Transparency Initiative (EITI)?

The Extractive Industries Transparency Initiative (EITI) is an international standard that promotes openness around the management of oil, gas, and mineral resources. Countries that are interested in extractive operations that are transparent, accountable and not corrupt are free to join the EITI.  This initiative requires the disclosure of information by governments and companies at all stages of an oil or mining project.

EITI member countries are required to disclose information on how much revenue is collected from oil and mining companies and whether the money collected is used for the benefit of the public. The governments and companies are also required to disclose the impact of their operations on the environment and other social-economic factors such as gender. 

The citizens in EITI implementing countries have access to information relating to the oil, gas and mining sector activities. This helps to identify possible cases of corruption, abuse of office and mismanagement of revenues by governments or companies. Citizens can get involved by asking questions and demanding answers about the money their government receives from natural resources and whether it is used to benefit them. 

What is the origin of EITI?

The EITI started in 2002. This was partly in response to the demand for transparency in the extractive industry by non-governmental organisations (NGOs), and partly the need to help resource-rich countries to get the best out of their natural resources. As of 2021, EITI is being implemented in 55 countries, 26 of which are African. Uganda is one of the latest countries to join EITI following its admission in August 2020. 

How does EITI work at national level and of what relevance is it for Uganda?

Procedurally, there are steps that a country must take to become a member of EITI and start implementing at national level. The process includes the following steps: a national declaration of interest to join EITI; appointment of a senior government official to champion EITI; establishment of a secretariat for the administrative role; and formation of a Multi-stakeholder Group (MSG) for EITI. The MSG is then expected to develop its terms of reference and a work plan for the implementation of EITI in the country. In conjunction with the secretariat, the MSG prepares the application for candidacy which includes the documentation of the above process and attachment of all the relevant documents. The application is submitted to the international EITI secretariat for review and subsequent admission by the EITI board. Upon admission, the country is then expected to start implementing the EITI standard and reporting on the same annually. 

At country level, the EITI is largely implemented by a national committee made up of different actors under the Multi-stakeholder Group (MSG). This group has representation from the government, oil and mining companies, and civil society. This group’s work is to ensure that the EITI standard as established by the international EITI secretariat is implemented.  Once admitted to EITI, a member country may customise the standard to the national context. The day-to-day operations of EITI are done by the national secretariat. 

Uganda is in the process of developing its extractive industry. The oil and gas sector is at the construction phase with the first oil expected in 2025. The mining sub-sector is in advanced stages of completing robust policy and legislative reforms that are expected to make mining more lucrative for the country. The EITI is therefore timely, and it will provide mechanisms for proper management of revenues from extractives to boost economic growth. If implemented well, EITI has the potential to curb corruption, mismanagement of public resources, maximise revenue generation and increase investor confidence in Uganda’s extractive industry. 

What has Uganda’s journey towards joining EITI been like?

Uganda’s journey to join EITI can be traced back to 2008. Following the 2006 discovery of commercially viable oil deposits in the Albertine Graben, the country embarked on putting in place the legal, policy and institutional framework that would facilitate good governance of the petroleum sector. The first of these policy documents was the National Oil and Gas Policy which came into force in 2008. This was followed by the Oil and Gas Revenue Management Policy in 2012. The sixth objective of the National Oil and Gas Policy was to “ensure collection of the right revenues and use them to create lasting value for the entire nation”. The policy, therefore, committed, among other things, to participate in the process of EITI. Armed with the policy committee, civil society organisations (CSOs), both local and international, started to advocate Uganda’s joining EITI. 

Timeline of Uganda’s journey to join EITI

1. Cabinet resolves to join EITI on 29 January 2019: The cabinet’s declaration to join EITI was welcomed by players in the extractive industry. In the declaration, signed by the minister of finance, the ministers stated that Uganda’s admission to EITI will benefit the country through various ways including (i) promoting accountability by minimizing corruption and mismanagement of revenues from oil, gas and mining; (ii) improving revenue collection process and boosting public finances; and (iii) improving investment climate by giving a clear signal to investors and international financial institutions that Uganda is committed to improving transparency.  
2. Appointment of a senior government official to champion EITI: Mr Moses Kaggwa, the acting director for economic affairs in the ministry of finance, was appointed in February 2019 as the champion for EITI. He is the current chairman of the Uganda Extractive Industries Transparency Initiative (UGEITI) Multi-stakeholder Group.
3. Establishment of the Multi-stakeholder Group (MSG) and secretariat: Between February and May 2019, the ministry of finance established a National EITI Secretariat, which worked with Mr Kaggwa to establish the UGEITI MSG. The MSG has representation from relevant government ministries, departments and agencies; oil and mining companies; artisanal mining; Uganda Chamber of Mines and Petroleum; and civil society. This MSG has 30 members and is at liberty to co-opt any other persons from time to time as the business at hand may require. 
4. Preparation of the MSG terms of reference and work plan: At the subsequent meetings of the UGEITI MSG between May 2019 and January 2020, the members developed their terms of reference and work plan. These were generated through a consultative process that required each of the stakeholders represented on the MSG to seek views of their respective constituencies. 
5. Preparation and submission of application for candidacy: Upon completion of the terms of reference and the work plan, the EITI secretariat and the MSG prepared the application for Uganda’s admission to EITI. The EITI international secretariat sent a delegation to Uganda to verify the application.  In July 2020, the UGEITI secretariat submitted Uganda’s application for admission.
6. Admission of Uganda to EITI: On 12 August 2020, the EITI international secretariat admitted the Republic of Uganda as the 54th member country of the Extractive Industries Transparency Initiative. Uganda also became the 26th African country to join EITI. This means that the country was not only committing to regulate its oil, gas and mining sectors in a manner that is compliant with the EITI standard but was also opening up to international scrutiny of the extent to which the government and extractive companies are adhering to the EITI principles and standard. 

Upon admission, Uganda was given 18 months within which to prepare and submit its first national EITI report. This time was due to lapse in February 2022, but the UGEITI secretariat and the MSG requested an extension to June 2022. There is optimism that Uganda will follow through with the submission of its first report. 

Originally, the national EITI reports were a reconciliation of the payments declared by oil and mining companies as having been made to the government in a given period of time against receipt declarations by government entities of the payments received from extractive companies.  Over time, the EITI reports have evolved to also reconcile data on other aspects of the sector such as corruption, compliance with laws, and other good governance parameters.  As of 2019, the EITI Standard now requires countries to also report gender integration in the sector, human rights issues, and environmental impacts of the sector. Uganda is thus expected to report in line with the new standard.

What opportunities does EITI open for campaigners? 

1. Access to information about the operations of the sector: For countries where the extractive industry is shrouded in secrecy, EITI reports provide a wealth of information than can be used for advocacy to continually improve sector governance. 
2. Platform for advocacy: The CSO presence on the EITI Multi-stakeholder Group provides a great opportunity for civil society to present issues that it wishes addressed. Unlike ordinary advocacy where CSOs must struggle to secure the audience of the government, EITI brings all the relevant players under one roof, hence easing advocacy.
3. Networking: CSOs can network and secure alliances within the government to push for common initiatives. One such area that is pleasing for civil society is that government entities such as the Uganda Registration Services Bureau, Uganda Revenue Authority, and Ministry of Energy and Mineral Development are embracing the push for beneficial ownership disclosure. CSOs had fought for years for such disclosure, but now EITI is generating momentum toward the establishment of a beneficial ownership register. 

Despite its important role, EITI is not an end. It is therefore incumbent upon a country to use it to achieve targets and goals, the ultimate being delivering sustainable benefits to society. 

Listen to the related podcast here. 

The other explainers are about the Crude Oil Pipeline, Funding of the Uganda National Oil Company, and mining

This ACME explainer is made possible with support of the Natural Resource Governance Institute