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Last updateMar, 27 Jan 2015 11am

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Mining transparency initiative in Africa

Ethiopia optimistic over bid to join mining transparency initiative - Ethiopian officials sounded optimistic Monday over an application to join the global transparency initiative aimed at injecting accountability in the use of proceeds from natural resources despite a report showing discrepancies in official receipts from mining activity.

Ethiopia applied to join the Extractive Industries Transparency Initiative (EITI) in 2010, but the application was left pending after member Non-Governmental Organisations (NGOs) raised concern over the freedom of local Ethiopian NGOs citing a negative civil society law enacted in 2010.

Ethiopian State Minister for Mines, Tolosa Shagi, said although an audit of the mining sector showed “small discrepancies”, the reasons behind the discrepancies could easily be explained to the international community to convince them of Ethiopia’s interest to maintain transparency.

“There is a small discrepancy down from the regions. We will make it clear to the international community where these came from. We will settle these discrepancies,” Tolosa told a news conference.

Ethiopian Extractive Industries Transparency Initiative National Steering Committee launched the nation’s first-ever mining transparency report, showing earnings at much higher levels than before.

The report shows the Ethiopian government received US$ 28.4 million in income from the mining sector. According to data from the Ethiopian Revenue Collection Authority (ERCA), the country received most of its income from the mining sector’s income tax and value-added tax.

However, a reconciliation of the mining sector receipts carried out on the 2009-2010 income, showed discrepancy totaling Ethiopian Birr 35.5 million (US$1.83 million). The auditors said the discrepancy was investigated but there were no sufficient information.

“There will be technology skills transfer to Ethiopia. It is also our own government’s commitment do as much as possible within our budget. We know there could be a challenge but we look for support for our membership. We will clean these discrepancies,” Tolosa added.

An audit was carried out based on the declarations made by the Ethiopian National Steering Committee, tracking payments received in the form of income tax payable by companies on mining profits.

The other sources of income included withholding tax, royalties, dividends by state owned companies and other significant benefits obtained from firms operating within the mining sector.

The audit of Ethiopia’s mining sector, carried out by Hart Nurse, Chartered Accountants, UK-based, concluded that income from gold mining, involving small-scale artisans, could not be properly accounted for because there were no proper records as to who supplied the gold to Ethiopia’s Central Bank.

The Central Bank, known as the National Bank of Ethiopia (NBE), purchased the gold from licensed individual gold traders and cooperatives.

In Ethiopia, royalties are paid at the rate of 5 percent for precious metals, 3 percent for metallic and non-metalic minerals and 2 percent for geothermal deposits and mineral water.

The government can acquire 10 percent of free equity in any major mining operation. Any additional equity stakes would be subject to an agreement defining the timing and financing under current laws.

Meanwhile, representatives of the Ethiopian civil society said Ethiopia’s application should be considered because it would encourage more participation of the civil society.

Kassahun Yibeltal, the President of the Federation of National Associations in Ethiopia, said the discrepancies in the mining income receipts were caused by errors generated within the tax collection system.

“At most, the discrepancies need further analysis which would then be forwarded to the national authorities,” Kassahun said.

Abraham Tadesse, a member of the Ethiopian Transparency Committee, said Ethiopia was keen to join the Transparency Initiative because the application of its international best practice in mining operations and transparency would benefit the Ethiopian citizenry.

He said the Transparency Board should not single out Ethiopia because the status of the civil society in the East African nation was better than many member states.

The IETI Board, chaired by former UK Minister, Clare Short, is due to meet 18-19 March in Oslo, Norway, to consider the Ethiopian application.

Pana 18/03/2014