Kenya Debating Transparency of Natural Resource Contracts

16 August 2013

Very few countries disclose the contracts made with private companies to develop natural resources, but pressure for more transparency has been on the rise, as is now on display in Kenya.

The Kenyan government recently cancelled contracts with mining companies over questions about their adequacy and transparency. The International Monetary Fund had been pressuring Kenya to disclose the terms of the contracts.

Another recent controversy, involving the lack of disclosure of a uranium mining contract, has arisen in Malawi. Recently, new Senegalese President Macky Sall announced that Senegal would publish all its mining contracts.

Transparency of extractive sector foreign investment contracts is considered desireable to permit the public to assess whether company payments are adequate, evaluate the other contract terms and monitor compliance. “Transparency is good for minimising the risks of corruption and mismanagement, and for ensuring accountability,” according to  Jonas Moberg, Head of the Extractive Industries Transparency Initiative (EITI) Secretariat.

IMF Presses Kenya

Contract transparency in Kenya was advocated very recently by the International Monetary Fund, which like other international development bodies has supported more contract transparency.

A July 21 article by Muna Wahome in Business Daily was based on a nonpublic IMF report by a “technical assistance” team.

Wahome reported:

An International Monetary Fund (IMF) team is pushing the Kenya government to make public details of a number of deals it has signed with oil exploration and mining firms.

But officials on the IMF team have disclosed that the government has denied them access to the documents, a fact that can only leave Kenyans guessing how the country is faring in regard to the exploration and exploitation of minerals.

The IMF assessment was prepared ahead of meeting with government officials. It found that the Ministry of Environment and Mineral Resources “treats these agreements as confidential and did not release them to the mission.”

“The Constitution requires ratification by the National Assembly of future agreements granting rights to natural resources—implying that they will become public documents,” the IMF report said.

The IMF team also was pushing of open competition for licenses.

Kenya is not an EITI member or candidate country.

In a follow-up editorial, Business Daily said:

It is not surprising that public apathy towards the sector is borne out of deliberate obfuscation by individuals in the Energy and Mining dockets, a situation the IMF has strongly noted in its recent report on the sector.

Officials should always stay true to the word of the Constitution that the minerals belong to the people of Kenya, not to the foreign miners or ministry officials.

It is not enough to act tough, let us see the agreements before we are taken to the cleaners.

Hopefully, the watchdog bodies including Parliament and Auditor-General will also wake up and do their oversight.

Mining Licenses Revoked

In early August, the Kenyan government revoked all 43 prospecting and mining licenses granted during the first five months of 2013 and suspended the commissioner of mines, Moses Masibo.

Mining minister Najib Balala told a news conference the licenses had been issued in a hurry and without transparency, according to media reports such as by the BBC and The Standard. Balala said he wants to make sure such deals are more transparent and wil introduce new legislation in the sector.

Since then, “Mining firms and oil and gas explorers in Kenya are warning that concerns over the sanctity of contracts signed with the government will create uncertainty in the business environment,” according to an article in The East African.

Transparency Also an Issue in Malawi

In Malawi, an article July 30 by Veronica Maele-Magombe the Nyasa Times describes “a stinging observation by United Nations (UN) Special Raportuer on the Right to Food Olivier De Schutter regarding Malawi’s Kayelekera Uranium Mine deal. She wrote that “two elusive culprits remain pretty much intact in their hard shells. It is as if the country’s most guarded contract between government and Australian company, Paladin Africa Ltd has not been unravelled as the worst possible swindle.”

She quoted Paladin officials as saying that “the original request for the Development Agreement to be kept confidential was made by Government.” Maele-Magombe wrote, “Despite growing public dissatisfaction purporting to the full-terms and conditions of the Kayelekera mining contract, Paladin angrily reiterated that Kayelekera is a done deal at the beginning of this year. It cannot be renegotiated until the expiry of the 10 year period of the current contract.”

International Attention Growing

Attention to the publishing of contracts, while not new, has been steadily growing over the past decade.

“Contract transparency is a relatively new advocacy goal,” according to the Revenue Watch Institute, which has an extensive background paper on the topic.

One new development was the publication by a new group, Open Contracting, of draft “global principles.”

Up-to-date information on how many countries disclose such natural resource contracts information appears scarce, but the tally is under a dozen. Publish What You Pay explanatory material includes a map showing about eight countries that disclose natural resource contracts.

Contract disclosure is encouraged but not required under the Extractive Industries Transparency Initiative standard (Section 3.12) as revised in May. Leaving such disclosure voluntary in the EITI standard was a compromise, EITI official Moberg said.

Looking to the future, Moberg said: “Many countries still do not disclose contracts, there is a rapid evolution and it is welcome that the EITI globally encourages contract transparency. EITI national commissions (multi-stakeholder groups) will be well placed to now consider how to best proceed.”

The EITI guidelines are followed by 23 countries with 16 are seeking certification. Among EITI countries, Afghanistan publishes contracts and the leader of Senegal has just pledged to do so.

The World Bank Institute hosts an online forum on governance of extractive industries.

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