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The Board agreed that Zambia has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Zambia

Decision reference
2017-54 / BM-38
Decision basis
2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

Board decision

The Board came to the following decision regarding Zambia's status:

The Board agrees that Zambia has made meaningful progress overall in implementing the 2016 EITI Standard. The Board’s determination of Zambia’s progress with the EITI’s requirements is outlined in the assessment card below.

The EITI Board agreed that Zambia has made satisfactory progress in meeting the requirements in the EITI Standard on Requirements 1.1, 1.2, 1.3, 1.4, 1.5, 2.1, 2.3, 3.1, 3.3, 4.1, 4.6, 4.7, 4.8, 4.9, 6.3, 7.1, and 7.4. The Board further agreed that Zambia has made meaningful progress in meeting requirements 2.4, 3.2 and 7.3, and inadequate progress in meeting requirement 2.2. The areas of concern relate to license allocations (2.2), clarity on the government policy on contract disclosure (2.4), production data (3.2), and follow-up on recommendations (7.3).

Accordingly, the EITI Board agreed that Zambia will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second Validation commencing on 25 April 2019. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, Zambia’s multi-stakeholder group may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 January 2017. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed by an Independent Validator, who submitted a draft Validation report to the MSG for comment. The MSG’s comments on the report were taken into consideration by the independent Validator in finalising the Validation report and the independent Validator responded to the MSG’s comments. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Zambia. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 25 April 2019:

  1. In accordance with requirement 2.2, Zambia should ensure annual disclosure of which mining, oil, and gas licenses were awarded and transferred during the year under review, highlighting the processes for transferring licenses, technical and financial requirements and any non-trivial deviations from the applicable legal and regulatory framework governing license awards and transfers. This could include the most recent information on the latest licensing rounds to improve the timeliness of the information on license allocations. The ZEC might consider ensuring that EITI reporting includes commentary on any deviations from the license allocation process and on the efficiency of the licensing process.
     
  2. In accordance with requirement 2.4 on contract disclosures, the ZEC should make sure that the description of the government’s policy regarding contract and license transparency in the next EITI Report is up to date and reflects the MMDA 2015. It should also clarify whether there are any laws or contractual provisions that affect disclosure of contracts in the petroleum sector. Further, the ZEC may wish to consider whether to include any descriptions regarding what information related to individual licenses is publicly available, such as work programmes and environmental impact assessments, and provide links to further information where applicable.
     
  3. In order to meet requirement 3.2 on production data, the government should ensure disclosure of production data for the fiscal year covered by EITI reporting, including total production volumes and the value of production by commodity. The ZEC should ensure that EITI reporting includes information on the progress made by the government in obtaining reliable production figures, and to refer to the existing information provided by the MDD, ZRA and Chamber of Mines.
     
  4. In accordance with requirement 7.3, the ZEC should consider a more systematic follow-up of the recommendations, for instance by developing a dedicated plan for following up on findings and recommendations from Zambia EITI Reports, outlining actions to address the recommendations that can address the issue raised. The ZEC could further consider ensuring that recommendations from Zambia EITI reporting to a larger extent address key challenges related to extractive sector governance. Such recommendations could take into account feedback recorded from stakeholders as part of Zambia EITI’s dissemination and outreach activities.

The ZEC is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the ZEC’s responses to these recommendations in the next annual progress report.

Background

The Government of Zambia committed to implementing the EITI in 2008 and a multi-stakeholder group - the Zambia EITI Council (ZEC) - was established in early 2009 to oversee EITI implementation. The country was accepted as an EITI candidate in May 2009, and became compliant with the 2011 EITI Rules in September 2012.

The Validation process commenced on 1 January 2017. In accordance with the Validation procedures, an initial assessment was prepared by the International Secretariat. The Independent Validator reviewed the findings and wrote a draft Validation report. Comments were received from the MSG. The Independent Validator reviewed the comments and responded to the MSG, before finalising the Validation report.

The Validation Committee reviewed the case on 4 October 2017. Based on the findings above, the Validation Committee agreed to recommend the assessment card and corrective actions outlined below.

The Committee also agreed to recommend an overall assessment of “meaningful progress” in implementing the 2016 EITI Standard. Requirement 8.3.c. of the EITI Standard states that:

ii.    Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard.

iv.   Meaningful progress. The country will be considered an EITI candidate and requested to undertake corrective actions until the second Validation.

The Validation Committee agreed to recommend a period of 18 months to undertake the corrective actions. This recommendation takes into account that the challenges identified are relatively significant and seeks to align the Validation deadline with the deadline for the 2017 EITI Report.

Scorecard for Zambia: 2017

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

A broad range of government agencies are represented on the multi-stakeholder group (MSG), government representatives regularly attend meetings. The attendance of the MSG Chair has been less frequent, but this does not seem to reflect lacking government engagement on the whole. Zambia EITI has also engaged several key government agencies and high-level officials beyond the MSG in the EITI implementation and outreach activities. Government commitment at the higher political level will be important going forward.

1.2Company engagement

Companies are fully and effectively engaged in the EITI process. The government has ensured an enabling environment for company participation.

1.3Civil society engagement

Civil society is fully and actively engaged in Zambia EITI process and able to speak freely on transparency and natural resource governance issues. The government has ensured that there is an enabling environment for civil society participation and made several efforts to engage civil society beyond the multi-stakeholder group in the design and implementation of the EITI.

1.4MSG governance

It was evident during the stakeholder consultations that multi-stakeholder group (MSG) members have a clear understanding of the Terms of Reference for the MSG and appointment of representatives. Decision-making is conducted in an inclusive way which treats each constituency as a partner. The Terms of Reference for the MSG are followed and the invitation to participate in the group is open and transparent, with stakeholders being adequately represented.

1.5Work plan

Zambia EITI’s work plan is a result of consultations with key stakeholders and endorsed by the multi-stakeholder group (MSG), and is made publicly available.

Licenses and contracts

2.2License allocations

While the report includes an overview of the licensing process, it is uncertain to what extent the information reflects any changes resulting from the MMDA 2015. There are gaps related to the process of license transfers, licenses transferred during the reporting year, and an explanation of the technical and financial criteria for awarding of licenses.

2.3License register

Comprehensive information on the licenses held by material and non-material companies is included in the mining cadastre. Data on the date of application / submission of bid is not available for petroleum licenses, althouh this is not sufficient for the requirement to be unmet.

2.4Policy on contract disclosure

While the EITI Report explains that there are currently no active contracts in the mining sector, the references to the MMDA 2008 does not make it clear whether the information is up to date and whether there are any changes resulting from the passing of the MMDA 2015. It is also not clear from the report whether there are any possibilities for entering into contracts with the government with regards to the exploration or production of petroleum, if so, whether there are any laws or contractual provisions that would affect disclosure of contracts in the petroleum sector.

2.1Legal framework

The 2015 EITI Report describes the legal framework and fiscal regime governing the extractive industries including the level of fiscal devolution, an overview of the relevant laws and regulations, and information on the roles and responsibilities of the relevant government agencies. There are parts of the report that refer to laws that have been replaced, such as the MMDA 2008.

2.5Beneficial ownership

Not assessed

Implementing countries are not yet required to address beneficial ownership and progress with this requirement does not yet have any implications for a country’s EITI status. The multi-stakeholder group published its roadmap by the deadline of 1 January 2017 as required.

2.6State participation

The EITI Report provides an overview of state participation in the sector including level of ownership held by Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH) in mining companies, changes in the level of ownership and funding arrangements provided to by the ZCCM-IH to mining companies. ZCCM-IH’s annual audited financial reports are publicly available and include information on the rules and practices regarding transfer of funds between the ZCCM-IH and the state, licenses held, reserves, licenses held, the names of operating companies, royalties and dividends. There is limited information on the recently established Industrial Development Corporation (IDC) and how dividends collected fromthe mining sector are managed, although state asset management companies do not fall under the scope of Requirement 2.6.

Monitoring production

3.1Exploration data

The EITI Report provides an overview of the extractive sector, including exploration activities and estimates of mineral reserves.

3.2Production data

The EITI Report provides information on production volumes by commodity, and documents the government’s effort to collect reliable information on production values.

3.3Export data

The EITI Report discloses total export values by commodity, and export volumes are disclosed for each of the major commodities exported.

Revenue collection

4.3Barter agreements

Not applicable

EITI Requirement 4.3 on barter and infrastructure transactions is not applicable to Zambia.

4.6Direct subnational payments

Direct payments made by companies to subnational government entities are reconciled in the EITI Report. These payments consist of property rates and annual business fees paid by companies directly to local councils.

4.7Disaggregation

Direct payments made by companies to subnational government entities are reconciled in the EITI Report. These payments consist of property rates and annual business fees paid by companies directly to local councils.

4.9Data quality

The EITI Report provides a clear account of the reporting procedures and an assessment of the reliability of the data.

4.1Comprehensiveness

The multi-stakeholder group (MSG) has documented its discussions and rationale for selecting a materiality threshold which has resulted in comprehensive reconciliation of the payments and revenues in the extractive sector.

4.2In-kind revenues

Not applicable

EITI Requirement 4.2 on in-kind revenues is not applicable in Zambia.

4.4Transportation revenues

Not applicable

EITI Requirement 4.4 on transport revenues is not applicable to Zambia.

4.5SOE transactions

The rules and practices regarding transfer of funds between the Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH) and the state are disclosed. There is limited information on the recently established Industrial Development Corporation (IDC) and how dividends are managed, although this does not fall under the scope of Requirement 4.5 as IDC is a state-owned asset management company.

4.8Data timeliness

The 2015 EITI Report was published one year after the end of the financial year covered by the report, well ahead of the two-year deadline.

Revenue allocation

5.1Distribution of revenues

The EITI Report describes the distribution of revenues and explains that only revenues collected by local councils are not deposited into the consolidated account.

5.2Subnational transfers

Not applicable

EITI Requirement 5.2 on sub-national transfers is not applicable in Zambia.

5.3Revenue management and expenditures

Not assessed

The EITI Report includes some information on the budget-making process. Reporting on revenue management and expenditures is encouraged but not required by the EITI Standard and progress with this requirement will not have any implications for a country’s EITI status.

Socio-economic contribution

6.1Mandatory social expenditures

Not applicable

There are no mandatory social payments from the extractive sector in Zambia. Requirement 6.1.a is therefore not applicable. The EITI Report discloses voluntary Corporate Social Responsibility payments per company, both in cash and in-kind.

6.2Quasi-fiscal expenditures

Not applicable

The SOE operating in the mining sector, Zambia Consolidated Copper Mines – Investment Holding (ZCCM-IH), does not appear to make material quasi-fiscal payments. There is only evidence of smaller social contributions being made, which are disclosed in the company’s annual financial report.

6.3Economic contribution

The 2015 EITI Report provides a brief overview of the contribution of the extractive industry to the economy and provides key figures on contribution to GDP, government revenues, exports and employment.

Outcomes and impact

7.2Data accessibility

Not assessed

The multi-stakeholder group (MSG) has made attempts to make EITI data accessible to the public, produced brief summary reports and is now planning thematic reports to attract audiences. Some capacity building efforts and trainings have been undertaken to increase awareness of the EITI process, improve understanding of information and data from the reports, and encourage use of the information by citizens, the media and others.

7.4Outcomes and impact of implementation

The multi-stakeholder group (MSG) has reviewed the outcomes and impact of EITI implementation on natural resource governance through the production of annual progress reports, agreed by the MSG and made publicly available.

7.1Public debate

There is ample evidence that a country-wide dissemination campaign has been made and that EITI Reports have been actively promoted. The multi-stakeholder group has agreed on a policy to the access, release and reuse of EITI data.

7.3Follow up on recommendations

The multi-stakeholder group has considered the recommendations from EITI reporting, but this approach has been ad hoc. A more systematic approach to developing and following up on report recommendations is needed to ensure that EITI reporting can help address gaps in the way the sector is managed.

Countries
Zambia