Tuesday, December 7, 2021

The Debswana secrecy….

The EITI says disclosure of beneficial ownership in companies is a key tool in the fight against corruption, tax avoidance, capital flight, environmental mismanagement and other ills linked to the mining sector.

While her latest report is on the accounts of the government of Botswana in general, Auditor General – Pulane Letebele mentions and highlights the importance of EITI not once but atleast twice and goes further to point out transparency leakages that came as a result of Botswana staying out of the EITI.

On one of the mentions, the Auditor General reveals that Botswana has notably not signed up to this extractive sector transparency initiative – EITI.

“The Extractive Industry Transparency Initiative (EITI) principles encourage countries to publicly disclose their extractive (mining) sector contracts agreements and licences. Botswana is however not a member of the EITI”, reads part of the Auditor General report under the sub-heading “Extractive Industries”.

Since the early 2000s, one of the highest-profile global efforts to increase natural resource transparency in resource-rich countries such as Botswana has been the EITI – a multistakeholder initiative consisting of countries, companies, and civil society organizations. The EITI aims to promote financial accountability in the historically graft-prone sectors such as mining.

While she did not state in clear terms the link between failure to sign up for EITI by Botswana and the decision by the Minerals Department to shun her office’s request to have access to the mining agreement between government and some mining companies such as Debswana Mining Company, Letebele said that, “The failure to avail the Debswana mining company’s terms of operation made it difficult to understand the responsibilities and obligations of the contracting parties”.

Debswana is a joint venture company co-owned by global miner De Beers Mining Company and the Botswana government. Letebele says the company’s mining licences were availed to her office without terms and conditions of operation, whereas other diamond mining companies’ mining licences together with their terms and conditions of operation were availed.

“The mining agreement with Debswana was not availed to me as it was considered confidential. This was said to be the case for companies in partnership with the Government of Botswana”, said Letebele. Letebele, however, says the agreement for Botash mining company – another mining company where the government has financial interest was availed together with its terms and conditions of operations.

The Auditor General says in seeking response, Department of Mines Management stated that mining contracts were not availed because they were commercial contracts, which if made public would potentially compromise the contracting parties especially if competitors got hold of the agreements.

“They further indicated that it was common practice for such agreements to be confidential and it should be noted that although the agreements were confidential, key terms of the agreements were publicized”, said Letebele.

On mining revenue reconciliation, the Auditor General’s office has established that the Department of mining had during 2020, neither reconciled revenue received from large mining companies with production declared nor requested for mining reports from the mines for the purpose of assessing whether dividends paid were commensurate with the financial performance of the company.

At this juncture, the Auditor General once again points the Department of Mines to the Extractive Industries Transparency Initiative (EITI) and the Natural Resource Governance Institute principles, which prescribes that payments and revenues collected from extractive industries should be reconciled by a credible independent administrator.

Letebele says this should be done by applying international auditing standards and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified. By repeatedly referring the department of mines to the EITI, the Auditor General’s office has in a way highlighted the secrecy behind some of the clauses contained on the mining agreement between Botswana and Debswana’s parent company – De Beers Mining Company.

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