2 January 2013

Mozambique: Third Nation's Eiti Report Published

Maputo — Mozambique has published its third reconciliation report under the Extractive Industry Transparency Initiative (EITI), referring to 2010, and showing only slight discrepancies between payments which mining and hydrocarbon companies say they made to the government that year, and the amount the government says it received.

EITI is an international initiative intended to guarantee transparency in payments from the exploitation of natural resources. Companies reveal what they pay and governments what they receive, and the two are reconciled in a report drawn up by an independent agency. In Mozambique’s case, the report was drawn up by the consultancy company Ernst & Young.

The Oslo-based EITI board declared in October that Mozambique was now compliant with EITI standards. For the previous three years it had been a candidate EITI member.

The Board’s acceptance that Mozambique is indeed “EITI compliant” was based on the EITI reconciliation report published by the government in March.

This report covered 31 reporting companies, and showed that the government had, in 2009, received just under 40 million US dollars in revenue from the extractive sector – 15 million dollars from mining and 25 million from hydrocarbons.

In the 2010 report, dated 26 December, the number of companies reporting payments has risen to 44. According to Ernst & Young, the questionnaire was sent to 46 companies, but two did not reply.

Initially, these companies claimed they had paid the Mozambican state a total of 1.878 billion meticais (about 63.4 million US dollars) in 2010.

However, the two government institutions concerned, namely the General Tax Directorate (DGI), and the National Petroleum Institute (INP), said they had received 1.909 billion meticais.

An extra 31.5 million meticais had found its way into the state coffers.

When the Ernst & Young team investigated the discrepancy, it was able to pinpoint some of the accounting mistakes, and reduced the unexplained surplus to 15.04 million meticais.

After the reconciliation exercise the amount the companies said they paid rose to 1.913 billion meticais, and the amount the government bodies said they had received was 1.928 billion.

The difference before reconciliation was 1.65 per cent of the total declared by the DGI and INP, and after reconciliation came down to 0.78 per cent. Discrepancies this small are regarded as acceptable. They are within the material limits established by Mozambique’s EITI Coordination Committee, which are three per cent of the amount reported by the state bodies.

The report covered 34 mining companies (including the two that did not respond) and 12 hydrocarbon companies. Although they are fewer of them, the hydrocarbon companies accounted for almost 70 per cent of payments.

The hydrocarbon companies declaring the largest payments in 2010 were Anadarko, the Texas-based company that has discovered huge reserves of natural gas in the Rovuma Bain, off the northern Mozambican coast (779.7 million meticais), Sasol Petroleum Temane, the South African company that treats and exports natural gas from the onshore fields of Pande and Temane in Inhambane province (182.6 million meticais), and the Norwegian oil and gas company Statoil, also operating in the Rovuma basin (102.5 million meticais).

The largest payments declared by mining companies came from Vale-Mozambique (266 million meticais), even though in 2010 Vale had not begun exporting coal from its open cast mine at Moatize, in Tete province, and from Kenmare Moma Mining, which operates a dredge mine on the Nampula coast exploiting titanium minerals (135.5 million meticais).

The figures show that in 2010 just one company, Anadarko, accounted for over 40 per cent of all payments from the extractive industry. The five largest contributors, Anadarko, Sasol Petroleum, Statoil, Vale and Kenmare accounted for 77 per cent of all payments.

The main payments covered by the report are corporation tax, the personal income tax paid by company employees, royalties, surface taxes, environmental licences, the institutional capacity building fund, and the social projects fund.

Corporation tax (IRPS) accounted for 56 per cent of all payments, and personal income tax (IRPS) for 21 per cent.

Currently, 127 companies hold mining titles – but 30 of them paid no taxes at all in 2010, because they had not yet been registered for fiscal purposes, or they were foreign companies that had not yet established a physical presence in Mozambique, or they had not undertaken any activities at all that year. They were therefore excluded from the report.

A further 63 mining companies were excluded because their payments to the state in 2010 were less than 500,000 meticais – the material limit defined by the EITI Coordinating Committee.

As for hydrocarbons, all 12 companies operating in this area were included in the report.

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