Last Monday’s sitting of the Public accounts Committee (PAC), the Auditor General’s report on the procurement, storage and distribution of COVID-19 supplies was discussed. It covers the six-month period March-August 2020, the outer date coinciding with the end of the APNU+AFC Administration. It is unclear why a longer period was not chosen, considering that the report was issued in September 2021. Had this been done, the report would have benefitted from coverage of the storage and distribution of 120,000 doses of COVID-19 vaccine received during the period March – August 2021 from the COVAX facility and the French Government.
Around the same time also, the Government had procured more than G$2 billion worth of Russian-made Sputnik V vaccine from a company owned by Sheik Ahmed Dalmook Al Maktoum, a member of the royal family in the United Arab Emirates, at more than double the World Health Organisation recommended price. Concern had been expressed as to why the vaccine was not sourced directly from the authorities in Russia rather than from the Sheik who in November 2020 had paid a visit to Guyana and who was alleged closely associated with two persons being investigated in Norway for fraud and money laundering.
The report stated that while the Procurement Act 2003 requires public tendering for goods, services and execution of works, there is no provision for emergency public procurement when it is not practicable to engage in public tender. It also stated that ‘[a]s a recourse to avoid any delay in acquiring the goods or services, an entity can engage in single-source procurement’ but did not cite the authority for this. Section 28 of the Act does, however, provide for single procurement where, among others:
(a) The goods or services are available only from a particular supplier or contractor, or a particular supplier or contractor has exclusive rights with respect to such goods or services, and no reasonable alternative or substitute exists;
(b) The services, by reason of their highly complex or specialized nature, are available from only one source; and
(c) Owing to a catastrophic event, there is an urgent need for the goods or services, making it impractical to use other methods of procurement because of the time involved in using those methods.
Considering the above and contrary to the findings of the report, the Ministry of Public Health and the Civil Defence Commission, in our view, did not breach the Procurement Act when it entered into 18 contracts valued at $424M without first obtaining the approval of the National Tender and Administration Board (NPTAB). The Act is silent on whether such approval is required before a procurement contract is entered into in the above circumstances. In any event, given the emergency nature of the procurement, it might not have been possible to obtain the NPTAB’s prior approval. The report did indicate that covering approval was subsequently granted. Therefore, there is no need to amend the Act ‘to include emergency procurement policies and procedures’, as recommended by the Auditor General.
Last week, we reported that Guyana was suspended from the membership of the Extractive Industries Transparency Initiative (EITI) for its failure to prepare and publish the 2020 annual report, as required by the EITI Standard. The report was due last year-end, and the delay is reportedly due to disagreement between the National Coordinator and certain members of the Multi-Stakeholder Group (comprising representatives from government, industry and civil society) over the terms of reference for the Independent Administrator responsible for compiling the report. The EITI has reportedly extended the deadline to 31 July 2023 for the publication of the report.
Some brief historical background on EITI
In 1999, Global Witness issued a report on the mismanagement of oil resources in Angola in which it called on companies to adopt a policy of full transparency in the extractive industry not only in Angola but also in other countries with similar problems of lack of transparency and government accountability. This led former British Prime Minister Tony Blair to introduce the idea of an EITI at the 2002 World Summit on Sustainable Development in Johannesburg, South Africa. He stated history has shown that the discovery and exploitation of oil resources do not automatically translate into economic growth and sustainable development. The problems include the vast size of potential revenues in relation to the rest of the economy, price fluctuations and the finite life of such resources. Mr. Blair went on to state:
Some people underestimate the importance of transparency. Together with improving standards of governance and democratic accountability, it is a central plank of a wider accountability agenda. This, in turn, is essential to improve development and the prospects of achieving the Millennium Development Goals for global poverty reduction.
Conversely, a lack of transparency undermines public confidence in the legitimacy of the state. When there is corruption, it is always the poor who suffer most. We need to use transparency in revenue and financial management to allow people to hold government to account and build public trust. Increased transparency will also help to create the right climate for attracting foreign investment, and encourage an enterprise culture. Governments need to create this favourable environment, but companies have an interest in promoting transparency too. Transparency should help companies to reduce reputational risk, to address the concerns of shareholders and to help manage risks of long-term investments. And transparency is a positive contribution to development as it increases the likelihood that revenues will be used for poverty reduction.
This Conference shows our commitment to improving the way we manage the world’s oil, gas and mineral resources. But the initiative will only be truly worthwhile if it is the start of a much more determined effort to improve transparency and accountability in the extractives sector and beyond.
In 2003, the UK Department for International Development held a conference in London involving 140 delegates from civil society, company, government, international organisations and investors. The delegates agreed to the following Statement of Principles to increase transparency over payments and revenues in the extractives sector:
We share a belief that the prudent use of natural resource wealth should be an important engine for sustainable economic growth that contributes to sustainable development and poverty reduction, but if not managed properly, can create negative economic and social impacts.
We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.
We recognise that the benefits of resource extraction occur as revenue streams over many years and can be highly price dependent.
We recognise that a public understanding of government revenues and expenditure over time could help public debate and inform choice of appropriate and realistic options for sustainable development.
We underline the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability.
We recognise that achievement of greater transparency must be set in the context of respect for contracts and laws.
We recognise the enhanced environment for domestic and foreign direct investment that financial transparency may bring.
We believe in the principle and practice of accountability by government to all citizens for the stewardship of revenue streams and public expenditure.
We are committed to encouraging high standards of transparency and accountability in public life, government operations and in business.
We believe that a broadly consistent and workable approach to the disclosure of payments and revenues is required, which is simple to undertake and to use.
We believe that payments’ disclosure in a given country should involve all extractive industry companies operating in that country.
In seeking solutions, we believe that all stakeholders have important and relevant contributions to make – including governments and their agencies, extractive industry companies, service companies, multilateral organisations, financial organisations, investors and non-governmental organisations.
As a consequence of the above, the EITI Association was established under Norwegian law and currently comprises 57-member countries. With an International Secretariat, and a 21-member board drawn from governments, civil society and industry, the EITI seeks to strengthen government and company systems, inform public debate and promote understanding. In each of the implementing countries, the EITI is supported by a coalition of government, companies, and civil society. It shares the belief that natural resource wealth should benefit citizens and that this requires high standards of transparency and accountability.
The EITI has adopted the above Statement of Principles and has promulgated standards, known as the EITI Standard, to which participating countries are required to observe. A key requirement is for countries to publish timely and accurate information on key aspects of their natural resource management, including how licences are allocated, how much tax and social contributions companies are paying and where this money ends up in the government. Through the EITI, companies, governments, and citizens increasingly know who is operating in the sector and under what terms, how much revenue is being generated, where it ends up and who it benefits. From the perspective of the State, the EITI helps to improve the investment climate by providing a clear signal to investors and international financial institutions that there is commitment to greater transparency. It also assists in improving governance and promoting greater economic and political stability.
Guyana’s membership to EITI
Prior to 2017, there was no mechanism in Guyana to provide for open and accountable management of natural resources, especially as regards public reporting of revenue derived from extractive industries. In 2010, the Government announced its commitment to implement the EITI programme, and discussions were held with the Government of Norway in 2011. This was followed by a workshop with key stakeholders. In May 2012, the Ministry of Natural Resources and the EITI signed a Memorandum of Understanding to assist Guyana in its preparation for the EITI candidacy, and it was agreed that an application for membership would be made by June 2015. A scoping study was then commissioned in early 2015 and a draft report (Moore Stephens Report) was issued in October 2015.
In 2016, the Government reaffirmed its commitment to becoming a member of the EITI with the issuance of an unequivocal public statement which is the first in a series of five steps before a formal application is made. The following actions were also taken, consistent with the EITI Standard:
Establishment of the EITI National Secretariat (GYEITI) in December 2016;
Appointment of a National Coordinator in February 2017;
Official launch of the MSG in February 2017;
Consultations with key stakeholders and conducting public outreaches in July 2017; and
(e) Submission of a formal application for membership of the EITI in August 2017.
In October 2017, Guyana was admitted to the membership of EITI. The first two annual reports highlighted significant deficiencies and instances of non-compliance with the requirements of the EITI Standard. These have led the Independent Administrator to conclude that he was unable to determine that all significant contributions made by extractive entity to the revenues of Guyana were included in the report.
The 2019 report made it clear that continued inaction on some of the recommendations previously made: (i) stymies progress in meeting the requirements of the EITI Standard; (ii) impedes preventative actions to correct and address discrepancies between declarations by government agencies and the extractive entities; (iii) adversely affects the data quality and comprehensiveness of the disclosures, which may reduce the public’s confidence in the report’s data; and (iv) compromises the fundamental purpose of EITI open data as a tool for government to improve policy making and sector management.
Apart for the requirement for annual reporting, EITI implementing countries must undergo a quality assurance mechanism, called Validation, at least every three years to assess progress towards meeting the EITI Standard and in promoting dialogue and learning at the country level. Three broad areas were considered – stakeholder engagement, transparency, and outcomes and impact – with Guyana scoring 60.0, 53.5, and 42.0, respectively. The EITI Board expressed concern, especially over the low score on the outcomes and impact component. It attributed Guyana’s performance to ‘an ad hoc approach to outreach and dissemination, failure to follow-up on EITI recommendations to deliver reforms and insufficient attention to the annual review of outcomes and impact’. The next Validation is due in April 2024. The Board has warned that the failure to take the necessary corrective actions in the 20 areas identified may result in temporary suspension.
It is relevant to note that Trinidad & Tobago received an overall score of 89 points in its most recent Validation. It is also the first country of Latin America and the Caribbean to publish the beneficial owners of oil, gas, and mining licences.
Next week, we will discuss the President’s reaction to Guyana’s suspension from membership of the EITI and the response of the MSG Civic.
