Humanity is in the hot seat. For vast parts of North America, Asia, Africa and Europe, it is a cruel summer. For the entire planet, it is a disaster. Climate change is here, it is terrifying, and it is just the beginning. The era of global warming has ended; the era of global boiling has arrived.
The air is unbreathable, the heat is unbearable, and the level of fossil fuel profits and climate inaction is unacceptable. Leaders must lead. No more hesitancy, no more excuses, no more waiting for others to move first. There is simply no more time for that… It is still possible to limit global temperature rise to 1.5C [above pre-industrial levels], and avoid the very worst of climate change. But only with dramatic, immediate climate action.
António Guterres, UN Secretary-General
According to a recent conclusion by scientists, human-induced climate change has played an “absolutely overwhelming” role in the extreme heatwaves currently being experienced across the globe, with record-breaking temperatures, sparking forest fires, water shortages and a rise in heat-related hospital admissions. Thousands of tourists were evacuated from the Greek island of Rhodes to escape wildfires; while an airport in the popular tourist resort island of Sicily was closed because of the threat of wildfires, as temperatures reached 47℃ (116.6℉). In Tunisia, at least 34 people, including ten soldiers, died because of wildfires; while in the United States 150 million people are under heat alert. And at the tip of Florida, the water temperature has reached 37.8 ℃ (106.7℉), causing widespread bleaching of coral reefs and threatening their very existence. The World Weather Attribution has stated that without human-induced climate change, the events of this month would have been “extremely rare”.
In addition to the direct impact on human health, the heat has caused large-scale crop damage and livestock losses, with U.S. corn and soybean crops, Mexican cattle, southern European olives as well as Chinese cotton all severely affected. While El Nino may have contributed to the additional heat in some regions, rising greenhouse gases are the major factor. Heatwaves will become increasingly likely if emissions are not slashed. According to one scientist,’[a]s long as we keep burning fossil fuels we will see more and more of these extremes. I don’t think there’s any stronger evidence that any science has ever presented for a scientific question’. See https://www.reuters.com/world/climate-change-role-july-heatwaves-overwhelming-scientists-say-2023-07-25/; and https://ca.news.yahoo.com/101-1-degrees-water-temperatures-214600885.html?.tsrc=fp_deeplink.
In today’s article, we discuss the main points of the Guyana Extractive Industries Transparency Initiative (EITI) report for the year 2020, as reflected in the Executive Summary. Due to the delay in its compilation and publication, Guyana was suspended from membership of the EITI. The report was due last year-end, and the delay was attributed to disagreement between the National Coordinator and certain members of the Multi-Stakeholder Group over the terms of reference for the Independent Administrator responsible for compiling the report. The report has since been published. As a result, Guyana’s membership to that body was restored.
Some background information
In October 2017, Guyana was admitted to the membership of EITI. The EITI Standard outlines 12 principles that provide the cornerstone of the Initiative, as well as the requirements that EITI implementing countries are expected to follow. These principles relate mainly to: (i) the prudent use of natural resource wealth for economic growth that contributes to sustainable development and poverty reduction; (ii) the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability; and (iii) public understanding of government revenues and expenditure over time that could help public debate and inform choice of appropriate and realistic options for sustainable development.
One of the requirements of EITI Standard, is the publication of an annual report indicating, among others, how licences are allocated; how much tax and social contributions are being paid and where they end up in the government; and how much revenue is being generated, where it ends up and who it benefits. The first three annual reports, i.e. 2017, 2018 and 2019, highlighted significant deficiencies and instances of non-compliance with the EITI Standard. These have led the Independent Administrator to conclude that he was unable to determine that all significant contributions made by extractive entities to the revenues of Guyana were included in the reports.
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.
It is also relevant to note that Guyana scored poorly in its first Validation carried out by the EITI Secretariat in April 2022 to assess progress in meeting the EITI Standard and in promoting dialogue and learning at the country level. In the three broad areas considered – stakeholder engagement, transparency, and outcomes and impact – 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 this 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.
Guyana is therefore not out of the woods as yet, and it will take a tremendous effort by the Guyana EITI Secretariat to implement all the recommendations made in the four annual reports and the Validation report. It is unclear what the present staffing of the Secretariat is. However, as of October 2021, it comprised five persons. According to the then National Coordinator, at least ten staff members are needed to effectively discharge the Secretariat’s mandate. In the circumstances, it would appear necessary for the staffing to be reviewed to ensure that the Secretariat possesses the necessary skills and competencies to bring about the much-needed improvements based on the recommendations contained in the five reports issued so far. Perhaps, it is time for consideration be given to making the Secretariat a constitutional agency. At the moment, it is funded out of the budget of the Ministry of Natural Resources, and the reporting relationship is to that Ministry.
Revenue generated from extractive sector
Total revenues received from the extractive sector in 2020 amounted to G$93.77 billion, compared with $39.18 billion in 2019, an increase of $54.59 billion, or 139 percent. This significant increase was mainly due to the receipt of $41.36 billion, or 44.11 percent of the total revenues by the Ministry of Natural Resources in respect of royalties and Guyana’s share of profit oil from the operations of ExxonMobil’s subsidiaries.
The other key agencies involved in the collection of revenues are the Guyana Revenue Authority (GRA) and the Guyana Gold Board (GGB) which accounted for 30.20 percent and 14.86 percent, respectively. In the case of GRA, there was an increase of 42.3 percent from $19.90 billion to $28.32 billion.
The annual report for 2019, however, indicated that the GRA received $49.02 billion, a difference of $29.12 billion. A footnote to Tables 4 and 5 of the 2020 report indicated that the difference was due to revenues received by the GRA in 2019 from service providers of the seven oil and gas companies, who were previously classified as from oil and gas sector. Since they are not, the comparative amount for 2019 was accordingly adjusted. Considering the significance of the amount involved, the overstatement of revenues received from the extractive sector in 2019 should have been prominently reflected in the 2020 report rather than by way of a footnote.
The increase in revenue collections by GRA was mainly due to tax revenues from Esso Exploration and Production Guyana Ltd. In the case of the GGB, the increase was 41 percent from $9.91 billion to $13.93 billion. It arose from an increase in the value of gold production although there was a decrease in production by volume.
Production data
Gold and diamond have shown declines in production by 7.8 percent and 65.0 percent by volume, and 10.2 percent and 75.2 percent by value, respectively. Bauxite production also declined by 69.05 percent by volume and 42.5 percent by value, mainly due to the decision of Rusal to suspend operations. On the other hand, the production of sand and loam increased by 138.4 percent in terms of both volume and value. On an overall basis, production in the mining sector increased by 7.8 percent by value.
In his budget speech for 2021 (not mentioned in the report), the Minister of Finance had the following to say as regards the performance of the extractive industries:
The mining and quarrying sector is estimated to have expanded by 303.7 percent in 2020… One of the large gold mining companies ceased production in July 2020 to facilitate a transfer of ownership, and only resumed operations in November. As a result of this stoppage, as well as lower extraction by the other large company, the subsector contracted by 7.8 percent. Turning to the bauxite sub-sector, the stoppage of mining by one company, combined with lower global demand for bauxite and disruptions to supply chains, resulted in an estimated contraction of 41.2 percent in 2020.
The other mining subsector, which comprises diamond and sand mining, as well as stone quarrying, was estimated to have contracted by 42.7 percent… Diamond declarations declined as a result of lower global demand for precious stones amid the global economic crisis caused by the pandemic, which resulted in lower prices. Additionally, the election impasse, COVID-19 restrictions and record high gold prices, saw less diamond mining activity. The prevailing political and public health challenges also resulted in a significant reduction in construction activities, with public sector projects grinding to a halt for several months, resulting in reduced sand mining and stone quarrying.
Completeness and reliability of data
Fifteen out of 16 extractive entities selected for the reconciliation of revenues received by government agencies, submitted reporting templates. The total amount involved in respect of these 15 entities was $80.89 billion or 87.74 percent of the total revenues from mining, oil and gas sectors. In relation to the entity that did not submit its reporting template, the amount involved represented 0.013 percent of reconciled revenues and 0.011 percent of the total revenue from the mining, oil and gas sector.
The GRA did not produce reporting templates for four extractive entities as well as the names and Taxpayer’s Identification Numbers for mining and oil and gas companies that were not selected for reconciliation, because of issues of legal confidentiality.
The Independent Administrator stated that ‘[o]n this basis, we can reasonably conclude that this report covers all significant revenues made by extractive entities to the revenues of Guyana in the fiscal year 2020’. Although these findings were similar to those contained in the 2019 report, he had concluded that it was not possible to determine that all significant contributions made by extractive entity to the revenues of Guyana in were included in the report. The 2019 conclusion appeared to be an error on the part of the Independent Administrator.
In terms of data reliability, two government agencies did not submit reporting templates certified by the Auditor General. The amount of revenue involved was $1.33 billion or 1.44 percent of the total revenue received from the extractive sector. Of the 15 extractive entities that submitted reporting templates: (i) five were not signed by an authorised officer at management level and certified by an external auditor, along with their audited financial statements; (ii) six were not certified by an external auditor along with their audited financial statements; (iii) three were not certified by an external auditor and without attaching the companies’ financial statements; and (iv) one submitted a non-signed reporting template by an authorised officer at management level and not certified by an external auditor and without attaching the entity’s financial statements. According to the Independent Administrator, ‘[t]he impact of the non-certified templates from companies is equivalent to 1.27% of extractive revenues from mining, oil and gas sectors’.
The Independent Administrator went on to state that ‘[b]ased on the above, we can reasonably conclude that the significant revenues declared by reporting entities and included in this report were subject to independent audits that have been performed in accordance with international standards’.
In his 2019 report, he had concluded that it was not possible to determine that the financial data submitted by reporting entities and included in the report were subject to audits that have been performed in accordance with international standards, although the findings contained in these two reports were broadly similar. Again, the 2019 conclusion appeared to be an error on the Independent Administrator.
To be continued –
