Validation of the Democratic Republic of Congo Report on Initial Data
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1 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation EITI International Secretariat 15 April 2019 Validation of the Democratic Republic of Congo Report on initial data collection and stakeholder consultation 2 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation Abbreviations ACE Agence Congolaise de l'Environnement ASADHO L’Association Africaine de Défense des Droits de l’Homme ASM artisanal and small-scale mining BCC Banque Centrale du Congo BCPSC Bureau de Coordination et de Suivi du Programme Sino-Congolais CAMI Cadastre Minier CdC Cour des Comptes CDF Congolese Democratic Franc CEEC Centre d'Evaluation, d'Expertise et de Certification CLS Comités Locaux de Suivi COMICO Compagnie Minière Congolaise COMINIÈRE SA La Congolaise de l’exploitation minière CRG Congo Research Group CTCPM Cellule Technique de Coordination et Planification Minière CTR Comité Technique de suivi et d’évaluation des Réformes DGDA Direction Générale des Douanes et Accises DGI Direction Générale des Impôts DGRAD Direction Générale des Recettes Administratives, Judiciaires, Domaniales et de Participation DPSB Direction de la Préparation et du Suivi du Budget DRC Democratic Republic of Congo DRHKAT Direction Provinciale des Recettes du Haut-Katanga DRKAT Direction des Recettes du Katanga DRLU Direction Provinciale des Recettes du Lualaba EITI Extractive Industries Transparency Initiative EPE Entreprise du Portefeuille de l’Etat ETD Entités Territoriales Décentralisées FEC Fédération des Entreprises du Congo GÉCAMINES SA La Générales des Carrières et des Mines SA IA Independent Administrator IGF Inspection Générale des Finances IMG International Monetary Fund INS National Statistical Institute INTOSAI International Organization of Supreme Audit Institutions IPIS International Peace Information Service JV Joint Venture MEDD Ministère de l’Environnement et du Développement Durable MIBA Société Minière de Bakwanga MIOC Muanda International Oil Company MSG Multi-stakeholder Group NRGI Natural Resource Governance Institute OHADA Organisation pour l’Harmonisation en Afrique du Droit des Affaires PERENCO Compagnie pétrolière et gazière francaise POM Plateforme des Organisations de la Société Civile Intervenant dans le Secteur Minier PSC Production Sharing Contrat RSC Redevance suivi de change (exchange rate fees) 3 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation SACIM Sàrl Société Anhui Congo d’Investissement Minier SàRL SAEMAPE Service d'Assistance et d'Encadrement des Mines Artisanales et de Petit Echelle SAESSCAM Services d’Assistance et d’Encadrement du Small-Scale mining SAKIMA SA Société Aurifère du Kivu et du Maniema SA SCMK-Mn SA Société Commerciale Minière de Kisenge Manganèse SA SGH Secrétariat Général des Hydrocarbures SGRN Synergie pour la Gouvernance des Ressources Naturelles SICOMINES Sino-Congolaise des Mines SIMCO Société Immobilière du Congo SODIMICO SA Société du Développement Industriel et Minier du Congo SA SODIMIKA SA Société de Développement Industriel et Minier du Katanga SA SOE State-Owned Entreprise SOKIMO SA Société Minière de Kilo Moto SONAHYDROC Société Nationale des Hydrocarbures du Congo 4 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation Table of Contents Abbreviations 2 Executive Summary 6 Overall conclusions 6 Recommendations 8 Introduction 13 Brief recap of the sign-up phase 13 Objectives for implementation and overall progress in implementing the work plan 13 History of EITI Reporting 14 Summary of engagement by government, civil society and industry 14 Key features of the extractive industry 14 Explanation of the Validation process 17 Part I – MSG Oversight 19 1. Oversight of the EITI process 19 1.1 Overview 19 1.2 Assessment 19 Government engagement in the EITI process (#1.1) 19 Industry engagement in the EITI process (#1.2) 22 Civil society engagement in the EITI process (#1.3) 25 MSG governance and functioning (#1.4) 38 Work plan (#1.5) 46 Part II – EITI Disclosures 55 2. Award of contracts and licenses 55 2.1 Overview 55 2.2 Assessment 55 Legal framework (#2.1) 55 License allocations (#2.2) 60 License registers (#2.3) 65 Contract disclosures (#2.4) 68 Beneficial ownership disclosure (#2.5) 70 State participation (#2.6) 73 3. Monitoring and production 90 3.1 Overview 90 3.2 Assessment 90 Overview of the extractive sector, including exploration activities (#3.1) 90 Production data (#3.2) 92 Export data (#3.3) 96 4. Revenue collection 100 4.1 Overview 100 4.2 Assessment 100 Materiality (#4.1) 100 In-kind revenues (#4.2) 109 Barter and infrastructure transactions (#4.3) 110 5 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation Transport revenues (#4.4) 114 Transactions between SOEs and government (#4.5) 115 Subnational direct payments (#4.6) 117 Level of disaggregation (#4.7) 120 Data timeliness (#4.8) 121 Data quality (#4.9) 123 5. Revenue management and distribution 135 5.1 Overview 135 5.2 Assessment 135 Distribution of revenues (#5.1) 135 Subnational transfers (#5.2) 136 Additional information on revenue management and expenditures (#5.3) 140 6. Social and economic spending 145 6.1 Overview 145 6.2 Assessment 145 Social expenditures (#6.1) 145 SOE quasi fiscal expenditures (#6.2) 148 Contribution of the extractive sector to the economy (#6.3) 149 Part III – Outcomes and Impact 155 7. Outcomes and Impact 155 7.1 Overview 155 7.2 Assessment 155 Public debate (#7.1) 155 Data Accessibility (#7.2) 158 Lessons Learned and follow-up on recommendations (#7.3) 159 Outcomes and impact of implementation (#7.4) 161 8. Impact analysis (not to be considered in assessing compliance with the EITI provisions) 169 Annexes 172 Annex A. List of MSG members at the start of Validation 172 Annex B. Cost of EITI implementation 173 Annex C - List of stakeholders consulted 174 Index of figures and tables Figure 1. Initial assessment card .................................................................................................................. 11 Table 1. Summary of initial assessment: MSG oversight ............................................................................. 50 Table 2. Summary of initial assessment: Award of contracts and licenses ................................................ 85 Table 3. Summary of initial assessment: Monitoring and production ........................................................ 98 Table 4. Summary of initial assessment: Revenue collection .................................................................... 130 Table 5. Summary of initial assessment: Revenue management and distribution ................................... 143 Table 6. Summary of initial assessment: Social and economic spending .................................................. 153 Table 7. Summary of initial assessment: Outcomes and impact ............................................................... 167 6 Validation of the Democratic Republic of Congo: Report on initial data collection and stakeholder consultation Executive Summary The Government of the Democratic Republic of the Congo (DRC) committed to implement the EITI on 17 March 2005, and issued a Prime Ministerial Decree in November 2005 creating the EITI National Committee (the multi-stakeholder group - MSG). The country was accepted as an EITI Candidate in February 2008. Following two Validations, the Democratic Republic of the Congo was declared compliant under the EITI Rules in July 2014. On 25 October 2016, the Board agreed that the country’s Validation under the 2016 EITI Standard would commence on 1 July 2018. On 4 September 2018, the EITI Board agreed that the Democratic Republic of the Congo was eligible for an extension of its Validation deadline1. The Validation commenced on 1 October 2018. This report presents the findings and initial assessment of the International Secretariat’s data gathering and stakeholder consultations. The International Secretariat has followed the Validation Procedures and applied the Validation Guide in assessing the DRC’s progress with the EITI Standard. As of 1 October 2018, the DRC EITI had not yet published a reconciliation report that covered the fiscal year 2016. The International Secretariat has therefore based its assessment of financial disclosures on the 2015 EITI Report, but has taken into account other publicly available information published before the start of Validation by the DRC EITI. This assessment therefore also takes into consideration data from 2016 and 2017, as well as disclosures by reporting government entities and companies. The MSG has not yet reviewed the assessment nor has the Independent Validator guaranteed its quality , but the Secretariat’s preliminary assessment is that 13 of the requirements of the EITI Standard have not been fully addressed in the DRC. Two of these are assessed as unmet with inadequate progress. The recommendations and suggested corrective actions identified through this process relate in particular to MSG governance (#1.4), license allocations (#2.2), license register (#2.3), state participation (#2.6), production data (#3.2), export data (#3.3), comprehensiveness (#4.1), SOE transactions (#4.5), direct subnational payments (#4.6), data quality (#4.9), distribution of revenues (#5.1), subnational transfers (#5.2), mandatory social expenditures (#6.1) and SOE quasi-fiscal expenditures