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Administrative Court Reveals Limitations in Supervision of Extractive Industry

Administrative Court Reveals Limitations in Supervision of Extractive Industry

The monitoring and supervision of the extractive industry, the main source of revenue for the Republic of Mozambique, continues to be one of the State’s great challenges. This time, the challenge is taken up by the Administrative Court, the body responsible for auditing public accounts.

While the Government is unable to “closely monitor” the companies involved in the extraction of mineral and hydrocarbon resources, the Administrative Court says it is facing legal difficulties in directly supervising the multinationals.

Speaking this week in Maputo during the presentation of the third edition of the Extractive Sector Transparency Index, published by the Centre for Public Integrity (CIP), the Deputy Accountant General of the State Accountancy Office, Victor Guibunda, revealed that the Administrative Court has no powers to supervise or audit the activities of multinationals, and so its role is limited to hearing the public entities involved in the sector, particularly the regulatory institutions (National Petroleum and Mining Institutes) and ministries.

“The role of the [Administrative] Court is somewhat limited when we talk about this [extractive] sector. We are talking about private entities that contract with the State (…) The Court has no relationship with the companies, but with the public entities that deal with them. Therefore, in its actions, the Court verifies if these public entities are fulfilling their attributions”, explained Guibunda.

According to the Deputy Accountant General of the State Accountancy Office, the only way found by the Court to deal with companies is to “scour” their activity reports and accounts, published in national newspapers and on their websites.

“The challenge is great for everyone, because much of the legislation still does not allow the Court to go further. We would be punishing someone who has set out to monitor, but also has no legal instruments to do so. There are aspects of our legislation that are not compatible with these operators”, he argued.

Meanwhile, the Administrative Court says it has found a way to discuss the extractive industry, with the creation of a chapter dedicated to that sector, in the Report and Opinion of the State General Account. The chapter has been drawn up for five years and has proved important for monitoring the State’s earnings in this sector.

“Time and again, we have found that the data in the present documents of the General State Account on revenue collection in this industry is conflicting. The Ministry has one figure, the regulator has another and when we cross-check with the information from the companies, which is published in the newspapers, we also see some inconsistencies,” Guibunda said.

“To some extent, these non-conformities may be from angles of analysis for the same object. But we know that when we are talking about production, for example of coal, it has consequences on the production tax. This production tax, in turn, impacts the 2.75 per cent (now raised to 10 per cent) that should be channelled to communities,” he pointed out.

“Also when we see the amounts that are transferred to the communities, sometimes we notice that some amounts are the same amounts that are transferred to the communities in two or three years. Any auditor, when he sees that situation wonders if the production was just that?! So there may be something missing between the executive power entities,” said Guibunda, but he assured that there had been some improvement in the Government’s accountability of the extractive sector.

As well as legal limitations, Guibunda said there were also technical limitations on the part of the auditors, as this is a complex industry, whose contracts are mostly written in English, with technical terms that are beyond the capacities of the Court’s technicians.

“There is a need for training of auditors on this value chain of the extractive sector and technical capacity building. We have challenges to participate in audits on health, safety and the environment, which is an area that the Court is predisposed to bring a new aspect in this chapter [Extractive Industry] in each economic year [Report and Opinion of the General State Account], because the complexity is enormous,” he said.

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The Administrative Court also defends the adoption of lasting public policies, which are not changed every government cycle, as, on the one hand, this is a challenge for that sovereignty body, and on the other hand, it creates constraints for the Court itself, which is reflected in the quality of the successive Reports and Opinions of the General State Account, which insist on presenting the same findings.

It should be noted that the report of the Extractive Sector Transparency Index 2021/2022 reveals the degradation of transparency in this sector, with the companies submitted for evaluation having scored an average of 21 points out of a possible 100. The result represents a reduction of four points compared to the 2020/2021 assessment and a decrease of eight points compared to the first assessment (2019/2020).

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