Global body wants identity of oil company owners revealed
Oct 07, 2020
All mining and oil companies in the country will be required to publish beneficial owners to improve accountability and transparency, according to the minerals directorate.
This follows confirmation of Uganda's membership to the Extractives Industry Transparency Initiative
(EITI), a global standards body which promotes transparency, accountability and good governance in the management of extractives such as oil, gas and minerals. Uganda was confirmed to EITI on August 12.
The publication of the owners who are directly and indirectly involved in the company activities is part of the requirements of EITI.
EITI is a global standards body aimed at promoting transparency, accountability and good governance in the management of extractive industries such as oil, gas and minerals.
According to EITI, the identity of the real owners of the companies that have obtained rights to extract oil, gas and minerals is often unknown, hidden by a chain of unaccountable corporate entities. This, according to EITI, often helps to feed corruption and tax evasion and affects other sectors.
"People who live in resource-rich countries are at a particular risk of losing out as extractive assets are too often misallocated for corrupt reasons," the EITI states.
"All EITI countries have to ensure that companies that apply for or hold a participating interest in an oil, gas or mining licence or contract in their country disclose their beneficial owners," the standard reads. This information, according to EITI, will be publicly available is for publication in EITI reports and public registries.
The EITI standard also requires public officials often referred to as "Politically Exposed Persons (PEPs)" to be transparent about their ownership in oil, gas and mining companies.
A 2017 report by Global Witness highlighted that politically exposed people in Uganda owned several mining companies in the country.
The report said such individuals had frustrated efforts to reorganise the sector and that is how they have benefited at the expense of others.
The disclosure of all information on ownership will also include information on the value chain, including award of extraction licences to how the extractives make their way through the government. It will include processes, royalties, contracts, licences and revenues obtained in the extractives sector.
In addition, the Government will also be required to disclose how the natural resources benefit the public.
Currently, 20 countries are engaged in making reforms to establish public registers.
According to EITI, hidden ownership poses problems for honest companies because they do not know who they are doing business with.
"Publishing the real owners will help ensure that there is a level playing field for all companies and allow them to know who they are doing business with," it reads.
The civil society welcomed the move, saying it will improve transparency and prevent corruption as well as improve industry engagement, competition and civic trust.
The deputy executive director at the Advocates Coalition for Development and Environment (ACODE), Onesmus Mugyenyi, said publishing owners' identities will curtail illicit financial flows from the extractive sector.
Winnie Ngabiirwe, the executive director at Global Rights Alert, which advocates transparency in natural resources management, said this should help law enforcers and the civil society to scrutinise these companies' activities.
"It has been reported many times in Uganda that certain government officials are involved in mining indirectly. Now, we want to know who the actual people reaping from this sector are," Ngabiirwe, who is also a member of the Multi-Stakeholder Group (MSG) said.
Magara Siragi Luyima, a member of MSG, noted that the mineral resources in Uganda have potential to diversify the economy, reverse trends and propel Uganda to the much-desired middle-income status.
He urged the Government to "finalise a fiscal rule that improves government performance, public financial management to improve our spending and investing of revenues from our natural resources".
Govt welcomes move
Saul Ongaria, a senior economist with the finance ministry, who also doubles as the national co-ordinator of the EITI, said the Government has embarked on implementing the standards.
"The Government intends to harmonise the local laws to conform to EITI standards and naming owners will not be debatable," he said.
Ongaria said the Government has 18 months to submit its first report to the EITI. The report will contain names of owners of the mining companies among the data. The report will be validated at the EITI International Secretariat in Oslo, Norway to decide if Uganda is compliant.
Moses Kaggwa, the director economic affairs at the finance ministry, said knowing both direct and indirect owners of mining companies will help the country know the right people to tax.
"We lose out on taxes in the sector because on many occasions we do not know who owns what. However, once we publish them, it will help institutions such as Uganda Revenue Authority go for all beneficiaries," Kaggwa said.
A 2017 Global Witness report said political elites exert a strong significance on the minerals sector. The report claimed that through African Gold Refinery, a group of Belgian and Ugandan businessmen have been able to ship out over $200m worth of gold without declaring its origin or providing evidence of adequate supply chain due diligence.
"The company has negotiated tax exemptions and has only paid a little over half a million dollars in tax," the report said.
Much as thousands of Ugandans already make a living from mining, the report said, the investigations noted that corruption, poor regulation and interference by the political elite are stifling good quality investment and putting Ugandans and their environment at risk.
The report also noted that previous attempts to reform the oil and gas sector have been undermined by institutional corruption and vested interests. Bodies such as the Office of the Auditor General and the Inspector General of Government have done some good work in identifying problems, and with sufficient resources and political backing, could play a vital role in cleaning up the sector and making it fit for sustainable and above-board inward investment.
"There are honest and dedicated employees at the Directorate of Geological Survey and Mines (DGSM). However, their efforts have been insufficient in the face of the entrenched corruption and established ways of working at the DGSM," the report said.