Extractive Industry Transparency: Payments from extractive companies reaches USD 1 bi for the first time in 2014

Nacala Port
Nacala Coal port terminal in Mozambique. Photo: Vale/ITIE Mozambique

Mozambique’s recently published sixth EITI Report, covering 2013 and 2014, shows that the mining and hydrocarbon industries accounted for 27% of total government revenue in 2014. The gas sector contributed 90% of the over USD 1 billion total extractives revenue in 2014.

According to the report, capital gains tax continues to be the main source of revenue from the industry. This is despite the fact that there has been a drop in production of extractives and the value of exports. The report shows that both production and export values decreased by almost 50% from 2013 to 2014, and were significantly lower than forecasted. Capital gains tax is paid for profits made from selling equity at a higher price than was paid when it was first acquired. Large capital gains tax payments demonstrate the increase in value of Mozambique’s off-shore gas fields since large discoveries were made.

Highlighting changes in the legal framework

New Petroleum and Mining Laws were introduced in 2014, and the report includes a summary of the changes. The new legislation strengthens state participation in the hydrocarbon sector and creates opportunities for increased Mozambican participation.  . The report also includes information on the licensing round which began in 2014 to award new hydrocarbon exploration and production contracts. The bidding round has been under scrutiny by civil society, and more transparency on these processes can help build trust in how the government manages exploration and production licenses.

Payments to communities covered for the first time

In accordance with the new legal provisions governing the extractive sector, the 2013 and 2014 state budgets should have allocated 2.75% of extractive revenue for community development programmes in the areas where extractive projects take place. Mozambique’s report captures for the first time these revenue transfers from the central government to communities. The report notes that the total amounts transferred in 2014 corresponded to 96% of what should have been transferred. The actual transfers accounted for less than 50% of what was budgeted due to royalty payments not reaching the forecasted level. This was caused by heavy rains and interruptions in the operation of the Sena railway that led to decreased coal production.

Other EITI countries in Africa have also provided information on transfers from central to local government. For instance, Ghana has published and reconciled transfers to local governments from mining royalties, which resulted in important findings used to improve the management of these transfers.

More relevant data along the value chain

The report also provides other relevant data on the extractive industries and contribution to the national economy. Some of this includes information on state participation in the extractive sector, in-kind revenues received by state-owned companies, revenues from gas transportation and social contributions from companies.

Read the full Mozambique 2013 and 2014 EITI Report (PDF) >

For more information about extractives transparency in Mozambique, visit Mozambique’s EITI website  or see their country page on eiti.org.(SOURCE: ITIE.ORG)

 

 

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