Is Senegal on the right track in the governance of mineral resources for the benefit of the people?

8 septembre 2018Tribune

Elimane Haby Kane

The announcement of major oil and gas deposits in the onshore and offshore territories of Senegal is the subject of much debate. These discoveries arouse envy and reveal new challenges in the governance of mineral resources in Senegal. The country has in its sedimentary basin a huge potential that can transform the structure of the country’s economy.

If recent discoveries of hydrocarbon resources have caused an uproar in this country, it is curious to note the absence of a substantive debate on the governance of mineral resources. Managing these resources is a big forgotten nebula in the hands of a closed club of actors. The mining sector has been explored for several years in Senegal with the granting of more than 202 mining titles (2014). The contribution of this sector to the national economy, particularly in terms of income, remains low.

A report of the General State Inspectorate (IGE) of 2014 counted only 14 billion FCFA of profits received by the State of Senegal over a period of 15 years

A report of the General State Inspectorate (IGE) of 2014 counted only 14 billion FCFA of profits received by the State of Senegal over a period of 15 years. Fortunately, with the various interventions of “civil society” actors, the sector has been invited into the national debate in the years 2010-2012, to the point of favoring Senegal’s candidacy for the Transparency Initiative in the United States. Extractive Industries (EITI). This candidacy was announced in December 2011 during a statement by the former President of the Republic, which was subsequently ratified by the Council of Ministers on 3 February 2012.

A few years later, this will is made effective by the current president who formalized the accession of Senegal in October 2013 to the EITI. Today, the question of the governance of mineral resources is becoming central, given the major upheavals in this sector.

From total dependence to the blessed godsend?

Senegal is a country that depends on the outside because of the characteristics of its economy, its energy consumption and especially hydrocarbon products. It is to be hoped that the country will move from this dependence to self-sufficiency if the announced blessing is well managed. It is enough to see how the products derived from mineral resources have a positive impact on the balance of payments of exports up to 23%. It is therefore reasonable to think of a revolution in economic statistics if we succeed in setting up a good system of governance of the sector with a strategic use of the revenues generated.

Transparency efforts that expose weaknesses in sector governance

There is a tendency to reduce the issue of mineral sector transparency to the publication of the EITI Report. This is a serious mistake and is a very minimalist perception of the dimension of transparency. The EITI is an initiative that follows the standard norms. It is concerned about the availability of data on payments issued by companies and collected by the State through its public institutions.

It provides a relatively interesting database for effective monitoring and control of the sector. It reinforces a pre-existing framework of legal rules and supervisory institutions. This initiative aims above all to support citizen dynamics that favor transparent management of public resources. However, the report also reveals shortcomings in the overall governance of mineral resources in Senegal.

In fact, it is still the private foreign companies that supply the data relating to the deposits. A sort of de-patrimonialization that does not say its name

The availability of information concerning the management of petroleum resources is a real problem. In fact, it is still the private foreign companies that supply the data relating to the deposits. A sort of de-patrimonialization that does not say its name. Even if one can evoke the existence of the mining cadastre, it does not exist yet for the oil sector. The question of ownership of mineral resources is also pending.

In addition, the EITI report highlights the non-implementation of Law 2012 -22 of 27 -12- 2012 on the Transparency Code which requires the publication of all mining contracts. This shows that there are many other factors and parameters to consider when judging the transparency of a mineral resource management system.

Petro-Tim case, unfulfilled promises … a debate still happening

Petro-Tim is an operating company whose “corporate purpose is oil exploration and research; the acquisition of interests in all mining and petroleum titles, exploitation, production, temporary storage, processing, transportation, refining, distribution, marketing and advertising”. This is the definition taken from the company’s website page. This company has a research and hydrocarbon exploration contract with the State of Senegal.

On 17 January 2012, the Petro-Tim LTD – Petrosen – State of Senegal contract for research and production sharing on the Cayar Offshore Deep and Saint Louis Offshore licenses was signed. This contract has given rise to many questions within the political and civil society that the press has taken over as the “Petro-tim Affair”.

The EITI report remained silent on the Petro-Tim case. It only mentions the procedures agreed between the National Committee and the Independent Administrator which are not intended to carry out an audit of extractive revenues, nor to detect errors, illegal acts or other irregularities. In other words, the report is strictly limited to terms of reference that do not provide for the control of transactions with that company. He invokes (referring to Article 8 of the Petroleum Code) the existence of two cases of transfers (Petro-Tim-Timis Corporation / Timis Corporation – Kosmos) by avoiding checking whether the conditions laid down have been fulfilled for these two operations.

It remains to be seen whether the transfer requests have been approved by the Ministry of Energy or if prior authorizations have been granted to purchasers to carry out these suspicious transactions.

Petrosen, a key public player in the oil sector

The Petroleum Company of Senegal (Petrosen) is a public limited company with a majority public shareholding with a rather ambiguous situation in the institutional architecture of the governance of the hydrocarbons sector. Indeed, Petrosen represents the State of Senegal in its participation in oil operations in privately controlled companies and at the same time, it assumes several other sovereignty functions such as the promotion of the sedimentary basin, the management of the strategic interests of the State in the sector, especially in production sharing contracts, value chain management, marketing and exploitation. The company also provides for the State of Senegal the monitoring and technical control of operations.

It is therefore imperative to put in place a more appropriate institutional arsenal that separates the different roles and scales of the chain of exploitation, transport, processing and marketing of hydrocarbon products. Thus, the Strategic Orientation Committee for Oil and Gas, the constitution of which is not yet specified, should not be a single political answer to the debate in a context of opacity. Its implementation should respond to an urgent need to take care of the new challenges of the sector.

Are natural resources for the benefit of the people to whom they belong?

The constitution of Senegal adopted by referendum in May 2016 states that natural resources now belong to the Senegalese people. This legal provision calls into question the operating regulations in force on the question of the ownership of resources. Indeed, the provisions of the mining code and the oil code stipulate that the natural resources belong to the State of Senegal. At this level there is therefore a need to harmonize. There is also the question of the representativeness of the people in the processes of negotiation and control of mineral resources.

Is the people only represented by the president of the republic and his government? Should we not open up the process of governance of mineral resources upstream and downstream, in parliament, local elected representatives and civic and community groups? The involvement of the latter representative categories of citizens should be carried out at all levels of the sector’s governance strategy and in a multi-party and equal manner.

The situation of local communities and people living in mining areas is more worrying. The people of these communities live in precariousness and extreme poverty. Corporate Social Responsibility (CSR) can be a tool to take care of people’s needs beyond mandatory payments. This instrument should be integrated as part of a national CSR strategy that would involve all stakeholders to define local priorities and go beyond the will of companies that often use it for philanthropic purposes or even social marketing.

The Strategic Oil-Gas Strategic Orientation Committee should start from this consideration to be an advisory body in the definition of the national strategy of the sector and to pilot the urgent reforms to be made in this sector.

The State does not have the means to ensure adequate administrative and technical supervision. The various codes, mining, oil and the general tax code allow tax and customs exemptions for holders of mining licenses and concessions over the first three years.

The need to reform the legal and institutional governance framework for the hydrocarbons sector

The process leading to the reform of the mining code shows incisive progress on the issues of transparency and taking into account local content (http://www.appa.int/pub/localcontentappa.pdf). However, it is urgent to tackle the oil code and especially to open the work to all stakeholders to move towards a qualitative consensus around the new challenges in this sector. Beyond the code, major concerns about the institutional architecture and revenue management are identified.

Strengthen transparency, tax efficiency and plan for future generations in resource management

Further reforms are needed in the legal framework and the revenue mobilization system generated by the sector. To this end, the current reform of the petroleum code will have to be rapidly extended to other actors, particularly parliamentarians and citizens’ organizations. The reform will have to be discussed publicly with the communities that will be impacted by these operations. This is to better understand the economic, social and environmental impacts and anticipate the risks incurred while ensuring a substantial revenue mobilization large enough to participate in the transformation of the country’s economic structure.

Further reforms are needed in the legal framework and the revenue mobilization system generated by the sector

The new code should strengthen transparency provisions in the awarding of contracts and conventions, ban tax incentives and allow for stricter control over the operations and accounts of operating companies. In addition, the distribution of resources generated should be done in a spirit of consensus, integrity, republican and patriotic spirit.

To this end, it is important to take into account the stability and growth fund reserves, funds intended for diversification investments in the motor economic sectors (energy mix, agriculture, fishing, livestock farming, etc.) and sovereign wealth funds, along with future generations. Part of the income derived from the exploitation of mineral resources should primarily be allocated to social spending to reduce poverty and the precariousness that still haunts a large part of Senegalese.

Source photo : actuprime.com

*This article was translated into english by Megan Goins, a volunteer for the WATHI think tank

An expert in governance – international development and project management, Elimane Kane is currently in charge of the governance program at the Oxfam NGO in Senegal. He was program officer, then executive director of Forum civil, the Senegalese section of Transparency International. He has coordinated several programs in the areas of governance, anti-corruption and civic education. He is also founding director of the Panafrican Higher Institute of Training ISAF-Kangforé. He is also a founding member of the pan-African association LEGS-Africa (www.legs-africa.org ).

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Is Senegal on the right track in the governance of mineral resources for the benefit of the people?

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