Evaluating mineral revenue transparency in Eswatini against the extractive industries transparency initiative

Abstract

In June 2007, the Government of Eswatini in its “Poverty Reduction Strategy and Action Plan” (PRSAP) committed to exercising fiscal prudence; prioritizing expenditures; improving infrastructure; human capital investment; removing obstacles to private investment, and implementing a conducive taxation system. In terms of the PRSAP, Eswatini aimed to ultimately eradicate poverty by 2022. However, Eswatini has been struggling to make judicious use of its natural resource wealth as a vital engine for sustainable economic growth that contributes to sustainable development and poverty reduction. To counteract this problem, the Government — in its National Strategic Roadmap 2019/2022 — called upon the Ministry of Natural Resources and Energy (MNRE) to unlock the mining sector and enhance economic activity within the country. While the targeted average contribution of the mineral sector to the gross domestic product (GDP) is 0.1 percent by 2022, scant information is available about the performance of the mining sector and its contribution to the country’s GDP. Due to the COVID-19 pandemic, the African Economic Outlook report of 2021 indicates that the economy of Eswatini has contracted by an estimated 3.2% in the year 2020 – after growing by 2.2% in 2019. It also states that investment has weakened in Eswatini. In terms of the Central Bank of Eswatini’s (CBE) “Annual Integrated Report 2019/2020”, all sectors reportedly recorded slower economic activity compared to the previous year. Therefore, it is not surprising that Eswatini was also among the jurisdictions that were excluded from the Fraser Institute’s 2020 annual survey of mining companies – a strong indicator that the country’s mining regulatory regime is unstable and deters investment. Confirming this, the “World Bank Ease of Doing Business Report” of 2020, reflects that Eswatini occupies number 121 in the world rankings, while the Government had tasked the Ministry of Commerce, Industry and Trade (MCIT) to improve the country rankings in the World Bank Ease of Doing Business index from 123 to 50 by 2022. Against this backdrop, this study examines the general and sectoral laws relating to the mining sector in Eswatini. In particular, the study examines the regulatory framework in light of the Extractive Industries Transparency Initiative (EITI). It appraises the extent to which the country’s mining laws embed transparency and accountability – which are key pillars of the EITI. The findings of the study suggest that the current mining legal framework does not sufficiently promote the degree of transparency and accountability required within the 2019 EITI Standard. The findings further indicate that the general and sectoral laws do not require companies in the mining sector and the government to publish and publicly disclose payments made and account for mining revenue received. The findings support recommendations that Eswatini should consider adopting the EITI to address the existing oversights relating to transparency and accountability in the country’s extractives sector. The study further supports the integration of the EITI Standard into the sectoral legislation dealing with mining, revenue and tax regimes, safety and health, and environmental regulation.