Mainstreaming EITI at the African Development Bank

1. Mainstreaming EITI at the African Development Bank Gabriel Negatu Director Governance, Economic and Financial Management Department The African Development Bank

2. Global Percentile Rank (0-100) Sub-Saharan Africa Governance Matters 2. How? Guiding principles Indicators show strengthening governance remains a key challenge in Sub-Saharan Africa

3. Crystallize the African Voice on Governance Our Focus 2. How? Guiding principles • Economic and Financial Governance at three levels: • 2008 Governance Strategy highlights aim to • assist African countries in building capable • and responsivestates. • Guiding principle is promotion of • transparency and accountability in the • management of extractive resources. • Working along Country, Sector, and Regional • platforms will strengthen accountability and • transparency in the management of public • resources. • Revenue management is part of this broader agenda towards an African Agenda for Good Financial Governance.

4. 2. How? Guiding principles Modalities of Bank support • Policy based lending programs (budget support) • Institutional support projects • Economic and Sector Work • Regional training initiatives (JAI, EITI) • TA, equipment, staffing, and institutional strengthening

5. 2. How? Guiding principles Our EITI support • The Bank endorsed the EITI and committed to support EITI implementation in resource rich member countries in 2006, structured around the following areas: • providing technical and financial assistance for EITI implementation; • promoting advocacy and outreach activities to strengthen the political will to improve governance of natural resources; • expanding support for good governance of the extractive industries at various stages of the governance chain; • mainstreaming EITI principles in the Bank’s own natural resource operations.

6. 2. How? Guiding principles Recent Bank Initiatives on EI Governance • Bank-wide Task Force to review the Bank’s engagement with the extractive sector (2007). • African Legal Support Facility to provide technical support to regional member countries for undertaking reviews of legal systems and preparing new laws and regulations in support of transparent and accountable natural resource management (2008). • Commenced developing a Natural Resources Management Policy with distinctive Staff Guidance Notes for each category of natural resources, to enhance the effectiveness and optimize the development outcomes of the Bank’s interventions in the natural resource sectors in a coherent manner (2009).

7. 2. How? Guiding principles Examples of Our EITI Support at Country and Regional Level • EITI implementation support to Liberia, Madagascar, CAR, Botswana. DRC, Congo Brazza, Sierra Leone, and Guinea have recently requested Bank support. • Support for policy dialogue on extractive sector governance to Uganda, Ghana, Equatorial Guinea. • Regional training and outreach activities (Mediterranean round table, EITI training, oil contract negotiations). • For private sector lending, the need to comply with EITI standards is evaluated on a case-by-case basis in resource rich countries with governance challenges.

8. 2. How? Guiding principles Mainstreaming EITI in implementing countries • As part of the strategy to promote good financial governance, the Bank is supporting PFM reform in several member countries and EITI is seen as one initiative that can promote the successful implementation of such reforms. • Transparent management of the extractive sector is an integral part of Bank policy dialogue with member countries in the context of Country Strategy Papers. • Good financial management, including transparent management of public resources, is a key factor in the allocation of Bank loan and grants resources to member countries.

9. 2. How? Guiding principles Issues in Mainstreaming EITI in implementing countries • EITI processes must be integrated into country PFM system to avoid becoming costly parallel accountability and reporting mechanism. • Other PFM assessment tools such as PEFA and CFAA are becoming diagnostic standards. Synergies and sequencing with EITI reporting remains to be strengthened. • One size does not fit all and the EITI model must remain unique for each implementing country and build on home grown initiatives.

10. 2. How? Guiding principles Mainstreaming EITI: The demand side • Growing demand from member states for financing and technical support to strengthen governance systems and institutions. • Members governments and inter-governmental forums have issued policy recommendations and legislative directives (AU, G8, U.S.). • Commercial investors/companies engaged in the extractive sector are eager to promote sound and transparent revenue management (Investors' Statement on Transparency in the Extractives Sector, ICMM). • Development impacts of the extractive sector is increasingly scrutinized (Revenue Watch, Global Witness, PWYP etc.).

11. 2. How? Guiding principles How is the Bank Mainstreaming EITI in its operations? • Expanding Bank’s internal capacity to advise member countries on sound and transparent management of the extractive sector. • Developing an assessment tool-kit to address governance and corruption risk in sectors, including the extractive industries, through enhanced due diligence. • Developing an ex-ante Additionality and Development Outcome Assessment (ADOA) to encourage operational staff to select projects aligned with country priorities and Bank mandate. • Importance of Readiness Review Assessment upstream in the project cycle to ensure quality at entry.

12. 2. How? Guiding principles How is the Bank Mainstreaming EITI in its operations? cont’d • Increasing representation of governance specialists in Project Appraisal Teams for extractive sector operations. • Conducting ex-post impact studies to evaluate the national governance context/risks (in specific sectors) and identifying corrective actions. • Implementing internal reforms necessary to effectively respond to external demand and promote best practices.

13. 2. How? Guiding principles Concluding Remarks • Systemic assessment of governance risks will strengthen analysis and guide action. • However, this approach risks danger of externally demand driven EITI implementation and loss of national ownership. (Hence, need to maintain balance between supply and demand.) • EITI practice should strive to strengthen country systems, including Auditor General.

14. 2. How? Guiding principles Concluding Remarks cont’d • Approach has greater likelihood of success if there is: (i) better harmonization with other partners; (ii) alignment with country priorities; and (iii) increased internal capacity for demand responsiveness. • As EITI emerges as a global standard and best practice, it will increasingly be mainstreamed into Bank dialogue with member countries. This will result in greater demand for upstream and downstream engagement.

15. Thank you for your attention Gabriel Negatu Director Governance, Economic and Financial Management Department The African Development Bank