Time to stamp out corruption in commodity trading

This post was originally posted in the Huffington Post Contributors section here.

An explosive investigation by Swiss NGO Public Eye has revealed the complex tangle by which employees of Gunvor, one of the world’s biggest oil traders, offered secret payments to officials in the Republic of Congo for access to the country’s assets.

The case is a painful but vital reminder that the world’s efforts to stamp out corruption in the gas, oil and mining industries still carry crucial blind spots. The upcoming board meeting of the Extractive Industries Transparency Initiative (EITI) on 24-25 October, where leaders meet to increase transparency in these sectors, should renew efforts to reveal them.
As a priority, they should examine how the EITI’s work — which was designed to cover ‘traditional’ extractive companies — could demand more from commodity traders that do not dig or drill but rather trade, invest, transport or store these oil, gas and mineral assets along supply chains worth many trillions of dollars.
The Gunvor Congo case wasn’t new. In 2012 prosecutors raided their Swiss offices, and followed trails of money transfers linked to deals with the Republic of Congo’s national petroleum company. But after those initial revelations, Gunvor blamed a rogue employee.

Last month, Public Eye unearthed evidence that the secretive dealings continued years later, and that Gunvor employees attempted corruption in relation to Congo as recently as 2014.
Inspired by the EITI’s transparency standard, ‘mandatory disclosure’ legislation in over 30 countries (including the EU, Canada and oil-rich Norway) cover many of the world’s largest publicly listed extractive companies. This followed years of efforts from coalitions such as the one I lead, Publish What You Pay, together with committed leaders in government, business, communities and civil society from the global South and the global North. These standards are a huge step to help channel countries’ revenues into equitable and sustainable economic growth, instead of evaporating into a few individuals’ offshore trusts and bank accounts.

But companies like Gunvor, on the grounds that they operate higher up the supply chain as middlemen, not extractors, are not held to the same standards. In the meantime, of course, they can exploit the same harmful networks of patronage.

And Gunvor is not the only suspected offender. A separate exposé revealed the suspicious dealings of another leading commodity trader, Glencore, in Chad, where the country’s ruling elite pocket vast amounts from oil-backed loans.

By contrast, a commodity trading firm called Trafigura chose to proactively disclose its payments to national oil companies in half a dozen EITI member countries. When finally revealed, these payments amounted to $4.3 billion.

Trafigura’s previous ‘claim to fame’ was being outed by the international press for taking out a ‘super injunction’ in British courts – a judge-ordered ban on news reporting that went so far as to include any public mention of the court ruling itself. The story they tried to quash was about their role in a toxic dumping incident in Ivory Coast.
After that scandal, it was encouraging to see Trafigura take a different course, one towards responsibility and transparency in their industry. According to one report, company officials themselves have “spoken enthusiastically about the process and its impact on Trafigura’s reputation.”

While such displays of initiative from individual companies are welcome, the Gunvor scandal shows that EITI member countries should keep the momentum. Following Public Eye’s revelations, Publish What You Pay colleagues in the Republic of Congo have called on the authorities to launch their own investigations and a public audit of the national petroleum company.
There are precedents for this in other EITI member countries. In Indonesia, our PWYP colleagues have been closely involved in the government’s pledge to clean up the extractive sector, including commodity trading, following a push at the EITI level. As a result, the country’s state-owned oil and gas company, Pertamina, was the subject of an audit that revealed many problems. In Cameroon, Chad, Ghana, Mauritania and Nigeria, national oil companies have expressed interest in demonstrating commitment to transparency in oil sales (first trades) in the context of the EITI. More needs to be done however to ensure that the data that is becoming available is easily accessible by stakeholders.

The EITI board meeting is a vital moment to create momentum, and let the sunlight in. Board members should raise the Gunvor case at every turn, and governments should make another push towards strengthening their reporting requirements to deal with the likes of Gunvor and Glencore. Otherwise we will keep waiting for investigative journalists and experts to break scandal after scandal. And we will keep tallying the lost billions, months or years too late.

Following a response from Gunvor, this blog has been amended to reflect the fact that a Gunvor employee was filmed offering bribes, not making bribes, and that the raid of their offices was not focused on the deals in Congo in relation to which they are now being prosecuted by the Swiss Office of the Attorney General. You can read their response here.

Third report on the monitoring of public investments in the health sector in Congo-Brazzaville

Third report on the monitoring of public investments in the health sector (year 2015): Only 27% of payments reached their planned destination

Pointe Noire, February 14th 2017 – Publish What You Pay-Congo (PWYP Congo) has published its third report on the implementation of planned public investments in the health budget for the year 2015. The report reveals that of the payments assessed, only 27% of the funds reached their destination.

Previous reports, covering the fiscal years 2011-2013 and 2014, were well received, and assessed items from the budget allocated to the Ministry of Health. However, for this new study, PWYP Congo didn’t work on forecasting, but instead on a list of payment orders made by the Ministry in 2015.


The study was an opportunity to reinforce the citizen network in charge of conducting the field study. 160 people in 8 regions were trained for this exercise and, among them, 24 observers were deployed to visit 22 projects. Projects planned in the Pool region (3) could not be assessed because of insecurity issues since the elections of March 2016. Moreover, 38 projects related to the supply of equipment could not be assessed either as there was no information about the beneficiary structure or location. PWYP observers also visited 16 investment projects from the 2014 budget, in order to evaluate the progress made since the last field visit.

By conducting yearly monitoring studies of the health sector since 2014, PWYP Congo seeks to bring forward solutions to make the health care system accessible to all and more effective. The Republic of Congo allocates significant funds to the Health Ministry (second budgetary item in terms of investments by the end of 2015), but actual efforts do not live up to these expectations.

The new report shows there has not been any significant progress in the past years regarding the implementation of health public expenditures. The main conclusions are:

1. In only 27% of the cases where money was disbursed, did the observers witness actual progress in the advancement of the project. In 41% of the situations visited however, while money had been disbursed, there was no evidence of the use of these funds. PWYP identified different explanations to this situation:
     a. Money does not often reach its final destination, or, when it does, not completely;
     b. Delays in payments by the Public Treasure often causes interruption to construction works;
     c. Construction sites are not being monitored by public services, which causes some of them to be abandoned;
     d. Impunity of public servants and entrepreneurs prevents an actual decrease in corruption and clientelism practices.

2. For 9% of the projects PWYP wanted to assess, the observers could not gather enough reliable information in order to evaluate how the funds were used. This was caused by a lack of cooperation from managers, or a lack of answers from the Health Ministry.

3. The Health Ministry budget suffers from poor planning:
     a. No feasibility study was conducted before the integration of an item into the budget;
     b. Investments are often over-evaluated. For example, some projects keep appearing in budgets, but they were never implemented;
     c. Regions are not treated equally;
     d. The program aiming at building a general hospital in each region launched by the government in 2012 was completely under-evaluated and was developed at the expense of the local health care system.

4. The Health Ministry does not have access to its yearly budget when the fiscal year starts. Moreover, modifications of the budget that happen in the course of the year make it harder for ministries to follow the original plans.

5. PWYP salutes the openness recently shown by the Ministry of Health, and hopes the dialogue will remain open, and will allow a better exchange of information;

6. However, opacity remains around budgetary issues:
     a. In Brazzaville, most health centre managers were not willing to answer PWYP Congo observers’ questions.

     b. Information is being shared with great difficulties in the administration and among the different levels of authorities.

7. Between 2013 and 2016, the allocated health budget increased only slightly. In the same period, the defence budget increased by 84% (+13% for the investments), while the education budget decreased by 19% (- 52% for the investments).


To the Ministry of Health and Population:
    – Make budgetary related documents public, including details about investments;
    – Publish expenditures implementation reports each semester;
    – Fight corruption and embezzlement practices in the ministry, and take actions against perpetrators;
    – Implement CEMAC directives regarding public finances management;
    – Develop investment budgets taking into account needs formulated by local authorities, while evaluating those needs in order for the budget to be realistic and feasible;
    – Allocate increased funding to project monitoring field missions;
    – Ensure the availability and deployment of medical workforce in local health centres;
    – Ensure the development and procurement in medical supplies of the local healthcare system;
    – Launch a program of systematic junction of health centres to water and electricity systems.

To the Ministry in charge of public finances:
    – Make sure every ministry has full access to its own budget and can start implementing it from the very beginning of the fiscal year;
    – Allocate increased funding to monitoring field visits, especially for social sectors;
    – Elaborate realistic budgets and avoid substantial changes of the budget in the course of the year;
    – Publish expenditures implementation reports alongside each modified budget in the course of the year, as required by the law;
    – Publish budget review acts in the timeframe required by law;
    – Publish expenditures execution reports each semester.

Important budgetary cuts in Congo-Brazzaville. But where did the money go?

In the Republic of Congo, the PWYP coalition is campaigning for better management of natural resources by looking into the efficiency of public spending. To this end, it organises targeted actions to hold the government accountable and to involve citizens into the budgetary process.

The President of the National Assembly rises solemnly. The microphone crackles for a moment to announce the opening of a discussion on the amended 2015 Finance Law. As Congo-Brazzaville’s budget is 75% dependent on revenues from the extractive industries, it is suffering from the serious decline in hydrocarbon prices that have dropped from an average of 125 USD per barrel in 2014 to 60 USD per barrel in 2015. Between 13 and 26 June, members of the Parliament met in an extraordinary session to deal with a challenging task: they were called to examine and approve the government’s proposal to cut the current 2015 budget by several hundreds of billion of CFA francs, from the initial 3.069.750.000.000 CFA francs to 2.715.066.000.000 CFA francs. Despite official references to a serious shortage of oil revenues, this substantial reduction still raises a number of questions highlighted by PWYP Congo B. in its position paper that was published for members of the Parliament and public authorities in general on 19 June 2015.

For example, PWYP Congo-Brazzaville has calculated that the State must have produced a budget surplus of 4,027 billion of CFA francs since 2008. This amount should have been put into the equalisation account created back in 2006 in order to help the country get through lean times. Those savings could be mobilised by the authorities now to make up for the drop in extractive revenues. However, no mention has been made as to the availability of those funds or their possible use. That is why PWYP Congo-Brazzaville is asking for more transparency from the government in its management of the equalisation account of which no information has been publicly disclosed so far.

Lack of reliable public information is concerning not only in the case of the amounts transferred into the equalisation account, but in other areas too. PWYP Congo B is therefore calling for the publication of commercial agreements between the government and different private and public partners. For instance, what are the terms of the loan agreement between the government of Congo-Brazzaville and China? Expenditure of public funds justifies the need for transparency in this area. PWYP Congo-Brazzaville therefore notes that, despite certain progress with EITI implementation leading to increased clarity regarding the generation of revenues by the government, further efforts are needed. This is particularly true for public expenditures and especially the status of public investments. When focusing on the quality of public investments in healthcare sector, the second largest budget item in the Republic of Congo, the coalition had to face a culture of secrecy and mistrust in an attempt to assess and collect a number of necessary documents. In a report published in December 2014, PWYP Congo-Brazzaville demonstrated that lack of transparency has led to manipulation, in particular where sources of funding for certain projects are concerned, and to mismanagement. Improper planning of healthcare projects discussed in the report is due to insufficient consultation with community stakeholders and inadequate communication inside the Congolese administration. As a result, more than a half of projects listed in 2011, 2012 and 2013 budgets have not been started, while only 9% of projects have been completed and are effectively functioning. A poor record for a country with an ambition to become emerging by 2025.

Another adverse effect arising from the general lack of transparency around the management of public funds that has been cultivated by the authorities is progressive disengagement of citizens who are encouraged to believe that they are not concerned by public affairs at all. It is in order to wake up the community conscience and remind the people of Congo that they have more than a right – an obligation to have their say – that the coalition endeavors to establish local groups responsible for budget monitoring in healthcare sector across the country. This was the case in Nkayi where PWYP Congo B organised a workshop on 22 and 23 June to raise awareness of local communities about the importance of monitoring practical implementation of investment projects. Although the Ministry of Planning of Congo is normally responsible for budget monitoring and tracking, while the Court of Auditors exercises the function of controlling public expenditures, it is essential to ensure civil society control to hold public authorities accountable for their management of public money. Local groups consisting of volunteers undertake field visits to inspect progress and provide a feedback to the coalition members who subsequently compile all data to produce a national report. Engagement of communities that are immediately affected by public investment projects guarantees the accuracy of data collected and also contributes to pressure at the grassroots level. “We have to become like microbes and contaminate the whole world,” shared his excitement a participant of the workshop in Nkayi.

This approach has already borne fruit in 2014 when the coalition undertook its first budget monitoring. Interest shown by local groups through a set of questions aimed at a better understanding of issues related to non-implementation of certain healthcare projects prompted a number of suppliers to resume their work or to complete it. Engagement of local groups is crucial for addressing indifference and the sense of impunity which may benefit certain unscrupulous actors, and proves that the Congolese people are far from being powerless.

PWYP Congo B – An opportunity to strengthen the EITI process

Publish What You Pay – Congo welcomes the Extractive Industries Transparency Initiative Board Meeting taking place in Brazzaville from April 13th to 15th 2015. By giving the Republic of Congo the responsibility of organising this important meeting, the EITI Board Meeting acknowledges the efforts from the government in terms of transparency in the access of data from the extractive sector. It is worth mentioning the Republic of Congo was one of the first countries to issue the 2013 EITI report. However, Publish What You Pay – Congo has noted several shortcomings hampering a reel implementation, and, as a consequence, contradicting the political willingness for more transparency as shown by the authorities. This is why the Publish What You Pay Campaign in Congo would like to ask the Board Meeting to call on the government of the Republic of Congo to implement all the necessary reforms regarding the reinforcement of transparency mechanisms. Publish What You Pay – Congo asks to:

Strengthen the reliability of EITI statements

The report by the Bern Declaration on the contract between the Congolese oil refinery (CORAF) and the Swiss trader Philia, recently caused many reactions from the international and national opinion. For Publish What You Pay – Congo this inquiry mainly reveals inconsistencies in the EITI statements by the national oil company, the SNPC, regarding its CORAF branch. The report shows that the CORAF earned profits in 2013 through transactions operated by Philia. However, these profits were not recorded in the 2013 EITI statements. Publish What You Pay – Congo already expressed concerns regarding this question in a press release dated March 3rd, and asked the SNPC to give explanations. “Close sources to the CORAF” cited by medias confirmed that the contract with Philia helped the CORAF to earn profits. No satisfactory explanation was given by the SNPC to date.

Make trade agreements public and available

The CORAF-Philia inquiry also revealed suspicious details in the contract. Provisions that were endangering public funds, made Publish What You Pay – Congo question the management of those funds, and remind the importance of transparent procedures. The coalition is also asking for more information regarding the trade agreement with the Popular Republic of China, which obviously involves large amounts of revenues. The same questions remain as to the conditions in which de Congolese government and the ENI company reached an agreement regarding the power plants in Djéno and Côte Matève.
The 2013 EITI report does mention these agreements and their main purposes, but does not provide any detailed information (amounts, interest rate etc.). Such contextual information would help comply to the EITI criteria n°3.

Put an end to the maritime tax exception

The maritime tax is still unilaterally declared by the companies, since the Congolese maritime trade company (SOCOTRAM) refuses to declare what it collects as payments of this tax, arguing that it does not collect it from extractive companies but from the ship-owners. In fact, ship-owners are the ones who pay the tax after billing the companies for it. Through several agreements with the government though, companies recover this amount as operational costs. This is why one can consider that the payment of this tax does impact the oil revenues of the country, and therefore should be integrated into the EITI perimeter.

Implement the EITI reports recommendations

Annual EITI reports deliver various recommendations, which often are similar. This shows difficulties to reform governance, although the EITI should be a driving force for public reforms strengthening transparency, responsibility and accountability in a sustainable way. The weak implementation of the recommendations is real hurdle to the EITI process, which aims at fighting poverty. The EITI process in Congo must do more than issuing reports and be used to actually strengthening accountability in the management of public affairs.

Consider the use of EITI data

Bearing in mind that the main purpose of the EITI process in Congo is the responsible and sustainable use of the revenues from the exploitation of the natural resources in order to help the social and economic development of the country, Publish What You Pay – Congo would like to draw attention to the use of the data made public through the EITI process. This seems particularly important in the current context of tightened public revenues as a consequence of falling oil prices. Publish What You Pay – Congo believes the EITI Board Meeting is entitled to encourage governments to extend transparency and accountability to public expenses mechanisms.

Put the Fiscal Transparency and Responsibility Law to vote

A law translating the EITI obligations into legal obligations and strengthening accountability mechanisms in the collect and execution of the budget, is currently being drafted. Although it was a promise from 2010, the draft has not been presented to the Parliament yet.

Implement the commitments in terms of a transparent management of budgetary surpluses
The Republic of Congo committed in 2006 to deposit annual budgetary surpluses at the Central African States Bank, in an account that was to be audited every year. To date, Publish What You Pay – Congo estimates that 4 207 billion FCFA could have been placed in this account since 2008. However, no figure is available as no audit has ever been conducted. While the Republic of Congo is currently struggling to present and execute a realistic and credible budget for 2015, these savings must be used in the most responsible and efficient way possible.

“Maintaining complying standards requires demanding commitments and practices from the government, in order to go beyond transparency. The aim is to use the EITI as a stepping stone towards a better governance, to help Congolese people out of poverty”, said Christian Mounzeo, Coordinator of Publish What You Pay – Congo.

Republic of Congo

Created in 2003, the Congolese coalition has been involved in initiatives including supporting effective EITI implementation, setting up a watchdog to combat corruption and advocating for income from the extractive industries to feature in the national budget. PWYP Congo currently focuses on monitoring the redistribution of extractive revenues through development projects, as well as campaigning for an EITI law and more open procedures for awarding contracts.

Preparing to surf the data wave!

‘Avalanche’, ‘deluge’, ‘tidal wave’ – there’s been a range of monikers for the amount of extractive data that is to come out over the next few years. By 2016, the EU Transparency and Accounting Directives will have yielded all the payments by project-level for all the extractive companies listed (and large companies non-listed) in the EU. That’s a lot of projects, and a lot of data – without even mentioning the information that will come out of the EITI reports that include project-level reporting, or the disclosures through regulations in the US and Canada. This is fantastic news for transparency campaigners, but a little daunting too – it’s perhaps no surprise that our monikers evoke awesome, rather than purely positive, forces.

What civil society keeps saying, and keeps getting told, is that we need to prepare for this avalanche. That activists need to be ready to use the data. As it happens, quite a few of the PWYP coalitions have been using the data all along. Ahead of ‘Open Data Day’ this Saturday, we’ve give a ‘Using the Data’ twist to our newsletter! To begin with, here is a round-up of some of the ways PWYP coalitions have been gearing up for the avalanche…

PWYP Congo Brazzaville

Transparency successes such as implementing EITI helped provide important information about what Congo B was getting for its oil. But what the PWYP coalition also wanted to find out was what the country was doing with its oil monies – earlier this year, the coalition examined the country’s health budgets and followed the money to see whether funds were being disbursed to the projects, and whether projects were being realised. PWYP Congo-B revealed that in a great many cases, the money was not reaching its intended destination and that projects were not being properly executed. You can read more on the report and the coalition’s findings here.

PWYP Indonesia

PWYP Indonesia has been incredibly active both in using data but also in engaging with the field of Open Data. The coalition hosted a school of data fellow who has helped them develop the skills and knowledge for how to use data. PWYP Indonesia recently conducted a study – along with the Anti-Mining Mafia Coalition – that calculated how much potential mining revenue had been lost in 13 different provinces due to the lack of a transparent and effective tax collection system and created infographics from the findings to support their advocacy. Earlier this week, the coalition hosted an event where they shared their experiences and thoughts on open data’s potential for Indonesia.

PWYP Niger

Using data doesn’t always have to come in the form of fancy visualisations or spreadsheets – it is often as simple as using key data as evidence to back up your advocacy. This is precisely what PWYP Niger did when they wanted the government to renegotiate a better deal for its uranium with AREVA. Using the EITI report covering data from 2010, the coalition gleaned that although uranium made up 70% of Niger’s exports, it contributed less than 6% to the country’s GDP. PWYP Niger propagated this figure through speeches, debates, songs, marches and press releases. When the Niger government publicly announced it would seek to ‘rebalance’ its relationship with AREVA, it was PWYP Niger’s figure that they used! Used effectively, data can support strong messaging.

How effectively is Congo B’s oil money being used? PWYP investigates

For more than a decade, arrests and intimidations notwithstanding, PWYP activists in Congo-Brazzaville have been campaigning to find out how much the country receives from its oil. Despite being in the top five oil producers of Sub-Saharan Africa, almost three quarters of the population are thought to live on less than $2 a day – for PWYP Congo B, this just doesn’t add up.

The coalition has enjoyed important successes in terms of accessing and disseminating extractive data. However, although it continues in that campaign, that aspect has always been just one side of the coin. The other has been to follow the money and find out where the revenues have been going and why, if the government reports each year high oil revenues (extractive revenues make up more than 90% of the government’s revenue) the living conditions of Congolese citizens haven’t improved.

In a report launched on 3rd December, PWYP Congo-Brazzaville examined the health budgets of 2011, 2012 and 2013 and followed the money to see how proposed projects were being realised. Between December 2013 and October 2014, PWYP Congo B realised eight field visits covering 192 projects.

The key findings made for sober reading…

  • Overall, only a small percentage of projects were complete (16%) and only 9% were functioning – the other buildings had been constructed but either had not yet been equipped or did not meet required standards.

  • More than half (56%) of projects listed in the 2011, 2012 and 2013 budgets had not been started.

  • 16% of projects had been abandoned and were not salvageable.

The report also highlights several important findings about the way in which the projects were decided and executed, including:

The need for an open and participatory budget process – During its investigations, the coalition discovered that 80% of projects were decided without there having been a feasibility assessment, which meant that projects were being proposed by ministers at a central level without their being enough information on how realistic the project was or whether it responded to a specific, and genuine, need. This resulted in projects that were not fit-for-purpose or top priority, for instance in Kouya the construction of a general hospital as well as a health centre, despite the fact that there are not enough people in the locality to warrant such an infrastructure. The lack of feasibility assessments makes it very difficult for projects to be realistically costed and, according to PWYP’s research, the allocated budgets were often well above what the project would actually cost which begs the question of what happens to the excess in allocated funds.

The importance of a better contracting process – As a result of the highly centralised nature of decision making almost off the contracts went to companies or entrepreneurs located in Brazzaville, and procurement would be made without having consulted the local authorities where the work was to take place. The coalition states that the poor workmanship witnessed at some of the projects raises questions about who is getting the contracts, and why. Worryingly, the report highlighted several instances of conflicts of interest – whereby contracts went out to companies belonging (whether directly or indirectly) to government workers (civil servants, ministers, military etc…). Corruption by the contractor itself was also revealed, for instance in Owando where it seems the contractor absconded with the funds in pocket, leaving behind an incomplete building. Furthermore, there is no system for sanctioning corrupt or incompetent contractors.

A lack of transparency leads to manipulation – Because the budget is not freely available or widely disseminated, there is a lack of clarity over who is really funding projects. In some cases, this results in political manipulation as local elects present projects that have been funded by the central public purse as ‘personal initiatives’, no doubt shoring up their popularity during election times. Other discrepancies however also emerged because of this lack of clarity – projects in Divenié, Banda, Mossendjo et Makoua, listed in the government budget were also apparently realised by ENI Congo’s fund. The coalition is pursuing this issue further to find out just what is happening there.

The difference between rhetoric and reality – Legally, Congo-B’s budgets should be publicly available to citizens. However, the PWYP coalition encountered many difficulties in accessing a copy and in the end obtained it through personal connections rather than a straightforward and open process. The lack of openness isn’t just to citizenry – exchanges with local authorities revealed that they themselves rarely received information about which projects were to be realised in their region – in the end, the documents produced by PWYP Congo’s research became an important source of information for them.

So this is where some of Congo B’s finite oil revenues have been going – to projects that have been unfinished, delayed or misconceived. PWYP Congo Brazzaville has elaborated a series of recommendations so that the elaboration and execution of these projects can be improved.

A full list is available in the report itself (French only) but key ones include:

To central government authorities, that they:

  • Make available and accessible key documents relating to the budget
  • Establish at the local level a coordination charged with monitoring the realisation of the project
  • Integrate health experts in budget allocation so that they can ensure projects are relevant
  • Require that feasibility projects be carried out before a project is inscribed in the budget
  • Make the procurement process transparent
  • Apply sanctions for contractors who do not respect their engagements or who engage in corruption
To the local authorities:
  • Demand and obtain from the central authorities the budget information relevant to them
  • Create monitoring committees for the projects

Click here to download the full report (French only)