Financial Crime World

Extractive Industries Transparency Initiative (EITI) Process in Ethiopia: A Review of Beneficial Ownership

Overview

The Extractive Industries Transparency Initiative (EITI) is an important global framework aimed at promoting transparency and accountability in the extractive sector. This report focuses on the EITI process in Ethiopia, specifically examining the country’s approach to beneficial ownership.

National and Local Presence

  • The Ethiopian Revenue and Customs Authority (ERCA) has a nationwide presence to support tax revenue assessment and collection.
  • However, ERCA does not collect information on beneficial ownership, which is a crucial aspect of EITI implementation.

Commercial Register at the Ministry of Trade

  • There is a requirement for all companies to be registered with publicly available information.
  • In practice, this data is often incomplete or outdated, and not readily accessible to the public.
  • This limitation hinders efforts to establish a comprehensive beneficial ownership register.

Existing Company Registers

  • Two registers exist for companies operating in the extractive sector:
    • One maintained by the Ministry of Trade (which includes legal ownership information).
    • Another by the Licensing Department of the Ministry of Mines (which holds details of companies applying for licenses but is not publicly available).
  • The second register could serve as a basis for beneficial ownership data, if made public.

Review of Existing Definition

  • The EITI definition adopted in Ethiopia’s draft roadmap lacks some essential elements:
    • References to publicly listed companies.
    • Government-owned entities.
    • Trusts.
  • A more robust definition would enhance the effectiveness of beneficial ownership disclosure.

Awareness and Information Campaigns

  • Stakeholders emphasize the need for awareness raising and information campaigns on beneficial ownership due to a lack of understanding amongst companies.
  • Improved education and outreach efforts are necessary to promote compliance with EITI principles.

Review of Beneficial Ownership Information Collected in First EEITI Report

  • 35 companies were asked to provide information on their beneficial owners, but only 15 provided sufficient information.
  • Key deficiencies include:
    • Lack of information on ultimate beneficial owners.
    • Failure to report back to natural persons.
    • Lack of clarity on listed owners.

Conclusion and Recommendations

  • The EITI process in Ethiopia’s extractive sector faces significant challenges related to beneficial ownership data collection and understanding.
  • Enhancing awareness among companies and utilizing existing databases as a starting point for building a more comprehensive beneficial ownership register are crucial steps towards improving transparency and accountability.