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PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Project Name
Region
Sector
Project ID
Borrower(s)
Implementing Agency
Environment Category
Date PID Prepared
Date of Appraisal
Authorization
Date of Board Approval
Report No.: AB6350
Sierra Leone Extractive Industries TA - Additional Financing
AFRICA
Mining and other extractive (60%);Public administration- Energy
and mining (40%)
P124633
GOVERNMENT OF SIERRA LEONE
Ministry of Mineral Resources
[ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
February 8, 2011
January 24, 2011
April 21, 2011
1. Country and Sector Background
Country and Strategic Context
Sierra Leone is well endowed with natural resources and is classified as a resource-rich country.
If in the past Sierra Leone was largely associated with mining (diamonds were first discovered in
1930), the 2009 discovery of oil off-shore of Sierra Leone has also put the country on the map as
a potential future oil producer. Extractive industries, as a term, in case of Sierra Leone now
include both mineral resources and oil and gas. Sections below provide more detail background
by each sub-sector separately given their peculiarities, however, it is emphasized that extractive
industries reform will need to have an integrated approach in order to achieve the GoSL’s
ultimate objective towards developing Sierra Leone’s natural resources in the best interests of the
nation.
Mining Sector. Sierra Leone is well endowed with mineral resources and is a leading producer
of diamonds, rutile, and bauxite. During the 1960s and 1970s, the mining sector accounted for
more than 70 percent of the country’s export earnings, 20 percent of GDP, and 15 percent of
fiscal revenue. The sector experienced a decline in the 1980s and came to standstill during the
1990s due to the decade-long civil war (1991-2001). The mining sector has three major
segments: (a) large-scale production of diamonds; (b) large-scale production of bulk minerals;
and (c) artisanal and small-scale production of diamonds, and to a much lesser extent gold.
During 2010, the Government of Sierra Leone (GoSL) signed two large-scale mining
development agreements for iron ore development in Marampa and Tonkolili with London
Mining and African Minerals Ltd, respectively. More companies are exploring in the country,
and several investment projects are expected in the foreseeable future, including a large-scale
gold mine. The main thrust of EITAP is to address bottlenecks towards efficient and sustainable
development of industrial scale mining.
Petroleum Sector. In September 2009, an offshore well drilled by Anadarko Petroleum
Corporation encountered petroleum, confirming the existence of an active petroleum system
within the Sierra Leone-Liberia basin. In November 2010, Anadarko announced an apparently
significant deepwater discovery at the Mercury exploration well. Although the Mercury well
looks encouraging, Anadarko’s drilling program still carries high risk and commerciality is
unlikely to be declared until 2012 at the earliest. Thereafter, the time line to first production
would be at least four years.
Sector Reform Framework
Mining Sector. Following a World Bank Sector Review of mining in Sierra Leone in 2005,
several donors (including DfID, EU, USAID, and UNDP) supported reforms in the legal,
regulatory, fiscal, and institutional arrangements of mining. Over the past few years, Sierra
Leone has passed some important laws and regulations and provided an enabling policy
framework for the growth of the mining sector. These reforms led to a recovery of the sector,
particularly diamond mining and rutile production from early to mid- 2000s, and more
importantly, they opened potential for new development.
Notwithstanding progress made to-date, the institutional capacity to manage sector, negotiate
agreements, enforce regulations, and monitor compliance remains weak. The government has
recently set up an inter-ministerial committee to handle all negotiations relating to the mining
sector. The team comprises a member of the Strategy and Policy Unit (SPU), the Attorney
General, the Director of Geology, the Director of Mines, the Law Officer’s Department, and the
Ministry of Finance and Economic Development. The need remains to clarify roles and
responsibilities going forward in a sustainable manner.
Petroleum Sector. The reforms are still fairly new and evolving. Upstream oil and gas activities
are governed by the Petroleum Exploration and Production Act of 2001. A Model Petroleum
Agreement implementing the terms of the Petroleum Act formed the basis of negotiation for the
individual Petroleum Agreements with investors. Fiscal conditions are determined through the
Petroleum Agreements and by the Income Tax Act of 2000. The Petroleum Resources Unit
(PRU), in operation since 2004, was established as the regulator of the sector as per the terms of
the Petroleum Act. During the licensing phase, PRU’s role consisted mainly of providing
technical input to the negotiating teams, but more recently, PRU has been attempting to move
towards its long-term enforcement and monitoring role.
After the Venus discovery in 2009, the President appointed a petroleum task force from a wide
spectrum of government agencies. Under the leadership of the Task Force, a new petroleum
policy has been drafted, adopted by cabinet and submitted to parliament. The task force is also
overseeing the preparation of a new petroleum law. Assistance in developing the policy and the
law has been received from an Advisory Group made up of representatives from Norad, the
Commonwealth Secretariat, Revenue Watch Institute, and the African Center for Economic
Transformation, an Accra-based NGO.
Overall. Sierra Leone has been an Extractive Industries Transparency Initiative (EITI) candidate
country since 2007. After a difficult start, the first reconciliation report was produced in 2010
and the validation process is underway for the first year audit to comply with the benchmarks set
forth by the EITI Committee in Oslo. With the EITI framework and baselines now in place, the
country will greatly benefit from stronger capacity to monitor extractive industries revenues to
ensure sustainable and transparent sector governance and revenue management. The GoSL
emphasizes the need to substantially improve its negotiations and regulatory capacity in the
extractive industries sector.
The proposed scaled-up project remains aligned with the World Bank, International Finance
Corporation and African Development Bank Joint Assistance Strategy for Sierra Leone (for
FY10-13) and with the GoSL’s Poverty Reduction and Strategy Paper (PRSP, 2009), which
identify mining as one of the priority sectors to be developed in the country. The original project
focuses primarily on the Regulations and Monitoring link of the Extractive Industries Value
Chain, while the additional financing will widen and deepen this support by scaling up legal and
regulatory reform and by also including activities to support two additional Value Chain links –
Award of Contracts and Licenses, and Collection of Taxes and Royalties.
The project forms a nexus of ongoing complementary activities by: (a) being coordinated with
the broader reform framework in the country on macro and strategic level (private sector
development, budget support operations and analytical work); (b) continuing to build upon and
align with other donors’ efforts, most notably in the implementation of an institutional reform
and capacity building plan developed with DfID’s support and UNDP support for the
development of the computerized mining cadastre system and assistance with mining contracts
renegotiations; (c) reinforcing, through better transparency and monitoring and understanding of
environmental and social impacts management requirements, support provided through the
Bank-administered Japanese grant to support artisanal mining communities; and (d) ensuring that
mining sector reform fits within the regional context and is aligned with regional objectives
(such as Mano River Union, and, on a broader scale, the Economic Community of West African
States (ECOWAS), and the Africa Action Plan.
2. Objectives
The Project Development Objective for the project is to build government’s capacity to manage
and regulate the minerals sector, and will be updated to “build government’s capacity to manage
and regulate the extractive industries sector” with the scale-up. The project name is being
revised and will become Extractive Industries Technical Assistance Project (EITAP) after the
approval of the additional financing.
3. Rationale for Bank Involvement
This is an additional financing project to scale-up activities of Mining Technical Assistance
Project (MTAP), approved in 2009.
4. Description
Part A: Extractive Industries Sector Regulatory Frameworks
1. Provision of capacity building to the Recipient to improve the regulation of the
extractive industries sector through the updating, or preparation of where applicable, and the
carrying out of related consultations on, new or revised regulatory instruments including inter
alia: (a) the Mines and Minerals Act and supporting mining regulations, (b) development of a
regulatory framework for the Recipient’s National Minerals Agency (NMA) including operating
procedures; and (c) the Petroleum Act and supporting petroleum and gas regulations.
2. Support to the Recipient in establishing and managing the policy level dialogue and
strategy formulation for the environmental and social aspects of the oil and gas sector
development.
3. Cover cost overrun for preparation of mining sector environmental and social
regulations, regulations for underground mining and regulations for mineral trading licenses,
supported under the original project.
Part B: Institutional Strengthening
1. Support governance of the extractive industries sector through:
(a) Strengthening the technical, institutional, and management capacity of the Ministry of
Mineral Resources (MMR) and, upon its establishment, NMA including, inter alia, collection
and management of geological and geochemical data for selected sites, carrying out targeted
geochemical surveying, mineral resource assessment and mapping of selected sites, and carrying
out investment promotion activities,
(b) Strengthening regulatory enforcement capacity of the MMR;
(c) Provision of transitional salary support to MMR and, upon its establishment, NMA
for selected civil service staff for carrying out geological, data management, and monitoring and
evaluation of mining operations functions;
(d) Developing a secure geodata management and information system in MMR and, upon
its establishment NMA, including web-based tools and promotion materials;
(e) Strengthening the procurement, financial management, project management and
monitoring capacity of the MMR to manage donor-financed projects;
(f) Developing and strengthening a monitoring and evaluation and reporting system for
the extractive industries sector;
(g) Supporting the Government’s Diamond Office through training, advisory services and
capacity building;
(h) Providing capacity building to MMR, and, upon its establishment, NMA, and
Ministry of Environment, Sierra Leone Environmental Protection Agency and Civil Society
Organizations on implementation of environmental and social regulations for the extractive
industries sector, including monitoring and evaluation tools, reporting, and consultation
processes; and
2. Strengthening the institutional and management capacities of the MMR, Strategy and
Policy Unit and the Recipients’ Negotiations Committee for extractive industries contracts
negotiations, including financial and economic modeling, review of technical and feasibility
reports, updating model agreements for specific commodities, and developing negotiations
strategies.
3. Provision of capacity building to the Petroleum Resources Unit, through: (a)
purchases of software licenses and hardware to allow PRU to store and analyze geological and
geophysical data; (b) financing the international advisor who will deliver hands-on training to
PRU staff, establish capacity to perform core functions relating to licensing and exploration, and
advise the PRU, the Petroleum Task Force and other officials on policy decisions as needed; and
(c) workshops, training and study tours.
4. Covering cost overrun of the original project for carrying out targeted geochemical
surveying.
Part C.
Project Management
Provision of technical and financial support to MMR for the management, procurement,
financial management, monitoring and evaluation and audit of the Project, all through provision
of technical advisory services, Training and Operating Costs.
5. Financing
Source:
BORROWER/RECIPIENT
International Development Association (IDA)
Department for International Development of UK
Total
($m.)
0.0
4.0
3.4
7.4
6. Implementation
The implementation arrangements for the scaled-up project will remain unchanged. Project
management responsibilities will continue to be handled by a Project Support Team (PST) within
the MMR staffed with a project coordinator, a procurement specialist, and a financial
management specialist, all of which are civil servants. The PST is supported during the initial
two years of project implementation by a consultant’s team which is tasked to build general
capacity within the MMR (PST in particular) to manage donor projects and carry out
procurement and financial management; this implementation support is expected to be extended
by about one year. The government has agreed to undertake a number of measures to ensure that
the PST is stable (all within its broader public sector reform actions).
For the oil sector technical assistance activities, the PST will provide procurement, financial
management and disbursement support to the PRU. The PRU, however, will be responsible for
the technical aspects, including (i) developing Terms of Reference for consultants’ services
under this component and participating in short-listing and consultants’ selection process; (ii)
monitoring of consultants’ performance and reporting on progress; and (iii) keeping track of oil
and gas related indicators. The PST will assist at all stages as needed and will prepare all
procurement documentation and contracts, as well as process payments.
The government has adopted a Project Operations Manual (POM) for the purposes of the
implementation of the original project; the POM focuses on processes and procedures for the
project implementation, monitoring, and reporting. The POM will continue to be used for the
scaled up operation, and will require an update of the project description to reflect the scaled up
activities, and also it will need to add the clear procedures to be applied to the oil and gas sector
activities implementation. Annual Work Plan (AWP) and Budgets for each year of the project
implementation are being developed by the government, and this arrangement will remain
without changes for the scaled-up project. The updated AWP for the current year and 18-months
Procurement Plan will be required by negotiations to reflect the new project activities.
Financial management functions for the project will remain unchanged from the original project
and will continue to be managed through the PST in full coordination with the Treasury, the
Accountant’s General office, and the Chief Financial Officer under the supervision of the
Ministry of Finance and Economic Development internal audit department (for internal audit)
and the Office of the Independent Auditor General (for external audit).
Procurement arrangements for the project will remain unchanged; the same procedures will
apply to both the original grant and additional financing credit in line with the financing
agreements.
7. Sustainability
EITAP implementation has been moving satisfactorily. The annual M&E assessment of the
Word Bank’s Africa Development Effectiveness Unit rated the M&E of the project as Highly
Satisfactory. The project is establishing a regulatory framework and institutional structure to the
mining sector and, with additional financing, to an emerging petroleum sector. Project design
takes into account sustainability issues and lessons learnt from similar sector reforms globally.
Going forward, special attention during the implementation of the additional financing credit will
be paid to (i) measures to ensure that all new functions as well as expanded capacity of existing
institutions are fully covered under the government funding before the end of the project and that
professional development of staff continues after the project is completed; enabling legal and
regulatory frameworks to assist with this transition towards sustainable operation of the sector
are a part of the project design; and (ii) ensuring that existing (non-confidential) as well as new
geodata acquired under the project is available to the investors and regularly promoted to attract
private sector investment into further exploration and mining.
8. Lessons Learned from Past Operations in the Country/Sector
The Project builds on experience gained from similar mining sector technical assistance
operations in many countries, especially in Africa. This includes countries with long traditions of
industrial mining like DRC, Zambia and Mauritania, and countries where mining has only
recently emerged like Madagascar, Mozambique and Tanzania. Lessons learned are regularly
captured in SEGOM analytical work and publications. Recent examples include technical papers
on mining cadastres and guidelines for community development agreements in mining areas (see
www.worldbank.org/mining).
The EITI++ approach used in the Bank’s current programs on extractive industries has been
instrumental in highlighting the critical need to integrate interventions aimed at improving
extractive industries sector performance with those related to the management of resource rents
generated by the sector. This approach is reflected in the PDO and Project design.
Project implementation experience has demonstrated that Government ownership is crucial at the
policy and project design level for successful outcomes. Consultations were designed to ensure
that the project is fully in line with the Government’s development goals and vision, and
responds to the expectations of the private sector and civil society.
9. Safeguard Policies (including public consultation)
By the way of background, a mining sector Strategic Environmental and Social Assessment
(SESA) for Sierra Leone was prepared in 2007 and its core recommendations were incorporated
into the original project. In 2010, as part of preparation of the regional mining project, the Bank
financed preparation of a West Africa Minerals Sector Strategic Assessment (WAMSSA).
While most of the recommendations of WAMSSA target regional level reforms, the scaled-up
EITAP will, inter alia, contribute to the goals of (i) strengthening environmental governance;
and (ii) improving social accountability and mineral sector governance.
The project will maintain safeguards category “B” triggering OP/BP 4.01. The scaled-up project
does not trigger any additional policies and remains a technical assistance project. The
Integrated Safeguards Data Sheet (ISDS) for the additional financing is being disclosed prior to
appraisal to confirm the category, safeguards management approach, and to reflect additional
activities as noted in the paragraph below. The Terms of Reference for preparation of
environmental and social regulations for mining sector and related capacity building that were
disclosed prior to the original project appraisal (October 2009) remain valid and the work has
already commenced with an expectation to be completed by 2012.
The additional financing will (i) scale-up capacity building activities to MMR, Ministry of
Environment, Sierra Leone Environmental Protection Agency (SLEPA) and CSOs to monitor
environmental and social compliance of the extractive industries operations (the sector specific
regulations, as well as sector guidelines and code and practice for mining, are being prepared
with the support of the original project); and (ii) initiate and support policy dialogue among the
Government and stakeholders to foster the development of policy frameworks and strategies to
support environmentally sustainable and socially equitable development of Sierra Leone’s oil
and gas sector.
9. List of Factual Technical Documents
Project Appraisal Document for Sierra Leone Mining Technical Assistance Project, dated
November 3, 2009 (Report No: 43233-SL)
The Transformation Plan for the National Minerals Agency, March 2009, MMRPA
Sierra Leone Mining Sector Reform: A Strategic Environmental and Social Assessment, World
Bank, 2007.
West Africa Mineral Sector Strategic Assessment for the Development of the Mineral Sector in
Mano River Union, the World Bank, March 31, 2010.
Sierra Leone Mining Technical Assistance project, Environmental and Social Management
Framework, Terms of Reference, September 24, 2009
Sierra Leone Mining Technical Assistance Project, Terms of Reference for Preparation of
Environmental and Social Management Framework, October 2009.
10. Contact point
Contact: Ekaterina Mikhaylova
Title: Sr Mining Spec.
Tel: (202) 473-4482
Fax:
Email: [email protected]
11. For more information contact:
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