On September 30th 2015, the Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) published its third TTEITI Report covering the period October 1st 2012 – September 30th 2013. This report provides an independent reconciliation of payments made to the government by energy companies with the revenues reported by Government as having been received from these energy companies. In other words, what the energy companies say they have paid to the Government compared with what the Government says it has received. These amounts disclosed are reconciled by an independent administrator.
While the TTEITI report discloses and reconciles the very significant payments within the sector such as Supplemental Petroleum Tax (SPT), Petroleum Profits Tax (PPT) and Royalties, it also discloses, (although unreconciled) Social expenditure.
The TTEITI Steering Committee, taking guidance from the EITI Standard, defines social expenditure as “the provision by public and private extractive sector and related companies of benefit to, and financial contribution targeted at, communities, civil society organisations, households and individuals. Such payments can be cash transfers or direct (in-kind) provision of goods and services, but shall exclude advertising and/or promotional costs related to the expenditure”.
This latest report discloses that for the fiscal year ending September 30th 2013, over TT $79 million was spent by the reporting companies on social expenditure, with 55% of this figure (approximately TT $44 million) spent by state-owned Petrotrin and NGC, and the remaining 45% (approximately TT $35 million) spent by the non-state energy sector reporting companies.
So what do these payments on ‘social expenditure’ tell us and how can we use this information?
The disclosure of social expenditure in the TTEITI Report is an important first step and provides a ‘sneak peek’ into energy sector social expenditure, however, in analysing and interpreting the information we must exercise caution in making too many assumptions without additional context.
For example, at a very macro level, the figures provide some indication of the energy sector’s contributions to what may be termed Corporate Social Responsibility (CSR) Initiatives; to communities, civil society etc., and a year on year comparison for TTEITI has shown a 13% increase in reported social expenditure from 2012 to 2013. On the face of it, considering the definition of social expenditure, an increase in this spending appears to be positive, however, much more detailed analysis is required to determine how this expenditure compares, for example, with the companies’ earnings or revenue in the particular year. As with all expenditure, it is possible for the total spend on an item to increase, while representing a smaller percentage of, say revenue, or vice versa. The point is that while it is very encouraging to see relatively large amounts being directed towards CSR, communities and civil society, we should not read into the information more than is actually there.
In our current context of falling oil prices, we are all weary of expenditure being cut and especially where some schools of thought are of the view that the CSR spend is a ‘nice to have’, it is more often than not, one of the first areas to experience budget cuts. The important thing is that we cannot simply assess the value or effectiveness of the CSR spend based on a review of the amount of money spent. Nor can we say whether the amount spent by one particular company, or even the sector, is too little or too much. What is important is impact. What impact has the spending had? In assessing the CSR spend, this is a question that needs to be answered and while the TTEITI Report provides a first look into the energy sector’s social contribution, it does not, nor is it intended to, tell the entire story.