Build exploratory capacity of geological service to ensure value for money in mining -Expert

A governance expert and the Executive Director at the Centre for Extractive and Development Africa, CEDA, Mr. Emmanuel Kuyole has asked the state and policy makers to empower the relevant statutory agencies within the mining sector value chain to negotiate mining contracts from a position of strength and adequate information. 

Making the point at a two-day workshop organised for members of the Institute of Financial and Economic Journalists, IFEJ, in partnership with the German Development Corporation, GIZ, in Koforidua in the Eastern Region of Ghana, Mr. Kuyole called for adequate investment in building the capacity of the Geological Service to gather enough data on the country's mineral potential in order to reduce the risk of the country being shortchanged by the mining companies during such negotiations. 

He said although the split system under which the companies are allowed to explore and gather data independently before coming to the negotiation table with the state is fine, it gives too little to the state in terms of the ability to negotiate from a superior position.

"Right now there is so much dependence on company information. The problem is that you put yourself at a disadvantage as a country when it comes to negotiations," he said. 

Mr. Kuyole also bemoaned the deliberate and wanton violation of the laws governing the mining sector, which severely undermines the fiscal regime leading to huge losses in revenue coming from the sector. He said for example when it comes to the signing of development agreements with the companies a lot of damage has been done to the tax status in terms of corporate income tax and royalties. 

"Instead of charging mining companies thirty-five percent corporate tax, you see that some of them through the development agreements it is reduced to thirty-two percent. Some of them are even exempted from paying local taxes,” he lamented.


An analysis of the recent development agreement signed between the government of Ghana and Anglogold Ashanti, Obuasi Mine, shows that the company has been granted tax concessions estimated at several millions of Ghana cedis. 


Per the stability clauses in the agreement, the company for at least 10 years will not be paying royalties at stipulated 5% but 3%. It is also exempt from paying import duties on some machinery and equipment, as well as VAT. 


This phenomenon however is not limited to Anglogold Ashanti as it is fast becoming a wide spread industry canker. Newmont Ghana Limited also had similar issues with fiscal instruments which led to the revision of the Newmont contract to prevent huge revenue losses to the state.


Mr. Kuyole stated further that the Minerals Development Fund Act 2016, Act 912 which was set up to ensure the smooth administration of mineral revenues to mining communities is consistently being violated. 


Enumerating some of the issues he said, "There are no regulations for the law, even though the law requires that after one year, it should have regulations. There is no board. The 20% community development amount that is supposed to be sent to mining communities has not been sent. 


There are years since 2011 where no disbursement has been made, for example in 2013 and 2015. Then in 2017 and 2018, what is happening is even worse; that the ministry of finance has decided to apply the capping law to the mineral development fund and capped it at 12.5% instead of the 20%, and even with the 12.5% they are not disbursing everything. So far only about 3.2% has been disbursed."


Mr. Kuyole therefore maintained that if the mining communities and for that matter the country would see any serious development from mining resources going forward, there is the need for government and its agencies to respect the provisions of the laws governing the sector and expedite the disbursement of funds to these communities.

STORY BY: NANA AGYEMAN-PREMPEH
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