extractive sector
An open pit mine in the town of Prestea, where Oxfam parter organization in Ghana, WACAM has been supporting the Concerned Citizens Association of Prestea in its efforts to negotiate with a mining company around issues related to air and water pollution, and the proposed expansion of mining operations.

A two-day workshop on Ghana’s mining revenue Act is underway at the Eastern Premier Hotel in the Eastern Region for 30 financial journalists.

The workshop is being organised by the Institute of Financial and Economic Journalists (IFEJ) in partnership with GIZ.

The two-day stakeholder engagement is being held to discuss and explore legislative and fiscal frameworks in the mining sector in a bid to diagnose revenue leakages in the sector.

The workshop among other things is to evaluate the legislative and institutional frameworks in Ghana of mining revenue governance;

To provide platform for national consensus building on policies that must be adopted to deepen mining revenue governance in Ghana and

To identify best practices in mining revenue governance for adoption by policy makers

Representatives from the Ghana Revenue Authority, Minerals Commission, Industry Regulators, Accountability Institutions, Chamber of Mines, Civil Society Organisations and Office of the Administrator of Stool Lands will engage the participants in the various aspects of the mining law.

The mining sector has been the major contributor to the growth and development of Ghana as this sector contributed 1.35billion and 1.65billion in 2015 and 2016 respectively. In 2015, the total contribution of the sector represented about 16 per cent of domestic revenue mobilised by Ghana revenue authority.

Bank of Ghana also indicated that the minerals sector accounts for 45.5 per cent of gross merchandise exports making it the leading foreign exchange earnings. Apart from these the sector also employ a significant number of Ghanaians.

Despite these contributions, the mining sector holds much more great potentials for domestic revenue generation. According to Africa Economic outlook report for 2018, there is currently the need for urgent tax reforms in African countries including Ghana.

This is due to the fact that there is huge unutilised opportunity for revenue mobilisation of about 3-5 per cent of GDP as additional revenue representing $50-80%billion. Tax to GDP ratio are still below 25 per cent threshold .The report emphasised on the need for better tax regime, and elimination of tax exemptions and revenue leakages in countries.

Fiscal policy reforms have been the bane of the mining sector in Ghana by extension revenue generation for the sector. There are myriad of challenges ranges from fiscal policy formulation and regulation weaknesses, sweeping tax exemptions, high revenue leakages coupled with illegal export and smuggling of gold, weak monitoring, enforcement and collection of revenue due the state and illicit financial outflows from the sector.

There is huge regulation gaps and implementation lapses among sector agencies in the import and export of gold which is a major commodity of Ghana accounting for over 95 per cent of export earning in recent years. This is evident in a revelation of the import export records leading to loss of about $6billion of revenue of about three of Ghana’s major trading partners; Switzerland, India and United Arab Emirates. There is huge unaccounted revenue leakages of the sector that needs to be fixed through policy dialogue.

Ghana has also recently granted tax concession to Anglogold Ashanti amounting to about several million of Ghana cedis. This is coupled with the fact that the company would not be paying royalties at current five per cent but three per cent due to stability agreements. Stabilisation clauses signed by Ghana is not also helpful.

There I the need to prevent signing freezing stability agreements in mining contracts. Anglogold Ashanti is not the only company, Newmont Ghana Limited also had similar issues with fiscal instruments which led to the revision of Newmont contract to prevent huge revenue losses to the state. These two companies’ combined are the largest producers of gold in Ghana.

Ghana also holds a free carried interest in mining contracts which is not yielding the required dividends because the big mining companies are not declaring dividends. Ghana does not also have a windfall tax provision in the mining sector to tax supernormal profits of mining companies.

Ghana apart from revenue generation difficulties in the mining sector, there is lack of comprehensive mineral revenue management law to guide the use of mineral revenue. By current best practices in the extractive revenue management and recommendation of Natural Resource Charter, sustainability in revenue utilisation is key.

However, per the current arrangements, only 20 per cent of Ghana’s mineral revenue is regulated by the Mineral Development Fund Act 912. 80 per cent mineral revenue is unregulated and therefore goes into consolidated funds for recurrent expenditure.

This defeat the idea of savings and investment of natural resource proceeds which is finite. Implementation of provision of Mineral Development Fund Act is also problematic because revenue going to District Assemblies and communities through community management schemes is not monitored for proper utilisation.

Source IfejGhana.org


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