Policy analyst and natural resource governance advocate Dr Steve Manteaw has raised concerns about what he describes as discrimination against Ghanaian mining companies under the country’s evolving royalty regime.
Speaking on Joy News’ PM Express on Monday, he said the current debate over mining royalties gained momentum following discussions around the country’s lithium agreement.
Dr Manteaw explained that the legal framework governing mining royalties dates back to amendments to the Minerals and Mining Act.
“The Act 703 was amended, and we provided that the minister shall prescribe the royalty rate for mining companies in Ghana.”
“But in the absence of that prescription, the status quo will remain.”
He noted that because the minister had not prescribed a new rate for years, the existing 5 per cent royalty continued to apply.
“So 5%, which was what the companies were paying at the time, remains until now.”
According to him, calls for changes to the royalty framework have existed for more than a decade.
“I remember, I recall that as far back as 2012, my committee, that is the Ghana Extractive Industry Transparency Initiative, proposed to the government to adopt a windfall tax for the mining sector.”
He explained that the proposal was meant to allow the country to capture more value from natural resources during periods of high commodity prices.
“Because, you know, we’re dealing with the commodity, and commodities go through boom and bust cycles.”
“So resource owners want to position themselves to be able to skim off a bit of the extra profit during the boom periods.”
Dr Manteaw said the idea was resisted by industry players at the time.
“At the time, I recall the gold price was around $1,600, so the industry kicked back and said, ‘ Look, this is not the time to be talking about extra profit tax.”
“Prices are depressed, and so let’s wait until the right time we can talk about this.”
He noted that while the mining sector did not adopt the windfall tax, the petroleum sector implemented a similar concept under Ghana’s petroleum revenue management framework.
“In the oil sector, around the same time, when we’re developing the petroleum revenue management framework, we provided for an extra profit tax in the form of an additional oil entitlement.”
“So as we speak, in fact, I think last year, one of the companies, I’m not too sure, it must be Petro SA, paid extra profit tax to the state because it had exceeded the threshold.”
He argued that because the mining sector lacks such a mechanism, policymakers opted for a sliding scale royalty system instead.
“And so this is what has brought us here, because we did not have an extra profit tax arrangement in the mining sector, we decided to go for the alternative, which is a sliding scale.”
“Sliding scale allocates risk and benefits equitably.”
“So when the price goes up, we all share the enjoyment and the benefits of the boom, and when the price becomes depressed, we all the companies pay less and the government also gets less.”
Despite supporting the concept, Dr Manteaw said the implementation has raised serious concerns among industry players and development partners.
“I do not think we had adequate consultations.”
“Especially in establishing the price bands or the thresholds at which the various royalty rates kick in.”
He warned that the structure could disadvantage smaller companies, particularly local firms.
“If you look at the industry, the three biggest companies that produce the bulk of our gold are Newmont, AngloGold and Goldfields.”
“They have stability agreements, so this particular new royalty regime will not be applicable to them.”
“That you agree creates some discrimination.”
According to him, the burden will instead fall on smaller operators, many of which are Ghanaian-owned.
“The majority of the companies, the 15 or so that are on their own, a lot of them are struggling, but some are Ghanaian, like ADAMUS Resources, Asante Gold and all that.”
“And then we have Namdini coming on board, and all these are Ghanaian companies.”
“They are going to have to pay 12%.”
Dr Manteaw warned that the higher royalty burden could be difficult for these companies to absorb.
“It’s a challenge for them, because even some of the bigger companies that have been around longer are struggling with the operations.”
About the Author
