Ghana: Development agreements with mining firms hurting earnings from royalties, corporate tax

A consultant with the Natural Resource Governance Institute (NRGI) has expressed his disapproval of the development and investment agreements between the country and gold mining firms in the country.

According to Mr Samuel Bekoe, the development and investment agreements which form part of stabilisation clauses found in mining contracts between government and multinational mining companies is resulting in lower revenues being mobilised from mining firms and the sector at large.

Making his argument and making specific reference to the royalties charged mining firms, Mr Bekoe noted that due to the development and investment agreements between government and mining firms, the standard 5% royalties on gold production charged mining firms have been replaced with a 3% – 5.6% royalty charge based on prevailing gold prices.

Mr Bekoe is of the view, the 3% – 5.6% royalty charge based on prevailing gold prices under the development and investment agreements is causing the country to lose revenues it would not have, should it have stuck with the standard 5% royalty charge on gold production.

“Deviation from the standard 5% royalty charge is bad, if government wanted mining firms to increase their investments and have development agreements with the mining firms, it should have maintained the 5% royalty charge and offer other non-fiscal incentives.

“Government would be making more money from mining firms if it had stuck with the standard 5% royalty rate and not used the gold price royalty rate,” he said speaking at an NRGI training workshop on government mining contracts for journalists.

Corporate income tax, Mr Bekoe further noted, is another area where the country is losing revenue from the mining sector.

Per the development and investment agreements, corporate income tax has been reduced from the standard 35% based on net profits to 32.5% based on net profits.

Per the law and mining contracts between government and mining firms in the country, mining firms must have a minimum of $500m in investments to qualify for development agreements between it and the government of Ghana.

Mining firms known to have development and investment agreements with government are Newmont Golden Ridge, Anglogold Ashanti, Goldfields Ghana, Anglogold Obuasi Mine Redevelopment and Abosso Goldfields.

About the training workshop

The training workshop organised by the NRGI, comes on the back of the launch of the Ghana Mining Repository (GMR) platform by the Minerals Commission.

The training workshop was to build the capacity of Civil Society Organisations (CSOs) and media practitioners on the navigation, use and analysis of development and investment agreements between the government and mining firms, as well as interrogate the data and demand accountability from government and business stakeholders.

On the back of the GMR, the Minerals Commission has published on its website, 31 mining leases, made entries on valid 129 mining leases, 121 restricted mining leases, 776 small scale mining licenses, 304 prospecting licenses, 153 mining support service companies among others.

Transparency in the extractive sector has been identified as an essential precondition to reaping benefits from resource extraction particularly in developing countries.

Although global trends indicate that contract transparency is becoming the norm, some resource-rich countries like Ghana still face challenges with the adoption and implementation of rules or guidelines that will ensure that the country obtain full developmental gains from the extractive sector.

For instance in Ghana, there is now legislative backing for the disclosure of mining agreements unlike in the petroleum sector.

There is also little awareness among stakeholders of the existence of these agreements and license information and how to access them.

Source: Norvan Reports

corporate taxDevelopment agreementsmining firmsroyalties