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sharing in governance of extractive industries

Has mining really served Ghana WELL? This is the burning question I want to pose to all Ghanaians for individual assessments.

Of course, one would not expect Joyce Aryee as an employee of the Ghana Chamber of Mines, an advocacy organization for multinational mining companies to say that mining has not served Ghana well. Being the Chief Executive Officer of the Ghana Chamber of Mines, expect nothing than a total support to multinational mining companies while hiding the true picture of how the industry is shortchanging Ghana.

But an unbiased analysis of the history of mining in the country should definitely reveal the plunder of natural resources without sufficient gain for communities and the economy at large. Close to being a seemingly hopeless economic venture, mining -with its immense wealth- continues to sap the vitality of the people and incapacitate the revenue gains of the economy. No wonder the country continues to be hooked on the unbridled taste for foreign aid. We go out begging for support when actually we are losing huge sums of money.

However, there is no doubt mining has contributed significant revenues for Ghana’s socio-economic development. Mining has served Ghana but not WELL. Last year, gold mining companies realize actual profits of about US $2.1 billion dollars while Ghana raked in just $130 million dollars in royalties only. This is good news. But this is a meager figure considering the massive amount of mineral revenues taken out of the country.

It still remains a fact that mining in Ghana has rarely had a glorious history. Apart from enormous loss of revenues gained from gold as a result of extreme illicit capital flight, mining inflicts never-ending environmental, social and economic damages to the already poor communities. Ghana is fast losing its forest cover partly as a result of mining operations allowed in forest reserves. Can the loss of the vegetation cover ever be quantified in monetary terms? When people living in mining communities continue to be mired in crushing poverty and social destitution, one has to wonder whether mining has indeed served Ghana well as trumpeted by CEO of the Ghana Chamber of Mines. The mining industry operators including the “chamber” churn out mineral revenue figures contributed to the economy to unsettle and confuse the minds of the ordinary Ghanaian and governments forgetting that the country is not getting a fair share of these revenues and that their operations contradict the laws of the land.

Let’s get to basic facts. When government has compromised its mandatory 10 percent stake in Newmont Ghana Gold Limited (both the Ahafo and Akyem project), very much in contravention of Section 43 (1) of the Minerals and Mining Act, 2006 (Act 703), can we say mining has served Ghana well. The report by the Insight Newspaper dated Wednesday 10 August 2011 indicating that Ghana has compromised its 10 percent stake in 5 mining operations is enough evidence to suggest that Ghana is losing out billions of dollars in mineral revenues. For Ghana to have lost 10 percent stake in AngloGold Ashanti (Iduapriem, Teberebie and Obuasi), Newmont (both Ahafo and Akyem project), Noble Mineral Resources (Bibiani), it goes without saying that mining is still yet to benefit Ghana. These are immense revenues eluding the country that urgently need foreign loans to develop aside from the status quo contradicting the Acts of Parliament and casting doubt on the potency of laws of the country.

When Newmont and other multinational mining companies do not pay any VAT on goods they import because of confidentiality clauses inserted in investment contracts, who dares to say Ghana is gaining significantly and equitably from mining. Even though Parliament has reviewed the rate of royalty payments to 5 percent, Newmont and other major multinational companies still pay 3 percent royalties. What is the gain here? Are these mining companies not robbing the country?

Looking at a study on trends and nature of taxation in Ghana’s extractive sector titled “Towards a Fair and Equitable Taxation for Sustainable Development Financing in Africa” by Akabzaa and Ayamdoo in 2007 that indicates that if royalties were paid at 6 percent between 1990 and 2007, the nation would have earned up to $388 million in mineral revenue, isn’t it untenable to say that mining has served Ghana WELL. Mining companies as a result of confidentialities clauses have resorted to the payment of 3 percent royalties.

In furtherance of this argument, according to the Christian Aid in its 2009 report titled “False Profits: Robbing the poor to keep the rich tax-free”, Ghana has lost approximately 36 million euros since 2007 partly as a result of price fixing and transfer mispricing. With weak institutions to regulate the mining industry, revenues of mining companies go untaxed.

Is it because Joyce Aryee works for the Ghana Chamber of Mines that she is compromising on the truth and reality? She should come again. Ideally, drilling the ground for minerals should bring revenues to the state. The intrinsic issue is that Ghana is not getting a FAIR share of the revenues from the mining industry.

It is against these deadly shortfalls that the Centre for Social Impact Studies (CeSIS), a research and advocacy non-governmental organization has called on the government to review all confidentiality clauses that give undue advantage to mining firms to rob Ghana.

The author Stephen Yeboah is a Senior Research Officer at the Centre for Social Impact Studies (CeSIS), a research and advocacy organization in Ghana. Email: stephenyeboah110@yahoo.com

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Comment by Chris Hufstader on August 19, 2011 at 15:12
Stephen thanks for this interesting post, I want to ask what is your source for these figures:"Last year, gold mining companies realize actual profits of about US $2.1 billion dollars while Ghana raked in just $130 million dollars in royalties only." I am doing some writing on this subject and trying to research some figures on mining and its economic impact in Ghana -- thanks for your help

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