A reform package geared towards improving regulation of Ghana’s mining operations aims to unlock new investment and boost government receipts.
As part of its broader push to diversify extractive activities and improve oversight, the government plans to tap investment for reserves of underexploited metals and minerals, better regulate small-scale mining and promote more sustainable extraction activities.
Ghana’s new minerals and mining policy, unveiled in late February by Nii Osah Mills, minister of lands and natural resources, comes amid a modest industry expansion.
Mining and quarrying generated GHS8.64bn ($2.2bn) in economic output in 2014, according to the most recent full-year data from the Ghana Statistical Service (GSS), nearly doubling the total achieved in 2011. The segment also led the industrial sector in 2014, with growth of 3.2%.
However, the government is hoping to stoke this further. Mills explained that while the mining sector has traditionally focused on gold, Ghana also has significant reserves of base and industrial minerals that have yet to be exploited.
“These minerals (iron ore and bauxite) have already been discovered and are in huge deposits, which are commercially viable, so all we need is investors who are ready to mine and help develop the entire value chain,” Jerry Ahadzi, principal policy officer at the Ghana Minerals Commission (GMC), told media earlier this year.
Ghana’s identified iron ore deposits stand at over 1.6bn tonnes, according to estimates from the GMC. Extensive reserves of other minerals with industrial and construction applications, including granite, sand and limestone used in cement, also remained undeveloped.
At the heart of the new framework is a push to diversify Ghana’s export base, through the development of value-added revenue streams and investment in downstream capacity.
“There should be conscious efforts aimed at integrating the mining industry with the rest of the local economy,” Mills told local media. “Ghana will increase benefits from the mining industry if the industry is recognised as a growth pole to spawn activities in other sectors of the economy .”
“The expectation is that the growing number of licensed gold buyers who have traditionally purchased raw materials in Ghana and have exported them to other countries will seek to refine that gold in Ghana creating jobs and increase revenue,” President John Dramani Mahama said in his February State of the Nation address.
Following on the country’s first gold refinery, built in 2005 in Accra, Ghana’s second such facility, the $7m Sahara Royal Gold Refinery in the Adjiringano neighbourhood of Accra, is nearing completion. According to local media reports, the facility will refine a total of 600 kg of gold per day.
According to Mills, greater availability of affordable refined gold could also help spur development of a local jewellery industry.
Regulating smaller-scale mining activities is another key focus of reforms, including tackling illegal operations and clamping down on smuggling, particularly of gold.
While approximately $3.2bn of gold was exported from the country in 2015, according to data from the Bank of Ghana, smuggling and under-declaration continue to pose problems.
According to media reports, some estimates put the losses in terms of unpaid taxes and royalties from the operations of unlicensed, artisanal and small-scale gold miners at around GHS500m ($126.1m) per year.
To help close this gap, in early January the Ghana Revenue Authority instituted a 10% withholding tax on the purchase of unprocessed minerals from small-scale mining operations.
Additionally, authorities plan to separate small-scale mining into three legally defined categories – artisanal, small scale and medium scale – with different tax structures, licensing durations and hectarage requirements for each category.
Joint ventures with foreign players will be allowed for medium-scale mining operations, the Minerals Commission said in early March, provided Ghanaian ownership stands at 51% or higher.
With support from the World Bank, in 2011 the government increased mining royalties from a range of 3-6% of total earnings to a fixed 5%. This was followed by an adjustment to the corporate tax rate, from 25% to 35%, in 2012. The government also closed the loophole on tax avoidance, ensuring that mining companies begin paying taxes within five years of operating in the country.
“Some of the reforms we [have] seen in the mining sector are quite fundamental, and [this] goes to the heart of bringing more revenue to the government,” Steve Manteaw, co-chair of the Ghana Extractive Industries Transparency Initiative, told media in February.
Ghana is also looking to reinforce more sustainable extraction practices, as the country faces a growing environmental impact from unregulated mining activities, ranging from deforestation to pollution of nearby rivers.
Mining firms are now being asked to pay more for ground rentals. In early 2016 concession rates were increased for the first time since 1986, from less than GHS0.01 ($0.003) per ha of leased land to GHS14 ($3.56), according to local media.
However, Toni Aubynn, CEO of the GMC, noted that to achieve these and other goals, such as boosting employment and supporting rural communities, further regulation and expansion of the mining sector through policy development was needed.
“[The] government also recognises that the national mining policy must provide for establishing an enabling environment for investors, one which is based on modern regulatory arrangements and sufficiently attractive terms,” Aubynn told media in February.
Credit: This information was originally published by Oxford Business Group (OBG),the global publishing, research and consultancy firm, appearing in The
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