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A new report authored by the Africa Centre for Energy Policy (ACEP) titled: ‘Golden Days For Newmont’ has indicated that mining companies are enjoying their ‘golden days’ in Ghana.
The report, launched by the energy think-tank yesterday in Accra, said that out of a total value of $23 billion gold produced between 2010 and 2013, Ghana received only $1.7 billion in taxes.
It said from 2003 to 2012, Newmont paid less than $500 million tax to the government despite reporting annual revenues of $931 million in 2012, $919 million in 2011 and $655 million in 2010, all totaling about $2.5 billion.
ACEP said such a situation emerged because government waived the payment of VAT and its share of up to 20 percent in the Newmont contract in 2003, among others.
“Foreign mining including Newmont – second biggest producer in Ghana in 2013 estimated share of 13 percent according to EITI), have been enjoying ‘golden days’ since Ghana has failed to capture adequate and fair share of mineral value over the years,” it said.
It further explained: “For instance, Ghana lost an estimated $90 million in 2011/2012 as a result of mining stability agreements and between $387 and $1163 million from non-optimization of royalty receipt from 1990 to 2007”, referring to a study by Ababa and Ayamdo in 2009 details.
Negligible revenue contribution
“Despite these findings, the mining sector contributed about six percent of Ghana’s domestic revenue in 2009 and 14.3 percent of domestic revenue mobilized in 2013.”
“The cost of production per ounce of gold was $596 in 2012 and $542 in 2013. This indicates a revenue of $850 to $1050 per ounce of gold in 2012/2013.”
The report further said government introduced windfall tax in 2012 to capture fair and adequate tax, but international mining threatened to lay off workers,” adding that “whilst Ghana’s economic performance is declining over the years, the mining sector grew by 11.7 percent in 2013 (EITI, 2014)”.
Citing a study by Osei-Assibey in 2014, it said Ghana reduced the poverty rate from 51 percent in 1990 to 18 percent in 2010. However, the number of poor people in the Northern Region increased by 0.9 percent over the same time.
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“With dire need for money to invest in power, education, agriculture modernisation, road and health infrastructure, the government of Ghana can rely on mining taxes.
Renegotiated contract
Noting that the Newmont contract was renegotiated in December 2015, it said per the new agreement, Newmont will pay more in royalty to the government of Ghana when gold prices go up, adding that by the same rule, the mining firm will pay less proportionately when gold prices drop.
“Hon Osah Mills said at the end of the negotiations, some payments were to be made upfront totaling $27 million which he said Newmont was organizing to honour for royalty payments and others all put together,” the report revealed.
Some advice to government
ACEP called for the introduction of a law on resource rent tax in the mining sector to capture a share of excessive profits and introduce other exempted taxes without negatively affecting long-term mining investment, a mining investment law to guide how mineral revenues are collected, disbursed and spent, and also an effective transparency and accountability to track the share of royalties that goes to traditional authorities.
It also called for targeted and sustained investment in infrastructure and alternative livelihood schemes in mining affected communities by setting up Community Mineral Develop Fund in the ratio of 70:30 and an effected tax administration to detect and punish transfer pricing and other illegal corporate practices.
By Samuel Boadi
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