Policy analyst and natural resource governance advocate Dr. Steve Manteaw has pointed out that Ghana may have sacrificed billions in potential mining revenue due to delays in implementing a windfall tax for the mining sector.
In a recent discussion on PM Express, Dr. Manteaw highlighted that the notion of an additional profit tax for mining has been on the table for over a decade but has yet to be realized. The amendments to Act 703 permitted the minister to prescribe the royalty rate for mining companies, but without these prescriptions, the existing 5% royalty rate remains in place.
The conversation about mining royalties intensified recently, particularly in light of discussions around Ghana’s lithium agreements. Dr. Manteaw noted that the Ghana Extractive Industries Transparency Initiative (GHEITI) advocated for a windfall tax back in 2012, stressing its importance for capturing a slice of the extraordinary profits that mining companies could reap during commodity price booms. He explains, “Commodities go through boom and bust cycles, and during boom periods, resource-rich nations want to claim some of the additional revenue.”
Resistance from the mining industry at that time stalled progress on this proposal. Dr. Manteaw recalls that when gold prices soared to around $1,600, industry players argued against the implementation of the tax, believing it was not an appropriate time to discuss such measures.
Interestingly, while Ghana hesitated on the mining front, a similar concept was integrated into the petroleum revenue management framework. The introduction of an extra profit tax for the oil sector has shown positive results, evidenced by companies like Petro SA willing to pay extra taxes when profits exceed certain thresholds.
He emphasizes that resource-rich countries must have mechanisms in place to capture additional revenue during price surges, asserting that every commodity facing boom and bust cycles needs arrangements that allow for the collection of profits during upswings.
Ghana ultimately opted for a sliding scale royalty system for the mining sector instead of a windfall tax. This sliding scale adjusts royalty rates according to commodity prices, ensuring that benefits and risks are shared equitably among stakeholders. However, Dr. Manteaw cautions that the current discussions around the royalty regime have brought to light concerns among industry stakeholders, highlighting a lack of adequate consultation regarding the thresholds that determine these rates.
He warned that the new royalty rates could disproportionately burden smaller mining companies. While major players like Newmont and Anglogold may not be significantly impacted due to existing stability agreements, smaller firms, including Ghanaian-owned companies, might struggle under a higher rate of 12%.
Dr. Manteaw concludes that the disparities created by the new regime could lead to greater challenges for smaller mining operations already facing operational difficulties, stating, “Many of the smaller companies are already struggling, and this change could exacerbate their challenges.”
The future of Ghana’s mining revenue hinges on adopting more robust and fair economic frameworks to ensure that the nation’s resources benefit all stakeholders and maintain competitiveness in a fluctuating global market.
