Contract mining could have negative impact on economy – WACAM

Mining advocacy group, WACAM, has warned government against the move by Gold Fields Ghana Limited, GFGL, to transition from owner mining to contract mining.

In a statement released on Thursday, WACAM insists the transition would mean a “reduced remuneration for employees and a resultant reduction in aggregate income tax from employees and these negative effects would have cascading effects on society and national development”.

“The transition from owner mining to contract mining implies that it’s shirking its responsibility of creating decent jobs. The affected employees would suffer diminution in their terms and conditions of service,” a portion of the statement revealed.

The group expressed worry over the future of mining in the country and has thus sounded a warning to government to resist the move as a successful transition by GFGL from owner mining to contract mining, would encourage “all mining companies to adopt contract mining as it will lead to huge savings for the company from cuts on labour cost”.

The group has thus proffered recommendation to government to establish a policy against contract mining in Ghana as it is not in the best interest of the people of Ghana who are the true owners of natural resources.

Read Full statement below

WACAM’S POSITION ON CONTRACT MINING MODEL

Gold Fields Ghana Limited (GFGL) has made a public statement in newspaper publications such as the Daily Guide captioned “Tarkwa Mine Begins Transition to Contract Mining” (Daily Guide of 12th March, 2018).

The referenced publication stated that, “Gold Fields Ghana Limited (GFGL) has formally begun the transition from owner mining to contract at its Tarkwa gold mine.”

It is important to place the discussion of the current decision of GFGL to change from owner mining to contract mining and the industrial impasse between the company and the Ghana Mine Workers’ Union (GMWU) in a historical perspective.

GFGL’s interest in the then Tarkwa Goldfields Limited (TGL) which was an underground mine and a subsidiary of the State Gold Mining Corporation (SGMC) started when Gold Fields South Africa had engaged with Tarkwa Goldfields Limited on a management contract arrangement from 1993 to 1994 after which Gold Fields South Africa purchased the Tarkwa Goldfields Limited in 1995 and renamed the mine, Gold Fields Ghana Limited.

Gold Fields South Africa purchased the Tarkwa Goldfields Limited underground mine in 1995 for a paltry US $3 million and that gave the South African company access to the large concession of the Tarkwa Goldfields Limited (TGL) of about 280 km2 land.

The sale of the mine for US $3 million was shortly after the government had secured a loan of $35 million Canadian Dollars which was invested in the underground mine.

By the acquisition of TGL, Goldfields South Africa gained additional properties of the state-owned Tarkwa Goldfields Limited (TGL) including housing estates for workers such as Tamso estate, Green Compound estate, Aboso estate and many bungalows for middle level management staff and senior managers.

The new company Gold Fields Ghana Limited operated as an underground mine alongside surface mining operations for a few years. The company took a decision to close down the underground mining operations in July 1999 and many workers especially underground workers lost their jobs despite the fact that the operations of the underground mine was the justification for the generous terms of the agreement of the Gold Fields Ghana Limited to attract the company to revamp the underground mine for job creation. The agreement of Gold Fields Ghana Limited can be likened to “Buy one get three free”.

Beyond these freebies for the survival of the company, the generous fiscal regime which was associated with the Development Agreement granted to Gold Fields Ghana Limited recently which provided the company the opportunity to negotiate high retention of foreign revenues, reduced corporate taxes, among others. Above all GFGL had the opportunity to reap windfall profits in the period when the price of gold skyrocketed around $ 2,000 per ounce.

Unfortunately, our country’s inability to take advantage of the high gold price to institute windfall profit tax in the fiscal regime for mining helped companies like GFGL to repatriate huge profits to the home countries of the multinational mining companies.

A related matter of interest is the fact that GFGL had contributed to the pool of unemployed people in the area of its operations. About 30,000 landlords from Old Atuabo, Mandekrom, Akontase and Sofo Mensahkrom were displaced by GFGL in five years and if each landlord had a family size of four (4), then it gives an idea of the level of unemployment created by GFGL.

The figures for displaced farmers by the operations of GFGL keep increasing.

On the specific issue of a transition from owner mining to contract mining, Wacam’s position is that, the investment of GFGL is a Foreign Direct Investment (FDI) which is a form of investment where investors from a country which is different from the host country use their controlling ownership to create mutual benefits for the host country and the investors.

Job creation, payment of corporate taxes and income tax of employees are regarded as some of the rents that accrue to nations that become the destination of FDIs.

The transition from owner mining to contract mining implies that Gold Fields Ghana Limited is shirking its responsibility of creating decent jobs. The affected employees would suffer diminution in their terms and conditions of service.

The contract mining would imply a reduced remuneration for employees and a resultant reduction of aggregate income tax from employees and these negative effects would have cascading effects on society and national development.

Gold Fields Ghana Limited is one of the most pampered mining companies in Ghana.

Wacam wishes to sound the caution that if government allows GFGL to succeed in transiting from owner mining to contract mining, it would serve as an encouragement to all the mining companies to adopt contract mining because it will lead to huge savings for the company from cuts on labour cost.

The state has a lot to lose in a shift from owner mining to contract mining.

Government should establish a policy against contract mining in Ghana because it is not in the best interest of the people of Ghana who are the true owners of natural resources.

Let the owner beware and act.

Hannah Owusu-Koranteng

Associate Executive Director