Ghana can bag $4.2 billion annually from extractive sector – Dr Boakye

Government has been urged to focus on the extractive sector to raise revenue as part of efforts to revive the economy under the International Monetary Fund (IMF) Extended Credit Facility programme (ECF), instead of relying on taxes.

The Institute of Fiscal Studies (IFS), an economic and financial think tank, said Ghana could raise more than $4.2 billion annually from the extractive sector to prop up the economy from the current crisis, which is more than the $3 billion government is raising from the IMF over the next three years as part of the ECF with the Fund.

The Senior Research Fellow of IFS, Dr Said Boakye, who made the call during a press conference to assess Ghana’s ECF with the IMF, said Ghana could raise substantial revenue from the extractive sector through active participation of extraction of the country’s mineral resources, joint ventures and pro­duction sharing approach.

According to him, studies con­ducted by the IFS indicated that out of the $22.72 billion worth of minerals produced in Ghana from 2015 to 2018, only $1.48 billion, representing a meager 6.5 per cent was paid as revenue to the govern­ment.

“The remaining $21.14 billion, representing 93.5 per cent went to the private producers of the minerals, mainly multinational, even though mineral resources are public endowed from God and should therefore benefit the state, which holds them in trust for the people,” Dr Boakye stated.

He said the country was not making much from its mineral resources because government relied on fiscal approach through concessionary arrangement to generate revenue.

“From IFS’s research, the rev­enue gap between Ghana and its peers is largely due to the country’s relatively poor revenue generation from the extractive sector, which is the result of leaving the sector in the hands of multinationals through concession arrangements that yield paltry revenue to the state, while the multinationals repa­triate billions of dollars in resource rents,” Dr Boakye stated.

He said between 2015 and 2018 only 10.5 per cent of the $14.14 billion supernormal profit gener­ated from mineral production, was paid as revenue to the government, leaving the private sector produc­ers to keep as much 89.5 per cent of the supernormal profits.

In contrast, Dr Boakye indicat­ed that for instance, in Botswana, mineral revenue constituted about 95 per cent of supernormal profit and about 52 per cent of the total value of mineral production.

In the oil sector, the govern­ment of Ghana’s revenue amounts to less than 20 per cent of the total value of production, whereas the Nigerian in that country.

“These wide differences in the extractive sector revenue gener­ation are because in Nigeria and Botswana, the governments are active participants with signifi­cant stakes in their oil and mining sectors, respectively, while the Ghanaian government has limited directing participating interests in the extractive sector, and instead over-relies on fiscal instruments under concessionary arrangements to generate revenue,” Dr Boakye stated.