Ghana needs cost-benefit study on mining - CSOs

Against the backdrop of the incessant governance problems that have come to be associated with mining and which typically manifest themselves in environmental, social and economic challenges, Government has been called upon to undertake a cost-benefit study of the activity to determine its net effect on the nation.

The call was made by Civil Society groups at the launch of the 2014 Ghana Extractive Industries Transparency Initiative (GHEITI) Reports on Mining, and Oil and Gas in Accra on Wednesday.

The proponent, Mrs. Hannah Owusu-Koranteng, a member of the CSOs constituency of GHEITI, says: “As a nation, we have not been able to draw a balance sheet of the benefits and costs associated with mineral exploitation. Government must commission a cost-benefit study of mining which takes into account the environmental, social and economic cost of mining for proper assessment of the benefits of mining to our nation and develop mechanisms that would ensure that companies internalize the environmental and social costs of mining in their investment plans and not to externalise such cost to society.”

While acknowledging the gains made in the extractive sector since 2007 when the first GHEITI report was established, Mrs. Owusu-Koranteng notes that after “over hundreds of years of mining, Ghana has not realised the full potential of the mineral wealth.”

She points out that revenues from mining to the national kitty have been dwindling, citing its contribution of 0.8 per cent to Gross Domestic Product in 2014 as a classic case.

Mining sector's contribution to Ghana's total tax revenues declined from 27 percent in 2012 to 19 percent in 2013 and 16 percent to 2014. Going forward, Mrs. Owusu-Koranteng, who is also the Associate Executive Director of Wacam, maintains that transparency in the extractive industries should not be limited to financial disclosure, but must also involve all principles for good governance, including the right to decide from contracting to mine, decommissioning and mine closure.

“Looking ahead, our efforts should aim at improving governance in the extractive sector by incorporating Free Prior Informed Consent (FPIC) clauses into Ghana's mining, oil and gas laws,” she proposes, reasoning that such a measure “will protect frontline communities from the many of the violations they suffer as a result of extractive activities.” According to her, FPIC would also equip the communities to protect their rights to ownership of land and livelihood prior to the granting of rights to extractive companies.

To Mrs. Owusu-Koranteng, the international recognition Ghana is currently enjoying as a pace setter in the implementation of EITI by way of reforms should encourage government to pass the Ghana Extractive Industries Transparency Initiative Bill “as a matter of urgency.”

The two GHEITI reports together with the Open Data Dashboard for Mining and Oil/ Gas sectors were formally launched by Mr. Kwabena Oku-Afari, Director, RSD of Ministry of Finance, on behalf of Hon (Mrs) Mona Quartey, a Deputy Minister of Finance. The mining report brings to 12, the total number of published since Ghana acceded to the EITI in 2003 while the oil and gas report is the fourth for the oil and gas sector.

The Open Data Dashboard aims at facilitating ease of appreciation of the information contained in the mining, and oil and gas reports. The facility, which was developed with support from the Natural Resource Governance Institute (NRGI), helps CSOs, journalists, and policymakers better appreciate the impact of extractives on the economy by providing visualisations and a macro level overview.

The reports, which are published in conformity with EITI standard adopted by the Sydney Global EITI Conference in 2013, go beyond the mere reconciliation of payments and receipts, to include contextual information such as summary description of the legal framework and fiscal regime, the sectors contribution to the economy and production data.

Other areas it looks at are state participation in the extractive industries; revenue allocations and the sustainability of revenues; license registers and license allocations as well as information on beneficial ownership and contracts.

At the 7th Global EITI Conference in Lima, Peru, Ghana was among four other countries selected from among 49 EITI implementing countries for the prestigious EITI Chair's Award.

Commenting on the 2014 reports, Civil Society Co-chair of GHEITI, Dr. Steve Manteaw said:” We are now beginning to get a fuller picture of the impact of the extractive sector on the national economy, thanks to the 2013 Standard. But until we begin to account for the environmental and social impacts, especially on host communities the last jigsaw puzzle that EITI seeks to resolve will still be missing.”

Key findings-Mining Sector

The key findings in the Mining Sector include the fact that the 2014 reconciliation had an amount of GHc 972,092,848 as government receipts and company payments of GHc 972,787,592. Initial reconciliation yielded a net discrepancy of GHc44, 877,385, however, after the resolution of some discrepancies the final net discrepancy came up to GHc 694,681. This represents 0.07 percent of reported government receipts.

According to the Report, all reporting entities required to report for the reconciliation exercise did so dutifully. Corporate tax was the largest of the mining revenue streams received by government and Ground Rent receipts were significant for the first time in the reconciliation process. It recommended that Mineral royalty payments should not be offset against any tax credits, as there are implications for subnational transfers.

Key Findings-Oil and Gas Sector

In respect of Oil and Gas Sector, the Report revealed that the Petroleum Holding Fund received $978,886,397 while government receipts after reconciliation amounted to $977,184,636. The difference is made up of surface rentals of the exploration companies and the return from investment on the petroleum funds. These were not considered for reconciliation. The Report notes that with the exception of Anardarko WCTP Ltd, all oil and gas companies that made payments in 2014 reported.

It revealed that unreported discrepancies amounted to $135,902,446 with non-submission of template by Anadarko, accounting for over 62 percent. The difference between corporate tax reported by Tullow (Ghana) and Ghana Revenue Authority (GRA) accounted for 38 percent of the unresolved discrepancy.

The Report recommended strongly that Anadarko, which still operates in the country, should be persuaded to participate in the EITI reconciliation exercises.

Mining: Number of Companies

For the mining audit, 15 companies made up of 12 gold mining, bauxite, manganese, and a quarry company took part in the exercise. State agencies which provided data and information on mining were GRA, Office of the Administrator of Stool Lands, Ghana Minerals Commission, the Municipal and District Assemblies within the areas of operation of the mines; the Ministry of Lands and Natural Resources and the Ministry of Finance.

Oil and Gas: Number of Companies

Oil and gas companies that participated in the exercise were Tullow (Ghana) Ltd, Kosmos Energy Ghana HC, Ghana National Petroleum Corporation(GNPC), Saltpond Offshore Producing Co. Ltd; Anadarko WCTP (Ghana) Ltd, Sabre Oil and Gas Holdings Ltd/Petro SA.

However, ENI Ghana Exploration and Production Ltd, Vanco Ghana Ltd, Shallow Water Basin, Amerida, Hess Ghana Ltd and Tap Oil Ltd were excluded from the exercise because they were still at the exploratory and appraisal stages of their operations.

On the government's side were, reporting entities whose date were reconciled with those of aforementioned companies were GRA, GNPC, Ministry of Finance, Bank of Ghana; National Petroleum Commission and Ministry of Petroleum.