Mining stability deals must be renegotiated

The chairman of the government committee set up to renegotiate stability agreements with mining companies has bemoaned the fact that Ghana failed to carry out proper groundwork before closing the deals.

Due to this, Prof. Akilagpa Sawyer said it is going to take time for the re-negotiations to be finalised.

“We didn’t do thorough work before completing agreements. We didn’t keep good records,” Prof Sawyer said at a forum May 15, 2013 in Accra during the launch of Revenue Watch Institute’s 2013 Revenue Governance Index (RGI).

According to him, before completing the negotiations, Ghana must get all “information and records on the mining agreements straight, do analysis and homework regularly” which Prof Sawyer says the committee has done “now to a large extent”.

“We are now talking to the mining companies about specifics upon technical competent work,” Prof Sawyer said without giving further details.

Some however, are of the opinion that reviewing the stability agreements will bring tension in the industry.

The Economic Intelligence Unit (EIU), for instance, said the government’s formation of a seven-member team to review and renegotiate the mining stability agreements would lead to renewed tension between mining companies and the government.

The unit’s March 2012 Country report revealed the determination of some mining operators to engage government as the mining stability agreements are binding and that there was little that the government could do to modify existing agreements without significant legal difficulty, reports the Ghana News Agency March 5, 2012.

According to the EIU investigations, the stability agreements seek to protect numerous mining companies in Ghana but as many as 20 large-scale operations do not have such agreements, meaning their operations will immediately be affected by the policy changes.

The government’s committee was inaugurated in January 2012 by the then Finance Minister, Dr Kwabena Duffuor. It was set up to ensure that the country derived maximum benefits from its resources.

The team was mandated to determine the extent to which the stability agreements depart from all mining leases granted to other mining companies and redesign any existing mining agreement and /or draft new agreement, where necessary, to ensure support for Ghana’s economic growth and development.

In addition, it was also to establish whether the Stability Agreements comply with provisions of the mining laws of the country, the legal regime for mining (fiscal imposition, foreign exchange regulations, duration of stability arrangements, and the provisions of the country’s tax laws) and the laws applicable to the agreement.

Besides that, the team was to look at the fiscal regime, governments carried and participating interests and undertake the preparation of a framework or procedures and conditions that will govern granting of stability agreement in the mining sector.

Other areas of reference for the team include the review of the mining list with the view to reducing exemptions granted and promotion of local content and establish whether the country is in a breach of any provision of any mining agreement.

Some civil society groups like the Third World Network (TWN), have also kicked against the stability agreement.

The TWN’s Executive Director, Dr Yao Graham in an interview with ghanabusinessnews.com December 2011, called upon the Ghana government to scrap the stability agreements it has with two of the major mining companies in the country – Newmont Gold Ghana and AngloGold Ashanti.

According to Dr Graham, there is no justification for these agreements. He said, “government must scrap the agreements because some of the tax holidays that these companies have are quite extensive.”

On the Newmont stability agreement for instance, Dr Graham said the erstwhile Kufuor administration gave the US mining firm too much privileged terms which he termed unprecedented.

“That agreement was negotiated in very peculiar circumstances. I can say categorically that the Kufuor government gave privileged terms to Newmont and they owe the country an explanation,” he said, asking, “why did Newmont get terms which were so unprecedented?”

Prof. Sawyer has indicated that details of the finalized re-negotiated stability agreements will be made public.

By Ekow Quandzie