State wants more from mining

Government is banking on two laws to establish a Minerals Development Fund (MDF) and local- content framework that will align mining operations with the needs of the country to drive economic development.

The two bills currently before Parliament remain government’s best hope yet for ensuring local participation and guaranteeing receipt by the state of a set percentage in windfall profits of mining companies from sky-high gold prices.

“The mining sector has the ability to unlock significant socio-economic benefits, reduce poverty and support progress towards the Millennium Development Goals (MDGs). However, this has not been the reality in the past as the sector has not been as well managed and regulated as it should be,” Mr. Mike Hammah, Minister for Lands and Natural Resources, said at the maiden Ghana Chamber of Mines ‘Mining for Development Forum’ in Accra.

“Government is putting in place a number of regulations, including the provisions for implementation of local content, which have been drafted to give full effect to the Minerals and Mining Act, 2006 (Act 703). These regulations are currently before Parliament and will soon be passed.”

The bill will compel the extractive industry and other transnational corporations to employ a reasonable minimum percentage of indigenes.

The MDF, when passed, will allow for the establishment of a Mining Community Development Scheme into which proceeds from royalty payments and development funds of mining companies will be paid.

The funds mobilised will be used by a Local Development Committee exclusively for developing infrastructure projects in mining communities.

An estimated 34 percent of the value of annual mineral exports, currently enjoyed by foreign firms and expatriates providing mining services in the country, could revert to locals if they are able to provide these services.

Estimates by the Minerals Commission show that the value of these services procured by the mining firms in 2008 alone came to US$680million -- more than taxes paid to the government -- but they continue to go to foreigners because locals have not positioned themselves to take advantage of the opportunities.

Mr. Hammah said in times when the industry has seen a boom, there should be a commensurate effect on the economy and vice versa. But in the last decade gold price has seen a significant increase, and it has not reflected in a commensurate impact in the lives of communities and the country, he said.

Dr. Toni Aubynn, Chief Executive Officer of the Ghana Chamber of Mines, has advocated in the past for a local-content policy and plan in the mining sector.

“The best way to keep the mining industry as an integral part of the country’s economy is to put in place deliberate and sustained local-content and capability-development policies, backed by legislation and enforcement mechanisms -- and not just resorting to appeals or pleas to mining exploration and production companies,” he said.

The mining industry accounts for about seven percent of the country’s GDP. Mineral exports account for 42% of total merchandise exports. Export revenue from the mineral sector in 2011 amounted to about US$5billion. The sector also contributed about 17.5% of the state’s total corporate tax receipts, and 28.3% of government revenue.

Government in its 2012 budget statement announced that the corporate tax rate for miners is being increased from the current 25% to 35%, while a windfall profit tax of 10% will be imposed. The new tax regime has generated a lot of debate among players in the industry, but the government has further moved to renegotiate mining contracts.