You can see it now. All of the NGOs applauding the Ghanaian Government’s move to double mineral royalties, from 3% to 6%, which should take effect this year. This is indeed something which is long overdue. It is no secret that African countries have achieved very little in the way of economic development through leasing their mineral-rich lands to international mining houses. The great disparity between the sector’s miniscule contributions to national GDPs and the value of the product they are exporting is testament of this. But the decision of the Ghanaian Government to do this now certainly raises eyebrows – or at least it should.
Of course, the move to change the royalty payment to 6%, though perhaps significant in practice, will entail only a slight amendment to extant legislation. At present, and as stipulated in the Mining Act, mining companies are required to pay between 3 and 6% as a royalty payment. As they are not charities, all pay 3%, with the exception of Newmont Ghana’s planned Akyem Mine, which, when it finally opens, will pay royalties in the range 3.25% as compensation for being situated in a – albeit contested – gazetted forest reserve.
But why make this amendment now, and not 10 years ago? Has it really taken the government this long to realize that the existing arrangement of 3% generates next to nothing economically for the country, or is it because of something else? It is certainly far more disadvantageous for the government to make such a change now than it would have been, say, a decade ago or even five years ago. All of mineralized sub-Saharan Africa has been partitioned to multinational companies in the past 10-15 years, and quite rapidly for that matter. Significantly, for Ghana, with gold, the principal mineral extracted in the country, being ubiquitous in the region, there is concern – or there at least should be – that, once the new mineral royalty rate takes effect, international mining houses will simply abandon their exploration activities and relocate elsewhere, such as Mozambique or Mali, where the investment climate is comparatively more attractive economically.
The claim made by the Ghanaian Government that the move to modify the mine royalty rate stems from its desire to ‘boost revenues from the sector’ is purely a facade: it certainly did not become enlightened about the implications of a 3% royalty rate overnight. It is rather, and quite worryingly, as result of an confidence, which seems to resonate in many branches of the government, about the perceived viability of other sectors of the economy. Notably, the Atta Mills NDC-led government is convinced that it will net something from what has become a debacle with Vodafone, which now holds a 70% stake in Ghana Telecom. It is working to unravel what it claims was an unlawful deal forged between the previous NPP government and the company. Some allege the deal was consummated rapidly before the 2008 elections in order to compensate for finances siphoned by the previous regime.
But the biggest reason why the government is exuberating confidence is the belief that the country’s economic woes will be resolved in record time, courtesy of revenues brought in from oil. Oil could indeed change the face of Ghana forever – for the better – but it would require the implementation of a comprehensive policy recipe that hitherto has failed to materialize in sub-Saharan Africa. Thus, the government’s continued belief that offshore drilling, which is scheduled to commence in late-2010, will catapult Ghana’s economy along a new development trajectory entirely is one concern. A more significant concern relates to what appears to be a belief that revenues from oil will be an instant cure-all – or, more specifically, the projection of this message on to an expectant public. The overhyping of oil discoveries in the local media has created great expectations in Ghana. Every one of its citizens will be paying close attention to how the current government manages oil revenues in the months to come. This could be serious because it has already created the impression that the economic benefits will be instantaneous.
NGOs and community groups, therefore, should view the adjusting of mineral royalties with some trepidation. Whilst ten years ago, such a move could have set an important precedent in sub-Saharan Africa, doing so today could prove fatal for the Ghanaian economy.
