Friday 19 December 2014

Let’s Tax Small-Scale Miners in Ghana…

There are a couple of things that are happening in Ghana right now – or at least appear to be happening – that have caught my attention. The first is the insistence of the government that small-scale miners be taxed. The second is the decision of AngloGold Ashanti, long one of the country’s chief operators, to release a 200 km2 section of its concession for subsequent re-demarcation, through the government, to licensed small-scale miners. Let me reflect on why we should view these announcements with some trepidation.

These are curious decisions to say the least for a country that has never really made much of an effort, beyond the rhetoric, implementing a licensing framework and launching the occasional support intervention, to formalize and assist small-scale mining. Prospective licensees have struggled to secure viable plots and make the costly payments needed to obtain the requisite permits in a country where most land is now in the hands of foreign multinational mining and mineral exploration companies. Rather than proactively prospecting and ‘blocking out’ suitable areas for (licensed) small-scale mining, the government has, for much of the past decade, elected to wait for prospecting large-scale prospecting licenses to expire before putting aside lands for this purpose. Moreover, as opposed to working closely with small-scale miners and helping them legalize their activities, the government – rather strangely – continues to do things such as assemble an Inter-Ministerial Taskforce Against Illegal Mining. Such moves suggest policymakers are completely oblivious to the fact that it is the very laws and frameworks which they have implemented and continue to endorse that have been responsible for fuelling the growth of informal small-scale mining activity in the country.
Why, then, should even the biggest sceptics be excited about the announcement to tax small-scale mining in Ghana? Largely because of everything that must be done before the government can be in a realistic position to do so, universally. At present, Ghana’s policymakers have little idea about where many miners operate and why, and possess minimal knowledge about the dynamics of the burgeoning and comprehensive informal networks these operators are a part of and ultimately nourish. To be in a position to send the tax man around to small-scale mines, therefore, would require the government to first do the following: 1) making available adequate land resources, a necessary first step for licensing; 2) kick-starting financial services for legalized operators; and 3) simplifying the registration process, decreasing the costs of licensing and helping to lift operators out of the informal economy. These announcements are a bit puzzling because these are changes that Ghana’s small-scale miners have been demanding for years. So why the sudden change of heart?

The policymakers I have interviewed over the years have consistently argued that any move to tax the country’s small-scale miners would be futile and met with resistance. This view, however, is simply baseless and, on the whole, ridiculous. A more significant question at this point, given the unsustainable development trajectory the industry now finds itself on, is: why wouldn’t a Ghanaian small-scale miner want to be taxed? Apart from benefitting from the above changes, these miners would – at least in theory – be able to hold their government more accountable. The argument that constantly surfaces in the resource curse literature is that taxation, being the foundation of accountability between the state and its citizens, has the potential to bolster the legitimacy of governments, stimulate institution-building and enhance democracy. Small-scale miners, therefore, would welcome being taxed if it enabled them to wield greater influence in Accra, and could explain why so many are demanding that the government make the move. We have already seen, in countries such as Guyana, how powerful and influential small-scale miners who are taxed and in regular contact with government can become.

But how does the government intend to proceed here? The country still lacks a mining policy, which would at least provide some reassurance as to where the policymakers intend to go with this. We must, therefore, still be wary. After all, this is a government that continues to be overwhelming pro large-scale mining; has a Minerals Commission which, despite experiencing a managerial overhaul in recent months, is still – in the words of one outgoing Minister I recently interviewed – largely dominated by a ‘treetop management’ that continues to cling to archaic ideas; and which has never gone out of its way to support ASM. So why the sudden change in attitude towards the sector? The obvious answer links to what is going on in the country’s large-scale mining industry: due to the recent decline in the gold price, companies have scaled down on exploration and, in the case of Obuasi, suspended production. A decrease in gold output obviously means less revenue in the form of taxes and royalties for government. Of course, Ghana would not have been in this situation had stabilization agreements not been signed with Newmont and AngloGold Ashanti in the early-2000s, when the gold price was a fraction of what it is today. Desperate to benefit from the recent windfall, the government did increase the royalty from 3 to 5%, in 2010, a move which seems to have alienated the few ‘unprotected’ companies operating in the country, notably Gold Fields, Kinross and Golden Star Resources. The only logical explanation behind any government’s decision to redistribute lands to small-scale miners, whether in at Obuasi or elsewhere, would be to compensate for lost revenue. With AngloGold Ashanti apparently suspending operations for at least two years, policymakers may be desperate enough to recoup some financial compensation from the idle site, even if it means formalizing resident ASM operators whose pleas for land, licenses and governmental assistance, we must not forget, predate Sam Jonah’s running of the company.

Thus, on the one hand, for Ghana, a move – even a suggestion – to tax small-scale mining, regardless of the motivation, must be considered progress. And, if the government is, indeed, serious about implementing this across the board, the changes that must be made for it to become a reality would mean many exciting times ahead for hitherto marginalized unlicensed small-scale operators. On the other hand, in a country without a mining policy, which recently assembled a taskforce to ‘eliminate’ all unlicensed activity and where there has been no interest shown, for the better part of 20 years, in devising innovative solutions to formalize artisanal and small-scale activities, any move to tax is likely a temporary fix. Officials at the Commission have already indicated that some small-scale miners ‘are in possession of heavy machinery’ and therefore ‘should be taxed’, which suggests that any move to collect revenue will not be a country-wide effort aimed at formalizing activities but rather selected taxation efforts. Will the government simply target the handful of licensees currently in operation for ‘quick cash’, and continue condemning those individuals who, for very legitimate reasons, remain in the informal economy?

Let us see how the Obuasi deal unfolds – if at all – and what comes from it. Maybe 40 years and ten large-scale mining operations too late, the Government of Ghana has finally recognized the importance of artisanal and small-scale activities.

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