Inconsistencies in mining strategy show lack of seriousness

On Tuesday, 27th March, 2018 the Minister of Lands and Natural Resources, Hon. John Peter Amewu, expressed outrage over a decision by Anglogold Ashanti (AGA) to shortlist two foreign firms for mining contracts just hours before hosting an event to coach local suppliers on how to win those same contracts. The outburst of the Minister was commendable and indeed attracted a lot of positive reaction from many people as it demonstrated the determination of the government in promoting Ghanaian businesses generally but specifically in the mining sector.

 

Unfortunately, developments in the mining sector over the past year show policy inconsistencies and question the government’s determination and seriousness in protecting the interest of Ghanaians as far as mining is concerned.

Barely two weeks prior to the Minister’s fury over the conduct of AGA, the government submitted new Tax Concession Agreement (TCA) and Development Agreement (DA) with the same AGA to Parliament for approval. It is understood that the new TCA and DA are needed by AGA to enable it re-open its Obuasi Mine which was suddenly put on care and maintenance a few years ago to the detriment of Ghanaians (especially permanent and casual workers as well as contractors whose livelihoods and those of their families depended on the mine).

Already, there are questions to be answered by AGA over its conduct under the old stability agreement where it shortchanged the country in broad daylight without any opprobrium from the government. One of several instances of deception and short change by AGA under the previous agreement was the contractual obligation on the part of AGA to establish a fund to develop mining-affected communities. AGA basically slept on this obligation until its stability agreement came up for renegotiation several years down the line!

Going through the new TCA and DA it is difficult to see any justification for the quantum of tax concessions that the government has offered AGA and seeking parliamentary approval beyond occasional references to its necessity to the re-opening of the Obuasi Mine. What informed the offer of US$177 million in customs import exemptions as well as other tax concessions? And come to think of it, it is the same AGA that the Minister of Lands and Natural Resources publicly castigated for its dishonesty.

Another area where the government has shown inconsistencies in its conduct in the mining sector regards efforts to protect the environment (especially water bodies) as far as mining is concerned. Soon after coming into office and following widespread unregulated and illegal mining activities (most of them small-scale mining), the government instituted a blanket ban on all small-scale mining activities with the main aim of protecting the environment (especially water bodies).

Though commendable, the failure of the government to separate a good number of decent small-scale miners with licenses and permits operating in accordance with applicable laws from those whose activities were not sanctioned by the law meant that some decent Ghanaian mining companies going against the odd to become like AGAs and Newmonts of this world and effectively challenge the status quo were put on the path of destruction (along financial institutions that exposed themselves to mining activities). Also destroyed were several thousands of jobs and livelihoods in rural communities where jobs are difficult to find.

This is in spite of the government’s own policy to support small-scale mining companies in lieu of the small-scale mining sector’s immense contributions in the areas of income generation, foreign exchange earnings, linkages to other sectors of the economy and job creation (in an economy where jobs are increasingly hard to come by).

Whiles the government’s efforts to protect the environment and water bodies are commendable, destroying decent and licensed Ghanaian mining companies operating in accordance with the law (and therefore not responsible for environmental degradation) sharply contradicts recent posturing of the government to be protecting the interest of Ghanaians in the mining sector. Not to even talk about the abuses associated with the activities of Operation Vanguard.

In a related development which also sharply contradicts the government’s acclaimed pursuit of environmental protection, the government has advanced plans to mine bauxite at the Atiwa ridge (the tributaries of major rivers in the country such as Ayensu, Densu and Birim). Experts have warned against such mining on grounds that it will directly and significantly affect major water bodies in the country. Some have even indicated that such a move by the government will lead to the ultimate destruction of affected water bodies. Question is, is it OK to destroy the sources of major rivers in the country simply because the activities leading to such destruction were initiated by the government?

The last issue which directly shows lack of seriousness on the part of the government borders on efforts to implement yet another layer of “audit to pluck leakages” in the mining sector. Two months ago, the Minister of Lands and Natural Resources had this to say during an encounter with the media:

“As government, we have been shortchanged for a long time in the history of a             country that is involved in mining….”“As a government, we feel strongly that our                 royalties, taxes and rents have not been properly recorded and accounted for, so we are going to do an audit of all companies that engage in mining to be able to determine the real        picture on the ground to be able to reverse this ugly trend,” [Hon. John Peter   Amewu, Minister for Lands and Natural Resources, Ghana, 02 February 2018; www.graphic.com.gh and www.citifmonline.com]

Elsewhere in Tanzania when the authorities wanted to prove the guilt of mining companies in shortchanging host countries, the government did not go to the media to announce plans for yet another mining sector-wide audit. Instead, a brief export ban was imposed which allowed the government to double check gold concentrates that had been prepared for export to verify if the records on those same concentrates were true.

The outcome of this was stunning! It was found that on average gold concentrates contained ten times more gold than was routinely declared and recorded to form the basis for payment of various taxes! Consequently, Acacia (majority owned by Canada-based Barrick Gold) was accused of under-declaring revenues and tax payments over a number of years running into billions of US dollars! Though the company has reservations about the findings it agreed to pay US$300million upfront to the Government of Tanzania so that both sides would look further into the findings.

Earlier, a government tribunal in Tanzania looked into the books of Acacia and found the company to be guilty of tax evasion to the tune of over US$40million. Straight away, the company was asked to pay the money to the government. In Ghana, when similar findings were made and reported in the 2012 budget statement (to the effect that the country loses about US$36million a year through transfer pricing in the mining sector) nothing was done!

 

Article: Alhassan ATTA-QUAYSON

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