GHEITI calls for clarity on mining development agreements

BY: Emmanuel Bruce
Dr Steve Manteaw — Co-Chair, GHEITI
Dr Steve Manteaw — Co-Chair, GHEITI

The Ghana Extractive Industries Transparency Initiative (GHETI) is calling for clarity on the criteria used in determining mining companies that qualify for development or stability agreements in the country.

The recommendation, which was contained in its recently launched 2016 report on the mining sector, is to ensure transparency and equity in the sector.

Development agreements are to ensure that the holder of the mining lease will not for a period not exceeding 15 years from the date of the agreement be adversely affected by a new enactment or subsequent changes to the level and payment of taxes, royalties, fees and other fiscals terms and laws relating to exchange control, transfer of capital and dividend remittance.

Currently, mining companies without development agreements pay royalty at a rate of five per cent while those with development agreements pay at a rate of three per cent.

The Minerals and Mining Law (ACT 703) section 49 states that the Minister on the advice of the Minerals Commission may enter into a development agreement under a mining lease with a person where the proposed investment by the person will exceed US$500 million.

In an interview with the GRAPHIC BUSINESS after the launch of the report, the Co Chair of GHEITI, Dr Steve Manteaw, said although the Mineral and Mining Law (ACT 703) allowed mining companies that were making investments of US$500 million and above to enter a development agreement with the country, “the law does not state when this investment had to be made.”

“We are asking for clarity on the time when the required investments have to be made,” he stated.

“The law requires that to qualify for a development agreement, a company should invest up to US$500 million in its operations but it is not clear whether the investment has to be made at the point it declares its intention or the money had to be invested over a period of time,” he explained.

He said there must also be measures to ensure that the US$500 million was actually invested.

Mineral royalty rate

The report also recommended that the Minerals Commission should consider differentiating the royalty rate paid by mining companies to meet international standards.

Currently, bulk mineral producers that need minimal processing before shipment and those engaged in gold production that undergoes relatively more processing all pay the same rate of five per cent for those without development agreements and three per cent for those with development agreements.

Public disclosure

To ensure transparency in the sector, the report recommended that the Multi Stakeholder Group should engage the Ministry of Mines and Natural resources on the issue of public disclosure of contracts on the ministry’s or GHEITI’s website.

Currently, it said the ministry, as a policy, did not publicly disclose executed contracts, which is not a good practice.

Transparent and prudent management

At the launch of the project, a Deputy Minister of Finance, Mr Kwaku Kwarteng, said given the strategic importance of natural resources, especially oil and gas, there was the need for more transparent and prudent management of revenues from those sectors.

He said it was also necessary to ensure that the country’s natural resources revenue data were widely available to empower the public to hold both companies and the government accountable.

“The government will continue to work assiduously to ensure that revenues from our extractive resources are prudently managed and utilised for the benefit of our people, especially those immediately and negatively impacted by the activities of the sector,” he said.

He said it would not only ensure that the allocation of revenues best promoted sustainable development but also that the processes and activities for the extraction of natural resources were fully integrated into community development planning.

That, he said, would help maximise the contribution of the sector in improving sustainable livelihoods in the communities.As part of the EITI standard adopted in Peru at the 2016 Global conference, Ghana is required to establish a beneficial ownership register and start reporting by January 2020.

The deputy minister said the Ministry of Justice and the Registrar General’s Department were working together with other key stakeholders, including GHEITI, towards the establishment of the beneficial ownership.

He said they were amending the Companies Law of 1963 (Act 179) to include provisions on beneficial ownership, as well as a new Companies Bill which had been approved by the Cabinet and currently with the Constitutional, Legal and Parliamentary Affairs Committee for discussion.

“The lack of a beneficial ownership disclosure regime in the country can lead to information gaps that allow financial corruption, transnational crime and tax evasion to flourish,” he stated.

“The establishment of beneficial ownership register in the country will, therefore, reveal the ‘flesh and blood’ owner of corporate entities and may reduce the potential for companies to engage in any illegal activities,” he added. — GB