Mining contributes more to national kitty
The story of mining can sometimes be told in distorted forms; emotionally hyped narratives of environmental harm and pollution; local people protesting activities of mining companies and sometimes overly exaggerated media coverage.
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There are also contradictions of a heavily taxed mining industry still considered as a gluttonous fat cow, yet considered by some as a sinister ‘tax evader’.
Mining continues to be the number one contributor to the Ghana Revenue Authority. In 2014, 34 per cent of Gross Export Revenue the country accrued was from mining. Additionally, mining is a major source of forex for the country.
In the mining sector, erroneous perceptions of a fat cow getting fatter eat up mining companies even more, and the African Centre for Energy Policy (ACEP) has just added to the perception by drawing conclusions based on the government’s returns from mining revenue realised from the sale of gold.
Again, an ACEP report contrasts growth in the mining sector against overall economic growth and suggests that the latter was expanding at a decelerated rate while the growth rate of the former was considerably high.
But the Ghana Chamber of Mines has refuted the claims by ACEP that Ghana’s economy is expanding at a decelerated rate while growth in the mining sector was recording a considerable high growth.
A careful analysis of the data published by the Ghana Statistical Service does not support such a conclusion.
Naturally, the reported sectoral growth rate will be a summation of the average rate of these sub-sectors. In order to ascertain the growth rate of the mining sector, it has to be isolated from quarrying and oil and gas.
Mining sector growth
Though it is difficult to determine the precise growth rate of the mining sector based on the data published by GSS, it could, however, be inferred statistically by simply subtracting the growth rate of the oil and gas sub-sector from the sectoral growth rate.
In this case, the GSS indicated that the former expanded by 18 per cent while the entire mining and quarrying sub-sector grew by 11.7 per cent.
Based on these figures, it is obvious that the mining sector contracted in 2013, which is in consonance with the position of the Ghana Chamber of Mines on the declining fortunes of the mining industry.
On the introduction of resource rent, the Chamber of Mines explained: “In principle, the Chamber is not opposed to the suggestion by ACEP that the government should introduce a resource rent tax to capture a share of excessive profits and introduce other exempted taxes without negatively affecting long-term mining investment.”
Rent tax regime
The Chief Executive of the Chamber of Mines, Mr Sulemana Koney, said the thrust of the chamber’s argument is that, “this so-called resource rent tax regime should accommodate the mood swings of the bullion market”.
This, he said, investors would not be made worse off during periods of downturn and, thereby guarantee the continuous operation of the mine as well as steady flow of revenue to the state to support its development activities.
As alluded to earlier, the recent past and, indeed, the current climate shows a contraction of the industry and a consideration of resource rent will not bode well for the country.
On the other hand, the Chamber fully supports ACEP’s proposition for a mining investment law to guide the collection, disbursement and utilisation of mineral revenue.
Furthermore, the report attempts to measure the unit revenue realised from the sale of gold by comparing the market price with the cost of production. While this is a proven and standard methodology, the data on cost cited by ACEP refers to “cash cost” instead of “all-in-cost” (AIC). Cash cost measures only the on-site cost incurred by a mine in producing an ounce of gold.
Sale of gold
This does not take into consideration other associated production costs such as exploration, development, depreciation, depletion, amortisation and closure and post closure. In view of its tendency to overestimate profits, the mining industry has shifted away from the use of “cash cost” as a measure of net revenue.
In tandem with this development, the Chamber regularly publishes data on the true cost of mining, which is AIC, in its annual report. In essence, the net revenue from the sale of an ounce of gold can only be established by juxtaposing the sale price with AIC.
As a founder member of the Extractive Industry Transparency (EITI), which is a pre-eminent transparency and accountability driven extractive industry initiative, the Chamber has relentlessly urged the government to promulgate a Mineral Revenue and Management Act.
This law will be analogous to the Petroleum Revenue and Management Act in promoting transparency and accountability in the mining sector. — GB
