Mining Companies Shun Ghana For Neighbouring Countries

Ken Ofori-Atta, Finance Minister with the Vice President, Mahamudu Bawumia

Accra, Ghana, October 12, 2019//-Mining companies are shunning Ghana for its neighbouring West African countries due to the obnoxious 12.5 percent Value Added Tax (VAT) and other multiple taxes imposed on them by the Ghanaian government.

 The Director of External Relations and Communications of the Ghana Chamber of Mines, Ahmed Nantogmah who disclosed this at Newmont Gold Akyem Mine in the Eastern Region, did not mention the names of the companies but the numbers are a lot.

He continued: “In Ghana, VAT is payable on exploration expenditure and it cannot be recovered by the exploration companies unless they make a commercial find and commence production.

This implies that where exploration is unsuccessful, VAT would not be recoverable. Effectively, the extent of actual exploration activity is diminished by upfront costs such as VAT on inputs.

Thus, relieving the usually illiquid exploration companies from the payment of VAT would not only improve their cash flow and reduce their operational costs but also enhance the country’s image as a competitive destination for exploration investment. In the long-run, this will guarantee continuous mineral production and flow of fiscal and forex receipts as well as other benefits from the minerals sector.

Declining exploration investment

He added that; “exploration investment in Ghana has declined significantly in recent years. This is alarming for a country to which mining is critical for forex and fiscal revenue generation”.

It is also worth noting that the preponderant share of exploration licenses issued by the Ministry of Lands and Natural Resources is held by Ghanaians who are usually constrained in raising capital to finance the high-risk business of exploration.

Why exploration is important

The relevance of exploration in ensuring a pipeline of future viable projects cannot be over-emphasized. It is the single most critical activity that guarantees continuous production of mineral and discovery of new mineral resources to supplement production from existing mines or replace output of mines whose economic ore body is exhausted, Mr Nantogmah stressed.

Given that Ghanaians hold a large share of exploration mineral rights, they stand to benefit if the hurdles of exploration in terms of upfront costs are reduced to facilitate effective exploration and consequent commercial finds, according to him.

Put in place an incentive scheme

In other words, it is crucial to put in place an incentive scheme that will reduce the cost associated with exploration and therefore attract the required critical investments into this high risk business of mineral exploration.

Call for exemptions

As a first step, the mining companies requested the government to exempt exploration companies from payment of VAT on big ticket cost items such as Drilling and Laboratory Services.

Sweeping reforms

Ghana’s West African neighbours are threatening to end the country’s decades of gold mining industry dominance following the introduction of several sweeping reforms in their various countries.

According to the industry experts, these reforms are yielding positive results at the time the world’s largest producers of gold-South Africa and Ghana are catching cold in the more than two years dip in production volumes of gold and its prices on the international market.

 Burkina Faso, Cote D’Ivoire, and Senegal often described as newcomers in gold mining are poised to dethrone Ghana from the number one position in the ECOWAS region.

Unlike Ghana, reforms in the mineral code of Burkina Faso have positioned the country as a significant site for exploration in Africa.

Similarly, Cote D’Ivoire revised mining code has been hailed as the “game changer” on the African continent. That Ghana’s western neighbour has overtaken it in terms of green field projects, according to experts.

Senegal is also actively encouraging investments into mining sector. Another area, the three neighbouring countries are leveraging on to take over the gold mining sector is taxation.

Experts say taxes in these countries are less as against Ghana which taxes all the processes of mining.

This single act serves as a disincentive to investors which usually seek to invest in countries with flexible investment climate.

Furthermore, although there are incentives for exploration companies in Burkina Faso, Cote D’Ivoire, and Senegal, these incentives are absence in Ghana.

Gold production

 Comparing Ghana’s gold production last year to its peers, gold output from Ghana increased from 130.7 tonnes in 2017 to 136.2 tonnes in 2018, a lift of 4.6 per cent.

Other countries that recorded significant growth in production include Mali (from 50.4 tonnes in 2017 to 61.2 tonnes in 2018), Senegal (12.3 tonnes in 2017 to 17.5 tonnes in 2018), Burkina Faso (52.6 tonnes in 2017 to 58.4 tonnes in 2018) and Cote D’Ivoire (36.7 tonnes in 2017 to 40.9 tonnes in 2018), according to the 2018 Ghana Chamber of Mine annual report.

As a result of the general improvement in the 8 output of most countries, total gold production from Africa increased by 1.6 per cent to 825.9 tonnes in 2018. However, its share in global gold production was fairly constant at 23.6 per cent in 2018.

In spite of all these positive developments taking place in the neighbouring countries, it appears that the Ghanaian government does not care to lose its mining supremacy.

By Masahudu Ankiilu Kunateh,African Eye Report

 

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