Connect to share and comment

Ghana weighs boosting tax on gold

New report urges government to increase its levy on gold mining.

Not surprisingly, the mining industry disagrees, reminding that Ghana wasn’t always Africa’s beacon of democracy and that the revenue from mining could be used to prop up military dictatorships.

Ghana's state-owned mines were on life support in the mid-1980s, as was the overall economy, following a string of coups d’etat after it won independence from Britain in 1957. The World Bank was the only willing lender but pushed for reforms, like privatization, to attract foreign money.

“At the time the 1986 laws were put in place, the country was in very dire circumstances,” said Joyce Aryee, chief executive of the Ghana Chamber of Mines. “Investment money goes where it feels comfortable.”

Investors became very comfortable in Ghana, pumping billions of dollars into exploration and extraction, resulting in a tenfold increase in gold production since the early 1980s. 

“I don’t think any nation thinks that they get enough revenue,” said Aryee, adding that in addition to taxes, mining companies spend hundreds of thousands of dollars each year on schools, health centers and roads in the mining communities.

Aryee said it’s the government’s prerogative to impose more taxes but argued “changing goalposts in the middle of the game is not going very good.”

But economist and investment consultant Kwame Pianim says the one-size-fits-all approach is unfair to Ghana, Africa’s second-largest gold producer behind South Africa. Ghana is much less of a risk than it once was, he said.

“New mining companies coming in … they should not have the same fiscal regime,” he said. “The new contracts that are coming in should be based on the fact that you adjust the risk. The risk profile has changed and therefore the fiscal regime should also change.”

Since 2000 almost 75 percent of foreign investment coming to Ghana has been in mining, according to a report last year by the International Food Policy Research Institute.

Pianim criticized mining companies for excluding themselves from the local communities, such as importing goods for their foreign workers. He said gold is refined outside Ghana, preventing the country from earning more revenue.

“We have for over 100 years failed to be able to build the gold mining industry into an integral part of the national economy," he said. "This is the biggest sadness of some of these mineral explorations.”

Editor's note: This dispatch was updated to include additional information.

More GlobalPost dispatches on Ghana:

Ghana's illicit trade in discarded electronics

Ghana shoots for sports diversity

Snow hits Ghana

 


View Larger Map

http://www.globalpost.com/dispatch/ghana/090430/ghanas-gold-rush