Ghana was called the Gold Coast prior to independence because of its rich deposits of gold and other minerals. Till date those rich natural resources deposits in gold, bauxite and other minerals are present and in 2019, the World Bankreported that gold was included in Ghana’s top three main export commodities.
Mineral and mining activities in Ghana is not only beneficial to the nation but also to investors and stakeholders in the mining industry. The economic challenges faced globally due to the recent health pandemic has negatively impacted many sectors, However, while there are restructuring and plans for recovery for these challenges globally, price and production of gold and other minerals appear to be steadily climbing back to normal trends.
The Ghana Chamber of Minesreported that in 2019, mining and quarrying were products that attributed to the increased GDP for the country and that the shipment of manganese and Bauxite increased in 2019 due to operational improvement.
Investors can be assured that mining production and revenue in Ghana is on target to continue to provide revenue and profit for their investment. As the leading exporter of gold production in Africa (after overtaking South Africa in 2018), Ghana is expected to continue its dominance in Africa after the Ashanti Gold Obuasi mines bounced back in January 2020 after nearly two years of being non-operational. It is also worth noting the importance of small-scale mining, which is reserved for nationals as contributors to mineral production and revenue for Ghana’s mineral sector.
Legal and Fiscal Regime Contributions
In Ghana, the mining industry is regulated by the Ministry of Lands and Natural Resources. The implementation and administration of policies that govern the industry is the responsibility of the Minerals Commission.
For a foreign investor interested in conducting business in the Mining industry, they must first comply with the Ghana Investment Promotion Center,(GIPC) Act 2013 (Act 865), thereafter the main legislations are the Ghana Minerals and Mining Act 2006 (Act 703) as amended by Minerals and Mining Amendment Act (Act 900), and the Minerals and Mining Regulations LI 2167 (2012).
These legal frameworks provide great incentives to investors and additionally protects small-scale mining. These laws have provided investors with the stability that a country needs to attract investors, thus despite the challenges that other sectors have had to grapple with, the mining sector will continue to perform and have a positive impact on the GDP and economic growth.
With African countries relying heavily on their natural resources for economic development, an attractive fiscal regime is key for foreign investment.
Equatorial Guinea, one of the top oil-producing countries in Africa, has recently granted mining concessions to foreign companies to begin the prospection and exploration of minerals following the country’s successful first mining bidding round held last year. It’s a legal framework, the Mining Law of Equatorial Guinea (2006) and recently published a new regulatory framework is focused on providing investors with the fiscal environment they seek before investing in a developing country.
Foreign Investors must ensure prudent procedure and due process is adhered to when making the choice to invest in Africa, for example in Ghana Article 268(1) of the 1992 Constitution requires that Parliament must ratify any mining lease granted to a mining company. Ghana’s Supreme Court in the case of Republic v High Court, Accra Ex parte Exton Cubic Group Ltd J5/40/2018 (unreported), recently affirmed this, thus resulting in a purported mining lease to Exton Cubic being declared invalid.
To the extent that mining has resultant environment considerations, a holder of a license or lease before undertaking any mining activity must additionally obtain the necessary permits and approvals from the Forestry Commission, the Environmental Protection Agency (which ensures environmental health and safety standards are adhered to), and the Water Resources Commission.
Mining companies are subject to fiscal regimes such as corporate tax of 35%, capital gains tax of 15%, a withholding tax of 15% and a capital allowance of 20% for 5 years. The ground rents, property rates and mineral right fees are payable as prescribed by Regulations. Royalties of 3-6% of mining revenue obtained are also payable.
Mining Companies are given exemptions from paying customs duty, Value Added Tax (VAT) and National Health Insurance Levy (NHIL) on plant, machinery, equipment and accessories imported specifically and exclusively for the mineral operation. The staff of mining companies may be granted exemption from income tax payment if their furnished accommodation is provided at the mine site and expatriate employees may also be exempted from tax payable on money transferred outside Ghana.
In order to realize the full benefits from the mining sector, the Minerals Income Investment Fund (MIIF) Act, 2018 (Act 978) (the “Fund Act”) was passed. The Act was passed to hold and manage the mining company equity interests of the Republic, receive mineral royalty revenues due from mining operations, and provide for the management and investment of the assets of the MIIF.
In 2019, the Ghana Integrated Aluminium Development Corporation (GIADEC) was established. GIADEC commenced a three Round Investor engagement process aimed at identifying strategic investors for the three main sectors of the Aluminium industry namely, mining, refining, and smelting. This is to enhance private sector participation in the sub-sector and revamp the entire Aluminium value chain in the country.
Local Content is prevalent in the mining industry. Excluding foreign participation in small-scale mining provides great opportunities for indigenous Ghanaians and that has served as a guaranteed employment source in these critical times. Ghanaian companies are also given preference in the supply of goods and provide services to the mining companies.
Social Responsibility is a very important and critical role of Mining companies. Mining Companies must not only ensure compliance of all regulations, they must be involved in the responsibility of developing the communities they operate in and should participate in the funding of projects in their communities.
Ghana continues to play an important role in the global production of minerals and mining and one expects nothing less in 2020 despite the challenges from the pandemic. Investors can be assured of a robust and stable environment to operate.
(Managing Partner; G&G and Associates)
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