The extraction of minerals, particularly gold, and the associated economic activities play a pivotal role in driving socioeconomic development. The mining sector holds significant importance in the Ghanaian economy, attracting more than half of all foreign direct investment (FDI) and generating over one-third of export revenues, making it the largest tax-paying sector in the country, according to the Mining Partnership for Development 2015 report. This sector contributes substantially to the gross domestic product (GDP) and provides both direct and indirect employment opportunities.
While Ghana has historically maintained a 10% carried interest in mining operations without comprehensive stabilization agreements, there is growing concern about the adequacy of this arrangement. Despite over a century of mining, the country’s returns are perceived as insufficient. A call is made for a holistic review of the industry’s existing fiscal regime and the effective application of royalty payments by mining companies.
In 2013, the government implemented substantial fiscal regime changes, including a corporate tax increase from 25% to 35% and a reduction in the capital allowance regime from 10 to 5 years, aligning it with the Oil and Gas sector. While these changes positively impacted government tax revenue in the short to medium term, there are concerns about their long-term effects on mining companies. Since 2013, Ghana has not witnessed new entries of mining investments, and existing operators have curtailed exploration activities, leading to job losses and reduced revenues from direct mining taxation.
Some operating mining firms in Ghana have trimmed their exploration budgets and slowed down expansion works, directly affecting production and tax revenue to the government. Reports suggest that a mining company in Nzema has sold its mine interest and shifted focus to expansion projects in neighboring Mali, Ivory Coast, and Burkina Faso due to the perceived high costs of mining in Ghana. Despite challenges such as fluctuations in gold prices, neighboring countries continue to attract mining investments.
There is a plea for the government to conduct a comprehensive review of the fiscal regime for the mining industry in collaboration with the Chamber of Mines and all stakeholders. This review is crucial to understanding the impact of the 2013 fiscal regime changes and ensuring a sustainable industry for the aspiring young graduates preparing to enter the mining sector.