Assessing governance and investment in Ghana’s mining sector

By Maame Esi Eshun, ACET

Performance across Ghana’s mineral value chain is strong and policies and laws governing the sector are satisfactory, but improvement is still needed in the negotiation of mining contracts, while environmental laws are not being adequately enforced and land access policies need to be more inclusive of communities affected by mining.

These are the findings of research on the effectiveness of governance and investment in Ghana’s mining sector conducted by the African Center for Economic Transformation (ACET) on behalf of Adam Smith International.

The research, begun in 2015 and concluded late last year, was conducted within the framework of the Mining Investment and Governance Assessment Review (MInGov), a tool being developed by the World Bank, which funded the research, to help strengthen the mining sector’s governance, investment environment and development impact. The tool is used to collect and share information on mining sector governance, its attractiveness to investors, and how it contributes to national development.

The results were reported at a Ghana MInGov validation workshop, held on 16th February 2017 at the Alisa Hotel, Accra. The closed-door meeting with relevant government officials was led by ACET’s Director of Research, Dr. Joe Amoako-Tuffour. The objective of the meeting was to validate data collected as part of MInGov and discuss options for the eventual “soft” or “hard” launch of MInGov Ghana.

MInGov identifies the status and challenges facing mining governance and investment across seven themes and the extractive industry value chain. Three of these themes are assessed across five stages of the value chain—Contracts, Licences and Exploration; Operations; Taxation and State Participation; Revenue Distribution and Management; and Local Impact.

The review is based on data from primary and secondary sources and in-country interviews. It assesses sector performance from the perspective of three stakeholder groups – government, investors in the mining value chain and civil society – and identifies gaps between declared and actual government policy and practice.

The review’s key findings:

  • Performance across the minerals value chain is strong. The management of the licensing and permitting process, operational phases of exploration and mining, and revenue collection have improved significantly in recent years. Some gaps, mostly regarding the use of paper-based applications and a lack of sector transparency especially with regard to the negotiation of Development/Investment and Stability Agreements and the publication or public disclosure of these agreements.
  • Ghana’s mining policy and laws have kept pace with the review of mining codes that has occurred throughout Africa over the last three decades. Therefore the policies and laws that presently govern the minerals sector in Ghana are quite satisfactory. However, Ghana still requires significant reforms with regard to the negotiation of mining contracts, the impact of mining in host communities, the use of mineral revenues, value addition, linkages with the rest of the economy and addressing the challenges of ASM if the sector is to grow sustainably.
  • The country’s environmental laws, with regards to mining, are not being effectively enforced. The enforcement of the country‘s environmental legal and regulatory framework is constrained by an acute lack of capacity. Unless this challenge is addressed, a significant expansion of the minerals sector would result in an increased risk of environmental degradation and a potential increase in social conflicts. There is almost no enforcement of environment and health and safety laws in the area of ASM.
  • Land access, including resettlement and compensation, requires a more inclusive process particularly with regards to communities impacted by mining operations. The legal regime does recognise the principle of compensation when the landowner or lawful occupier’s rights are acknowledged for the purposes of mineral development. The owner must be compensated for any loss or damages that may be caused by the holder of the mineral right. Essentially, this serves to redress in financial terms the economic impacts of a lost opportunity caused by mining, which may occur through deprivation of use, or damages to property and crops, for example. One central issue is that the compensation that the holders of mineral rights have been paying over the years has ignored the nature of the land tenure system and the rights of various communities.

Some possible areas for action are identified in the review. A survey of priorities for stakeholder groups identifies the following areas to improve governance:

  • Create a stable fiscal framework for mining so that even when changes occur, it is predictable. This is particularly important for a country like Ghana, which has a very long history of mining.
  • Although, the new mining law requires that mineral mining contracts are ratified by Parliament, it is critical that these contracts are published on the website of the Minerals Commission.
  • Although most mining companies do carry out community development initiatives, it is important for these initiatives to be anchored in law. Consequently, community development agreements should be made compulsory and regulations developed to guide their use.
  • Develop a local content strategy for the mining sector. This should have participation by the industry and ensure that industry needs are met as well as government localization objectives.
  • Provide and deepen the support to ASM operations especially in the area of land access, health and safety, marketing of minerals, equipment and finance.
  • Develop an integrated approach to land use management that balances the competing interests of the various stakeholders and addresses the issues and conflicts pertaining to land access and mining, especially with regard to ASM.
  • Abolish or discourage the use of stability agreements or, alternatively, develop a framework or procedures and condi­tions that will govern the granting of stability agreements in the mining sector in a manner that maximizes the flow of economic and social value to the country on a sustainable basis.
  • Develop a model agreement to be used as a basis for mineral agreements to ensure that they significantly support Ghana’s economic growth and development, in terms of providing better financial returns, more social investment, critical infrastructure and greater transparency in mining operations.

 

 

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