Integrate Mining Into Local Economy - Addo Kuffuor
5/5/2012 9:38:43 AM -
Kwame Addo Kufuor - Vice President for Corporate Affairs, Anglogold Ashanti Gold for years has been a very precious metal and store for value. This precious metal has equally been used to transform economies of some countries because the mining and processing of this metal has been fully integrated into the economies of such countries. However that is not the case for Ghana.
The Vice President for Corporate Affairs for AngloGold Ashanti, Mr Kwame Addo Kufuor, said for the metal and mining in general to have real value, the sector must be fully integrated into the local economy to enable the indigenous companies to fully benefit from the processes from the sector.
He said presently, all the proceeds that come to the government from mining is from taxes, ground rent and royalties among others which is not enough considering the potential the sector holds to transform the local economy.
In a brief interaction with the Graphic Business during an official tour of the Graphic Communications Group Limited in Accra, he consequently called for “capacity building of the local businesses to be able to provide some of the required materials and services needed by the industry players”.
His call comes in the wake of the concerns raised by the African Development Bank (AfDB) regarding how the benefits of the mining sector are eluding African countries.
The AfDB published in its working paper that Africa is not cashing in enough from its large gold resources, despite the spiraling price of the precious metal over recent years.
The paper, entitled ‘Gold Mining in Africa: Maximising Economic Returns for Countries’, points out that gold mining is a significant activity in at least 34 of the continent’s 54 countries.
Africa’s annual average gold production is 480 tonnes, or 20 per cent of the total average annual global output of 2,400 tonnes.
The price of gold has soared by more than five times since 2000. At more than US$1,600 an ounce, the spot price of gold is at an almost unprecedented high, surpassed only by the spike experienced in 1980.
However, African governments and the peoples of Africa are not benefitting as much as they could from this boom.
A key factor is unfair concession agreements, say the authors of the paper, which severely limit the gains from gold mining that remain in the producing countries. This particularly applies to the royalty rate stated in the agreements.
The authors point out: ‘Our analysis shows that royalties, as a share of production cost, are low in Africa.’
They also note that most gold mines in Africa are majority-owned by foreign multinational companies, so the main way that African countries benefit from gold production is through tax revenues. However, many mining companies have negotiated tax exemptions far above the provisions in the relevant mining code.
Not only does these mean governments are not receiving a fair share of gold revenues, it is holding back development in Africa.
In some cases, African governments have taken action to solve the problem, which is not always restricted to gold but applies to other mineral concessions.
The authors cite the example of Liberia. In 2006, the current Liberian government ordered a review of concession agreements signed in the country between 2003 and 2006. Of the 105 contracts reviewed, 36 were recommended for outright cancellation and 14 for renegotiation. Whether Liberia received a fair share was one of the key evaluation criteria for cancellation or renegotiation.
Prospects in Mining sector
Government in the 2012 Budget announced an increase in corporate tax on mining companies to 35 per cent from 25 per cent and a 10 per cent windfall tax on mining profits to be introduced.
The government has also set up a team to review and re-negotiate stability agreements it had entered into with some mining companies to ensure that the country derived maximum benefits from its resources
Data gathered by Supply Managers indicate that it could well be possible to increase mining sector spending on Ghanaian manufactured products in the long term by 66 per cent from around 120 million dollars per annum to 200 million dollars.
The multiplier effect of this growth on the Ghana economy would be many times the current increase in direct expenditure.
To make it a policy for the local; businesses to full participate in the mining sector, there is a local content bill being pushed to make it mandatory for the players in the industry to use local materials.
One of the major planks of Ghana's emerging official oil and gas policy is to achieve 90 per cent local content in the industry.
Mr Addo-Kuffuor was of the view that the local content policy was necessary but noted that there is the need for capacity building of the local companies to enable them to produce what the mining companies want from them according to international standards.
To him, the mining companies are all multinationals and procure their materials according to prescribed standards. Against this background, there is need for any supplier to ensure that quality and standard is not compromised in any way