A Critique Of The Royalty Fiscal Regime System

At last, some educated Ghanaians have woken up (a bit) and are questioning the rate of the colonially-imposed and inherited royalty agreements, that is, the fiscal regime, used to exploit our mineral resources. We of the FTOS-Gh PSA Campaign, first working under GIGS, now under the auspices of CNREM, which we founded ourselves, were, of course, the first to start this awakening when we challenged the royalty or concession fiscal regime proper the NPP under President Kufuor illegally used for the Jubilee Field, as the existing law, PNDCL 84 represented by the Model Agreement, clearly mandated a Production Sharing Agreement or Contract (PSA or PSC) fiscal regime. For that catastrophic failure, which handed the “cash-cow” Jubilee Field to KOSMOS, Tullow, etc., with 2% free share for his front Sabre Oil which he later sold to the S. Africans for over $520m, Ghanaians were literally sold down the river like his ancestors used to sell slaves to the whites. His pals of the E&OE Group got 3% free of charge to split too, for merely handing over GNPC acquired seismic data to KOSMOS to interpret. Almost all educated Ghanaians cannot tell how much the rest of Ghanaians got. The pity is they do not even care to know.

This write-up is to express my personal outrage, disdain, disgust, anger, contempt and utter rejection, all captured appropriately by the Scandinavian word, “avsky”, against the ignorance and consequent stupidity that STILL determine Ghana’s mineral laws. This is in keeping with the conclusion that ignorance (and its consequent stupidity) is the most pernicious cog in the vicious cycle of backwardness and underdevelopment, superseding all other cogs. Its twin, Superstition, was born after it, and is bedeviling us, but my focus is not on it here, too. Expressing avsky, of course, is the intermediate stage one reaches which took the form of the polemical treatises of the C19th and early C20th in the West, prior to higher stages like resort to demonstrations, violence like throwing Molotov cocktails and finally armed rebellion in the change process in polities when one is angry enough. More on this later, as how change is brought about in organisations or in political systems is a major topic on its own.

We are now in the 16th year of trying to knock some sense into the heads of the powers-that-be, Prof. George Ayittey's typical "coconut heads." They have elevated their ignorance and buffoonery to the level of virtue, as the NDC’s Buah recently displayed by reducing the royalty in the lithium agreement from 10 to 5%, with some extremely stupid MPs defending that. Luckily, the President responded to the public protests this time. He is being served very badly again by some of his appointees. He was deceived as to what PSA entails, hence his misleading answer when he met the VR House of Chiefs prior to the elections, and that is being charitable to him..

We had read all kinds of articles opposing the lithium agreement, but none has taken up the political economy [philosophy] ground why we must reject the existing royalty agreements format for our minerals. Pointing to other countries having higher rate is an empirical argument, as example to emulate, is good but that is not enough, as there is no examination of why they decided to change to higher rates. That failure is reflected in the genuflecting, arse-kissing attitude to the foreign transnationals that permeate the thinking of not only the politicians and the technocrats, but even those advocating for change, as in the article by Dr. Hene Kwapong, a fellow of the CDD-Ghana, a “comprador NGO,” according to Martin Amidu. I was not impressed one bit with his tagging the royalty at 18%!

He is partially right though that Ghana does not have in government employment the skilled and informed experts to deal with negotiation and other technical matters related to the extraction of the minerals. The GNPC, for instance, send staff around to be outrageously lying to the chiefs and their subjects that Ghana is getting very low benefits from the Jubilee Field because the government is not contributing a pesewa towards winning the oil. Such unconscionable and mentally stunted morons should not even be in employment at GNPC. The truth is, Ghana, indeed, have in the private sector, home and abroad, especially the latter, the expertise and knowledge. However, many at home have become heavily compromised and are silently ignorant, the most vicious form of ignorance. They have become the Collaborators maintaining the neo-colonial status quo (and galamsey), whether in the hard minerals sector like gold or the new sectors, oil and lithium. Dollars have been thrown on them “like confetti,” like Mr TKA Hammond glamorously put it. I am devoting an article to take on one such person, a well-known campus socialist, now a renegade quoting Bible verses at Ghanaians like the fugitive Ofori Atta. They have almost succeeded in turning the majority of Ghanaians into ignorant, unmitigated fools easily deceived by their lies.

Ghanaians are among the top international consultants and operators in the oil sector working out of Houston, Texas, etc. Mr Kwame Pianim, in e-mail exchanges intercepted by us, lamented that the failure of one such person to join them was a major cause of their undoing in the Jubilee Field case. I can reveal now the top international consultant was my Aku House junior at Mawuli School with a PhD in the field. We have been in contact since the Okyeame Forum days in the early 90s, so I have a different version of what transpired. He was outraged with what they intended to do despite all the advice he was giving; the same kind of thing that forced his friend Dr. Quaah to leave as GNPC CEO. Both of them support us without reservation against what I call creating the “moneybags approach” to challenge the Nigerian moneybags they adopted, as some advocated behind the scene. Is there anyone who does not know that that approach brought the current calamity upon Nigerians?

My own senior brother, Efo Solo, had worked as senior accountant with Texaco Head office in Accra and was teaching the subject of oil taxation at the polytechnic which is now LASU in Lagos before I completed Legon in 1980. He was the first head of the Accounts Department at LASU. He could not understand why the educated Ghanaian elite advising government could not understand, or pretend not to understand, the superiority of PSA to the royalty system after supplying them with tons of materials, including the book he wrote on the subject, which is in the libraries of first class academic institutions in the West. The excuse of "this is not my field of specialisation" some gave is hollow. He was teaching same thing to those things to Nigerians with only O’Levels. Dr Kwabena “Village Boy” Donkor needs to explain why an order was given to stop the distribution of the books I paid for to be distributed to the MPs on his watch.

Let me turn to my main intention of writing, that is, focus on the obnoxious royalty system a bit. I will not dwell on the shenanigans associated with it, such as failure to pay correct royalties and taxes due to numerous opportunities to cook the books, which are no jokes. It is a major issue on its own, based on how Tullow really screwed us up, leading to the dispute the current NDC regime too wants to sweep under the carpet.

Why should we even accept a rate of 18% in Nkrumah's Ghana when others, including Eritrea, are now taking 45% shares for their minerals without investing a penny? I think it is a pathetic capitulation and we should not adopt such a position at all. Let us completely reject such a mentality that we in Ghana deserve less than even other African countries. Dr Kwapong is equally a surrogate of the neo-colonial regime in place and is begging for a bit of what belongs to us in the first place.

This genuflecting, subservient mentality of Mr. Buah and the others is borne out of historical ignorance, political illiteracy and the consequent lack of understanding that the royalty system imposed on us by the colonialists is not the same as what they, the imperialists, have in their own countries. It was an exploitative regime set up after taking over the Obuasi Mines from the original Gold Coast investors who had even ordered machinery already to start the mine.

After the failure to seize and vest our land in the Queen of England, the British passed the Minerals Ordinance to surreptitiously transfer the allodial rights to our minerals to the Queen, thereby achieving partly what the Aborigines Rights Protection Society fought against. The minerals, therefore, under colonial law did not belong to us, and still does not belong to us once a royalty agreement is signed, unlike under the PSA or Service Agreement, which may not even require pathetic royalty payments. The royalty was thus originally fixed as a small compensation - ground rate - to placate the people and the chiefs supposed to hold the lands in custody for the people, while the British companies have full rights and ownership of the minerals rights transferred to them by the Queen. This is just like the ground rate they pay for where the castles and forts they built, covered by the coveted "Notes". The one who has the Notes gets paid, so the Asantes were getting the payments for the castles in Elmina and Accra until the C19th because they got the Notes from the Denkyeras in 1701 and the Akyems in 1763 respectively; the latter who also got the Accra Notes from the Gas in 1730 as payment for helping the Gas to defeat the Akwamus. That was the practice that was converted into the royalty system in Ghana, which was much different from the UK and the USA where the landowners pay that small amount to the state as tax.

In some other countries such as South Africa and Zimbabwe, the colonialists seized outright the lands and no royalties are paid to any chiefs for the minerals extracted or the farms on them. In Zimbabwe, they even seized their cattle, especially the special dwarf cows the Shonas bred with some bogus claim that the Jews bred them. They seized the lands in Kenya too without compensation or royalties to any Kikuyu chief as the rule.

As for the native Americas, we all know what happened to them. Don't we? They seized their lands, enslaved them and put them to work extracting the minerals or farming the sugarcane, and killed off an estimated 150 million of the natives. The natives who ended up on reservations in Canada and the US were the lucky ones. Whole tribes became extinct as in the Caribbean. No royalties to anyone. Bartolome des Casas, appalled at their suffering, campaigned to have Africans replaced them as the workers, and the rest is history we the scions of the protagonists are very reticent to talk about. And, their scholars said it is because Africans do not have memory. Hmm….

Even the Americans seized Texas from the Mexicans before the robber baron cowboys seized it from fellow Americans who got shares of the seized lands, prior to the oil barons stepping in. It was might is right and winner takes all. The French applied the same principle, albeit more brazenly with the Colonial Tax imposed after the flag independence of their colonies in Africa, an emulation of what the West conspired to help them impose on the Haitians, ensuring the eternal poverty of Haiti. They now take 50% of proceeds though, instead of the initial 85%, so that is a far better deal than we are getting but we are aware of how the AES states have revolted against even that. We should therefore not be still happy to receive 5% compensation from the transnational because their ancestors defeated our ancestors and did not kill them off and seized our lands. A BIG NO! The nationalists led by Nkrumah fought back and regained our political independence and we must continue the fight to regain our more important economic independence all the nationalists knew we must get too. Nkrumah said "seek ye first the political kingdom...," and was heavily criticised by J.B. Danquah as a sell-out in the 50s. Gross ignorance of the social and political elite about our history is making them to adopt intellectually bankrupt and subservient economic positions. Nkrumah was assiduously working towards our economic independence when he was overthrown by the traitors with the help of the neo-colonialists. Declassified files 1000s of Ghanaians had seen named names and showed how they undermined and overthrew the CPP regime of Nkrumah.

The royalty in the West is imposed by the state on the landowners as a tax for extracting minerals by the landowners, that's, a contribution to national responsibilities of the state. It was therefore low and the landowners keep the bulk of the revenue even after capital tax of say 25 to 40%. After all, they control the state apparatus, so it is a contribution to further their own common interests; the state, as Marx succinctly put it, being just a committee for organising the affairs of the whole bourgeoisie.

Sure, we all know what they still do to indigenous peoples and activists in Latin America and even Africa who fight for their lands and minerals rights, so many are scared, including ourselves. The brazen, unfolding events in Venezuela or threats to seize Greenland, even Canada, are being condemned by many. They are just dying pangs of imperialism under the control of Pax Americana.

I often wonder why we should expose ourselves to danger fighting for something we might not even enjoy directly ever. But, it is time to reject that fear, as others had done in their countries and even took up arms to fight the imperialists and their local Collaborators, and boldly demand a fair share as determined elsewhere, even in Africa. That fair share is determined by even their own analyses of what is determined as fair returns or yield on capital, and interest rates. It is not rocket science. Their Monopoly Commissions and utilities control boards have churned out tons of materials on that.

As an undergraduate student in Legon, I read a quotation of Marx attributed to a British sociologist as to how capital responds to various levels of yield up to 25%. At that yield, capital is said to be ready to kill or die trying to get that profit. Even venomous snakes, mosquito and cannibal infested jungles did not deter them. Venture capital, in particular, does not fear anything. They sold arms to the S. Sudanese rebels on credit because they knew they were sitting on billions of oil deposits. I heard it from Dr. John Garang's own mouth in the 90s, before his tragic death in the helicopter crash. And some sit there in Ghana claiming they are giving good terms in order to attract investment and "de-risk," de-risk what, which Sudan, Eritea or Chad does not have? After all, how much do their investors on their stock markets make? We therefore know any returns of 25% upwards is a bonanza. That is why Norwegians tax up to 73% on their oil and Malaysians have 83% PSA share but they do not lack investors. Case closed.

In view of the foregoing, we should at least ask why Nkrumah's Ghana should not at least aspire to get the 45% Eritrea is getting now for all its hard minerals without investing a penny? Any position less than that, in my opinion, is a pathetic acceptance that we do not deserve even equality with Eritreans. We should be told why by President Mahama and his appointees. Opps! Add the renegade who is now a moneybag dollar multimillionaire to help them.

Let us uplift ourselves and think bigger, please, as Ghanaians. We were in a decisive year when Pax Americana shall take a bigger stumble despite all the gunboat diplomacy and sabre rattling and threats of war against the Russians and Chinese and now Venezuelans. Africans must take advantage and advance their economic emancipation instead of continuing to be bootlickers and Collaborators of neo-colonialism.

That is the theme of the political economy philosophy some of us are working with.

Forward with the economic liberation of Africans from the claws of the neo-colonialists and their African Collaborators!

ANDY C.Y. KWAWUKUME
cyandyk@ymail.com

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