2018 Budget: Chamber of Mines Confident Despite Gov’t Refusal to Abolish 17.5% VAT

The eagerness with which mining companies in Ghana were seeking to embrace the 2018 budget plummeted despite assurances by government to remove the 17.5percent VAT levy on mining exploration and goods but the Ghana Chamber of Mines is confident.

The Chamber in an interaction with Journalist for Business Advocacy’s (JBA) in Accra at M Plaza Hotel few months ago under the theme, “Deepening the Integration of the Mining Industry into the Non-mineral Economy” was optimistic government was going to remove VAT charges on expenditure items such as drilling and laboratory services in the 2018 budget to reduce the cost of doing business in the country.

The Chamber has also indicated its constant engagement with the policy makers on the impact of those taxes and stating how those taxes are crowding out businesses and reducing investor confidence in the mining industry.

On the sidelines of an event to launch the local content portal for the Chamber, the Chief Executive Officer of the Ghana Chamber of Mines, Sulemanu Koney says although they had all the assurances from government pin down the VAT he is still optimistic government will consider their proposal in the next budget presentation.

Mr. Koney was fast to downplay the suggestion whether that act of government and perhaps the Finance Minister should be described as a clear swerve, indicating that that policy decision was merely the case of government priorities.

“Our expectations unfortunately have not reflected and probably in the priorities of government they may decide that probably not this year but like I said we will not relent. If mining does not take place how can we develop our local manufacturers? Mining can only take place when you have buoyant exploration and identifying new opportunities for business to grow otherwise there is no point in mining,” he stated. According to him, that decision by government should and cannot deter them from engaging the right policy makers to provide relief to the industry for business to grow and survive.

“We have not been neglected but rather a question of priorities and government probably thought at this time wanted to look at other areas but don’t also forget they mentioned something about power for the mining industry,” the Chief Executive Officer stated. “The challenge is on us and we need to go back and make sure that government really understand the issues because this not self-servicing but a national agenda.”

He added that one critical issue about the industry is availability of power and government has demonstrated its efforts to making power available and cost competitive.

“Most of the companies belong to the unregulated market and they have bilateral agreement with suppliers such as VRA which is outside the spheres of the PURC the regulated market. The announcement was related to PURC and so probably it is a good tangential to the mining industry although we have a few of them belonging to that category but because they have a bilateral relations. What we would expect is that companies will have deeper conversations with VRA regarding the statement and whether some of the benefits which have actually been announced will be extended to the mining companies through their relationship with VRA,” Mr. Koney intimated.

The President of the Ghana Chamber of Mines, Mr. Kwame Addo-Kufuor emphasized that references were made to the local content in the 2018 budget which brings to the point the creation of the local content online portal by the Chamber.

According to him, exploration which is the pillar of growth for the mining sector usually results in new finds and therefore it is important that VAT on inputs for exploration which is not deductible should not become a cost to operators.

“We are still engaging government and going forward we are sure of something good in that direction. We have engaged the Ministry of Finance on the benefits of excluding VAT on the cost of exploration and we are sure they understand and in future budget hopefully they will consider it” he stated.

Mr. Addo-Kufuor added that gold prices are expected to remain same by the end of the year (1280 and 1290 dollars per ounce) because of the impact of the global tensions and the direction of the US interest rates but not significant.