Chief Executive Officer (CEO) of the Ghana Chamber of Mines, Dr. Sulemanu Koney, has said taxes and levies on mineral exploration investments are making Ghana’s mining sector unattractive for investors.
He noted that the value added tax (VAT) places on exploration fund at every stage of the process is making investors turn away from Ghana and looking at other jurisdictions where the conditions are more favorable.
According to him, most of the exploration licenses have been given to Ghanaians, but most of the them are trying to sell out to foreigners because they are unable to bear the exploration cost due to the heavy taxes placed on them.
Dr. Koney was speaking with journalists at forum organized by the Journalists for Business Advocacy to familiarize journalists with the state of the mining sector.
He thinks government should allow exploration companies to use 100 percent of their exploration investment for exploration – particularly gold – rather than charging taxes and levies before the companies even break the ground to find the mineral.
“It’s one of the concerns we had and the need to provide a fertile and conducive environment for exploration companies to use practically 100 percent of their exploration investment into exploration, rather than paying taxes and other levies even before they break ground.
The Chamber of Mines CEO said exploration is quite expensive and there is no guarantee the explorer would make a commercial find, and yet “we have a fiscal regime which requires companies to make some payment before even digging the ground.”
He said the situation is making Ghana less competitive compared to other jurisdictions, which have a fiscal policy that allows explorers to make commercial finds before taxing them.
“We think that government should allow the exploration companies some space to explore and when the find commercial quantities of any minerals, we can all share in the benefits,” he said.
“When it comes to investments in exploration activities, we didn’t do too well in attracting investments into exploration which is the lifeblood for the sector and ensures the sustainability of the mining industry,” Dr. Koney added.
Cote d’Ivoire’s rise to first place, the Chamber notes is due to a significant increase in budgetary allocation for gold exploration in Cote D’Ivoire – around $105 million.
Total planned gold exploration expenditure in Africa for 2020, according to the Chamber amounted to $590 million.
A reduction by some $25.9 million when compared to the $615.9 million spent by gold mining firms in 2019.
Gold production volume in Ghana fell by 12.1 percentage points in 2020, the lowest in the last sixteen (16) years – since 2004.
Gold production dropped to 4.02 million ounces in 2020 from 4.57 million ounces in 2019.
But despite the fall, the country, however, retained its position as Africa’s top gold producer and sixth biggest producer in the world.
Ghana’s closest rival and long-term leading producer, South Africa, also recorded a 13.7 percent decline in production at 91 tonnes and remained in second place on the continent and tenth globally.
Meanwhile, President of JBA, Sulemana Mustapha noted that large proportion of the inputs used for mining exploration and production are now sourced locally, unlike previously when most of those inputs were imported.
He also noted that local expertise in technical areas such as geological survey, mining engineering and others are growing, adding that with the establishment of the African Continental Free Trade Area (AfCFTA), which allows for duty free exports, Ghana now has an excellent opportunity to be a continental hub for mining services.
“In turning this potential into reality however, Ghana’s business media has a vital role to play, in promoting the reputation of the country’s mining support service providers so as to make them attractive to other mining countries around the continent,” he said.