11.08.10 Ghana Politics and Security News Digest: Africa Mining Comment & Analysis – Ghana

Ghana Miners

Alhaji Collins Dauda, Ghana's Minister for Lands and Natural Resources yesterday told Joy FM of the government's continued intention to review some aspects of the stability agreements held by companies with large-scale mining projects in Ghana. Dauda said that the government "was not imposing anything" and that it would "walk gradually through the agreements". Where changes were required, "we will take the provisions out of the agreement so that it becomes a win-win something".

(Source: Joy FM)

Chris Melville , Africa mining consultant with Menas Associates today commented:

"Ghana has a deserved reputation for its investor friendly mining regime, which has facilitated the entry of a number of substantial foreign partners in recent years".

"However, like it or not, stability agreements exist to protect private companies from the kind of regulatory changes currently envisaged by the Ghanaian government".

"Even if the government's approach is consensual and even if the proposed changes are minor, the principle of legal protection is put at risk and this has the potential to sour relations with miners investing in Ghana".

"If the government is concerned about social and environmental impacts, systematic enforcement of existing legislation would produce better effects".

"Likewise, qualitative reform of the tax regime - as opposed to tinkering around the edges - might prove more beneficial for the government, as well as having a greater chance of achieving consensus with foreign investors, since security of tenure would not be put at risk".

Background

The Ghanaian government is currently undertaking a wide-ranging review of regulations governing the mining sector and in 2009 it announced that it intended to double royalty rates from 3-6 per cent. While a figure of 5 per cent was eventually adopted, companies with stability agreements have been exempted.

© 2010 Menas Associates