Mining Consultant and Policy Analyst, Ing. Gomashie Edem Wisdom has issued a stern warning against the government’s proposed move to abolish stabilization clauses in Ghana’s extractive industry, describing the policy as a potential threat to the sector’s long-term survival.
The proposal, which accompanies plans to implement a sliding scale for gold royalties ranging from 5% to 12%, seeks to maximize state revenue but risks alienating the foreign investors who provide over 80% of the capital for major mining projects.
“Where government is getting it wrong is attempting to scrap stabilization clauses in tandem with seeking higher royalties. In my interview with FRANCE 24, I indicated this as a higher risk that may or can cripple Ghana’s Mining Sector.”
Ing. Gomashie Edem Wisdom
The tension arises as the government moves to rewrite mining laws to capture a larger share of windfall profits from record-high gold and lithium prices, which have seen unprecedented growth in the last year.
While industry experts generally support the logic behind increased royalties noting that the 5%–12% scale is justified for new projects the attempt to simultaneously strip away the legal “anchor” of stabilization clauses is viewed as a high-risk gamble.
Expert argued that without these protections, which shield companies from sudden legislative or fiscal changes, Ghana could lose its competitive edge as Africa’s top gold producer.
The Perils of Policy Volatility
The decision to scrap stabilization clauses represents a significant departure from the protections afforded under Section 49 of Act 703, which currently grants fiscal certainty to investments exceeding US$500 million.
By removing these guarantees, the state inadvertently signals a shift toward “resource nationalism,” a move that could trigger capital flight at a time when global competition for critical minerals is intensifying.
Analysts point out that the high-risk, high-cost nature of mining requires a “predictable legal environment,” and removing the “fiscal floor” could make the cost of borrowing for local projects prohibitively expensive.
Strategic Alternatives to Abolition
Rather than a total repeal, Ing. Gomashie suggests that the government should “fine-tune” these clauses to better serve the national interest while preserving investor confidence.
One proposed middle ground is to move the qualification threshold from US$500 million to US$1 billion, ensuring that only the most significant, transformative projects benefit from such protections.
Furthermore, the duration of these clauses could be significantly reduced from the current 15-year window to a more flexible 5, 7, or 10-year term, allowing for more frequent fiscal adjustments by the state without abruptly terminating existing legal contracts.
Global Models for Fiscal Stability
Ghana could find success by adopting “additional levy” models similar to those utilized in leading mining jurisdictions like Chile and Peru.
In these countries, stabilization is not a free right but a premium service; companies pay extra levies to the State in exchange for the guarantee that their tax and royalty rates will remain unchanged.
Such an approach would allow the government to “maintain grounds on royalty protections” while ensuring that the state is compensated for the stability it provides, particularly for high-value minerals like Lithium and Rare Earth Elements (REE).
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