The debate about Ghana falling into the resource trap appears evident, and this description is said to cut across the century-old mining sector and the decade-old oil and gas sector. Particularly, without an improvement in mining sector subnational governance, the development of mining communities may delay for as long as another century.
For the mining sector, the adoption and rapid improvement of subnational governance structures is far below what can be considered a continent-wide example worthy of emulation. Ghana is considered the leading producer of gold on the African continent and the sixth largest in the world. However, there is no single success story with mining communities all these years.
The recent Resource Governance Index for 2021 placed the governance of the country’s mining sector a little above 50/100. And the key area highlighted in the 2021 resource governance index that the country woefully lagged is “Within the licensing and subnational resource revenue sharing subcomponents.” The issues identified were that these “were still classified as ‘failing,’ reinforcing the need for legislation and further disclosures.”
Constituents of development
Fundamentally, development is not an abstract phenomenon only authenticated by data, as that can hide the intricacies of issues to be considered. However, the monumental progress of the communities (in this case, mining communities), is a significant variable in the equation.
Whether one considers a bottoms-up approach to development or a top-down approach to development, the common denominator is the existence of robust inter linkages between the communities and the nation as a whole. Thus, by disregarding this element without giving attention to community development would not suffice. In fact, the development of mining communities, cannot be isolated and made distinct from the fabric of national development.
While policy makers look to ensure national development, the cumulative progress of communities cannot be overlooked within the development matrix. However, the opposite is exactly what is seen in respect of the development of mining communities in Ghana.
The successes or otherwise of the practice of revenue sharing mechanisms adopted by the government are evident. There is still a wide gap regards the extent of success expected to arrive at as a result.
In 2015, it was reported that the government’s royalty arrears to mining communities had skyrocketed to over GHS100 million, in a span of just three years (2012-2015). And this was at a time when the existing Mining Act, Act 703 of 2006, stipulated just a 10 per cent share of total royalties paid to government. Under this regime, the lot of times payments were eventually made were characterized with delays.
Addressing problems of Subnational Governance
With the new Act, the Minerals Development Fund Act 2016 (Act 912) mining companies are to pay up to 5 per cent of their total revenues as royalties to the state, and of that, the government transfers 20 per cent to the Minerals Development Fund.
Of this amount, 4.95 per cent accrues to the respective District Assemblies, another 4 per cent to the Mining Development Scheme (MCDS).
Meanwhile, this new Act, although an improvement of the previous, is still bogged with the same challenges. In 2020, mining communities received only 13 per cent of the total royalties to the government, thus delaying or not matching up the required developmental projects in mining communities.
According to resource governance experts, Daniel Kaufmann and Rebecca Iwerks, in some cases, “the design of power or revenue sharing systems is often done in a reactionary manner.” In other cases, “poor design can lead to gaps or overlapping national and local government authority”. And either of these or a combination of the two may be considered as the problem of the subnational governance system in practice in Ghana over the years.
Stakeholders call for increase in communities’ share of royalties
The Ghana Mine Workers Union (GMWU) has persistently decried the ‘meagre’ revenue allotted to mining communities, calling for an increase of the royalties transferred to mining communities to 50 per cent.
Akin to this call, the Ghana Chamber of Mines has also advocated for an increase in the share of the royalties due mining communities to 30 per cent. The Chamber has suggested the use of such an amount to be earmarked for specific sustainable infrastructure projects in the mining communities.
Mr. Eric Asubonteng, the President of the Ghana Chamber of Mines is on record to have suggested that: “The poor state of mining communities is largely a function of the development status of the country as well as an outcome of the mechanism for allocating and utilizing fiscal revenues realized from the extraction of mineral resources.”
For a country poised to rise above foreign aid (receiving ‘handouts’ from developed economies), as well as chart a path towards development and prosperity for all, the first sign of commitment to this end is to draw the needed attention to mining communities.
Like a dream, many in mining communities are still wondering how they got here. Mining communities are still facing grand developmental deficits.
To move forward, there is the need to revamp the current subnational governance system and ensure communities obtain full benefits from resources mined in their jurisdictions.
