The management of Ghana mining revenues has improved substantially with the adoption of new fiscal laws, but revenue sharing mechanisms lag, according to the Natural Resource Governance Institute (NRGI).
Assessing the country’s management of mining revenues, the report indicates that the most substantial improvement throughout the sub-components was attributed to a 34-point increase in budgeting subcomponent reaching a score of 70 points out of 100.
By adopting the 2018 Fiscal Responsibility Act, the government introduced concrete numerical fiscal rules governing public expenditure, limiting uncontrolled spending in times of high resource revenues. Capping the fiscal deficit to not exceed 5 percent of GDP as well as appointing the Fiscal Responsibility Advisory Council in 2019, the report allots such a score which describes better management of mining revenue.
This notwithstanding, the report highlights that compared with its previous Resource Governance Index (RGI) in 2017, there has been no meaningful evolution in the governance of subnational resource revenue subcomponent. A score of 39/100 was retained for the subnational resource revenue subcomponent across both the 2017 RGI and the 2021 RGI.
Apart from the fact that the Extractive Industries Transparency Initiative (EITI) process is used to audit the transfer of revenue to subnational governments, there are currently no rules at the national level and no oversight bodies have been appointed to audit such transfers, the report notes.
Recommendations to improve the mining sector
The National Resource Governance Institute (NRGI) advocates for a law that will govern such transfers and improve the robustness of accountability measures such as have been highlighted above.
The report recommends that the Ministry of Lands and Natural Resources and the Mineral Commission should accelerate and leverage the on-going review of the Minerals and Mining Act 2006 to strengthen the legal framework governing the mining sector.
More broadly, Ghana’s extractive sector, and specifically the mining sector lacks a long-term national development plan which if available could help guide extractive governance, the Natural Resource Governance Institute recommends.
Considering other subcomponents, the report indicates that governance of taxation improved by 10 points since the 2017 RGI, driven mostly by the adoption of the Revenue Administration Act. The Revenue Administration Act empowers the Ghana Revenue Authority to audit all businesses, including mining companies. Precisely, rules and oversight measures prevent tax revenue leakage, and mandate external audits of all government agencies, including the Ghana Revenue Authority.
Furthermore, the index’s local impact subcomponent score, which measures adherence to environmental and social impacts has improved to 100 in the 2021 RGI. “All gold mining companies commissioning new projects or beginning extraction have disclosed environmental and social impact assessments, as well as environmental mitigation plans,” the report suggests.
Overall, the report, in comparing the governance of both the mining and oil and gas sector shows that the oil and gas sector outperformed the mining sector with a score of 78/100 and 69/100 respectively. And the fundamental point of divergence between them is that the oil and gas sector features a more robust legal framework compared to the mining sector.