Fitch Solutions, a leading provider of credit, macro-intelligence and risk management solutions, has issued warnings in line with persistent resource nationalism risks in Ghana, highlighting that the situation is likely to persist under the leadership of President Akufo-Addo.
According to Fitch’s report on ‘Resource Nationalism in Sub-Saharan Africa (SSA): A Trend Towards Beneficiation Requirements’, the risks in Ghana are further compounded by deteriorating public finances in the country, which has been grappling with a debt-repayment crisis.
As a result of the debt-repayment crisis, Ghana has been attempting to restructure more than $30bn of domestic and international debt since late-2022.
The report pointed out that default risks could incentivize the government to seek higher tax revenues from the mining sector, potentially by raising royalty payments.
Fitch Solutions’ report further disclosed that President Akufo-Addo had previously stated that fiscal incentives for mining firms in the country agreed by previous administrations are too generous.
However, Fitch argues that several countries in Sub-Saharan Africa (SSA) are facing rising resource nationalism towards their respective mining sectors, as part of a global trend towards greater government intervention in the industry, which has been underway since 2020.
The report identifies countries where resource nationalism risks are high and/or rising in SSA, including the Democratic Republic of the Congo (DRC), Guinea, Mali, Namibia, and Zimbabwe, in addition to Ghana.
According to Fitch, increased government intervention in the mining sector of these countries will generally aim to extract greater value from the mineral supply chain for local stakeholders, including the government (through taxes), employees (through job creation) and the mining service industry (through increased business).
Impact of Resource Nationalism
Resource nationalism is a growing trend worldwide, with governments seeking to increase their control over natural resources and ensure that they receive a greater share of the benefits from the exploitation of those resources.
This trend, as stated by Fitch, is particularly prevalent in the mining sector, where mineral wealth is often seen as a vital resource for economic development, adding that: “mining companies operating in Ghana and other countries are at a high risk of resource nationalism.”
Nonetheless, many experts have warned against the adverse impact of resource nationalism and the potential risks it tends to pose on investment and economic growth if governments pursue overly aggressive policies.
Commenting on the impact of resource nationalism, Fitch has urged companies to carefully monitor political and economic developments to ensure they have effective strategies in place to manage risks associated with government intervention in the mining sector.
Ultimately, the ability of governments to strike a balance between extracting greater value from their natural resources and creating an attractive environment for investment and economic growth will be key to the long-term success of the sector in SSA and beyond.
Read also: SoNA: We Have Not Been Reckless In Borrowing And In Spending- President Akufo-Addo
