Mining tax in Ghana should ‘reflect impact on agriculture’ – policy paper

Out-Law News | 10 Mar 2014 | 4:48 pm | 2 min. read

Ghana’s government has been urged to reassess tax rates for the country’s mining sector to “incorporate the true economic and social costs” associated with extraction.

A policy paper from the UK-based International Growth Centre (IGC) said it is crucial for Ghana to reconsider the ‘opportunity cost’ of the mining industry in terms of the impact on agriculture.

The IGC commended government policies, which it said paved for the way for continued growth in the mining sector and was “good news for the economy”. However, the IGC said it is important to consider the effect of this growth on different sectors of society.

In its paper, IGC said: “Following the expansion of this sector, many large-scale operations have been opened near densely populated areas where agriculture is the main source of livelihood. This has a direct impact on farmers in those areas, and for Ghana’s economic growth to be truly inclusive, the welfare of these farmers cannot be ignored.”

According to an IGC-funded study published last year, Modern Industries, Pollution and Agricultural Productivity, agricultural productivity near mining areas decreased by about 40% between 1998 and 2005 relative to areas further away.

IGC said of the study: “The negative effect declines with distance and extends to areas within 20 kilometres of mining sites… during this period, although measures of living standards have improved all over Ghana, families involved in agricultural activities close to the mines have gotten relatively poorer.”

Most government revenue from mining is channelled to the central government and only about 9% makes it to the local authorities, according to the study. In 2005, mining related revenues amounted to roughly $75 million and only about $8m of this made it to the local authorities of the mining regions, the study said. According to the study’s authors, the average overall loss by farming households in mining areas was around $97m.

IGC added: “Given these numbers, it is crucial for the government of Ghana to reconsider the opportunity cost of the mining industry, in terms of agricultural gains foregone. The debate is not about whether mining is good or bad. The debate is about whether we are correctly calculating the costs associated with mining and whether the government is addressing them through targeted policies.”

An Africa Progess Panel report published in 2012, Equity in Extractives: Managing Resources to Transform Human Development, called for ‘country mining visions’ across Africa to consider public-private partnership opportunities to explore how infrastructure investments could “serve broader development purposes”, including expanding agriculture.

World Bank vice-president for the Africa region, Makhtar Diop, has also warned that “many resource-rich countries tend to gravitate towards the bottom of the global Human Development Index – a composite measure of life expectancy, education and income.

He added: “My strong hope is that all the people living in these resource-rich African countries also get to share in this new oil and mineral wealth. So far, with one of few exceptions being Botswana, natural resources haven’t always improved the lives of people and their families.”