Africa’s natural resources and underdevelopment
The lesson is clear: In their pursuit of FDI, African countries should avoid Ghana’s example and instead put in place proper laws and tax regimes that will ensure a win-win for all concerned.
“Africa’s Natural Resources and Underdevelopment: How Ghana’s Petroleum Can Create Sustainable Economic Prosperity” by Kwamina Panford is an important addition to critical thought on the continent. It tells how Ghana, under pressure from global capitalism, enacted mining laws that have empowered foreign companies to do whatever they wanted with the country’s gold resources without any Ghanaian supervision.
According to Kwamina Panford’s explosive book, Ghana’s government under President John Agyekum Kufuor enacted a mining law that literally gave international mining companies total freedom to mine, process, package, ship and sell overseas all the gold they produced in Ghana without supervision or intervention by any Ghanaian authority - not the government itself or any of its relevant agencies.
And all this was done in the name of boosting foreign investor confidence in the country and to entice more foreign direct investment (FDI) into the mining sector.
But “by so doing, the state of Ghana literally reneged on its duty to ensure proper accounting for the tonnage of gold produced and to ensure accurate assessment of taxes and other relevant fees owed the state,” says Kwamina Panford, a Ghanaian associate professor who teaches at the Northeastern University in Boston, Massachusetts, US, in his book.
“It is therefore not surprising,” Panford says, “that some gold companies did not pay to the Government of Ghana dividends from its carried interests in such enterprises … This is, in effect, ‘globalisation run amok’. It is also tantamount to the public authorities handing over Ghana’s gold, in this case bullions or ‘dores’, on golden platters to mining companies.”
Panford is an expert with intimate knowledge of Ghana’s gold and oil industries. In 2015, he provided critical input into Ghana’s Petroleum Revenue Management Act (PRMA), and was also instrumental in getting the PRMA to make it mandatory for the Ministry of Finance and the Bank of Ghana to publish audited accounts of Ghana’s petroleum funds in newspapers to make it easy for Ghanaians to know how much their country’s oil earnings are, and how they are being spent.
In February 2012, Panford was designated by the Public Interest and Accountability Committee (PIAC), a multi-stakeholder committee made up of government officials, workers, academics and civil society members that oversees how Ghana’s petroleum revenues are spent, to visit the Bank of Ghana to verify information and data pertaining to the country’s oil and gas earnings. As the lead consultant for the PIAC, Panford used the information and data he collected to draft the PIAC’s first report in 2012.
Thus, what he reveals in his book carries great weight and is bound to cause great commotion in his native country. Interestingly, since the book came out late last year in the US, the usually vociferous Ghanaian media has somehow missed it and no reviews have appeared in the country so far.
In the beginning
Panford dates his extraordinary story back to 1986 when the then military government led by Flt-Lt Jerry John Rawlings capitulated to pressure from the neoliberal Washington Consensus and enacted the first ruinous mining law (ruinous to Ghana) giving multinational mining companies what amounted to an official licence to exploit the country’s natural resources.
“As a result of global capitalist pressure, starting in 1986 with mining, especially gold and diamonds, and since 2007 with oil, the Government of Ghana, acting on policy advice from the IMF and World Bank, seems to be forsaking Ghanaians,” the book says matterof-factly.
Two pieces of bad legislation stand out in this drama. “The first law, the book explains, “was passed by the PNDC [Rawlings’ Provisional National Defence Council] as part of its 1983-85 Economic Recovery Programme (ERP) which it later converted into one of Africa’s notorious Structural Adjustment Programmes (SAPs). The second law was enacted [in 2006] by the NPP [President John Kufuor’s New Patriotic Party] to deepen the country’s neoliberal credentials.”
Panford continues: “PNDCL 153 was a ‘pro-investment’ mining code introduced as part of Ghana’s SAP developed with the support of the IMF and World Bank. Purportedly aimed at spurring foreign direct investment (FDI), PNDCL 153 allowed sweetheart deals granting large capital investment allowances, exemptions from fees for imported equipment, expatriate personnel salary transfers abroad, and nominal royalties of as low as 3 percent. Although on paper Ghana could access royalties of up to 12 percent, in fact that rate was never charged.
“In the attempt to make mining to benefit Ghana, there was supposed to be a windfall tax of 25 percent levied on mining companies’ extra profits. In addition, in the initial but feeble and ill-fated attempts to retain some local control, the law nominally allowed the government to acquire up to 30 percent of all companies’ stocks. In reality the government retained only 10% carried interest.”
According to the book: “By 1994, Ghana had acquired a uniquely dubious distinction, by becoming the most economically liberalised country in the whole of Africa… But this created a paradox: while privately-owned companies’ profits soared from 2003 to 2014, the proportion of state revenues shrank substantially.
“Developments in the mining sector after 1986 exemplify how neoliberal policies in Ghana not only ruined its fiscal situation in terms of falling government revenues, but also led to an environmental nightmare which is still unfolding and which will require massive public policy intervention to halt or even to bring under control.”
Race to the bottom
Even worse, instead of setting the pace for an environmentally friendly and local community-centred agenda, Ghana, through the introduction of the post-1986 mining laws, policies and actual practices, embarked on what is known as the ‘race to the bottom’, and set the bar so low that it was emulated by other African countries such as Sierra Leone, which had a mining lease with a royalty of a miniscule 0,5 percent a year.
Panford reveals that “after other countries sought to catch up with Ghana’s attempts to race to the bottom, it created a much lower standard to boost its competitiveness and to persuade Western donors that it was indeed their Sub-Saharan Africa’s star pupil.”- New African Magazine
◆ Read the full review on www. herald.co.zw