Policy analyst and natural resource governance advocate Dr Steve Manteaw says Ghana may have lost billions in potential mining revenue by delaying the introduction of a windfall tax regime for the sector.

Speaking on Joy News’ PM Express on Monday, he explained that proposals for an extra profit tax in the mining industry had been made more than a decade ago but were never implemented.

“The Act 703 was amended, and we provided that the minister shall prescribe the royalty rate for mining companies in Ghana.”

“But in the absence of that prescription, the status quo will remain. So 5%, which was what the companies were paying at the time, remains until now.”

Dr Manteaw said the renewed debate over mining royalties gained momentum during discussions around Ghana’s lithium agreements.

“And I think this whole discussion came about as a result of this lithium deal.”

According to him, the Ghana Extractive Industries Transparency Initiative (GHEITI), of which he was a member, proposed introducing a windfall tax on mining companies as far back as 2012.

“I recall that as far back as 2012, my committee, that is the Ghana Extractive Industry Transparency Initiative, proposed to the government to adopt a windfall tax for the mining sector.”

He explained that such a tax is designed to allow resource-owning countries to capture a share of the extraordinary profits companies make during commodity price booms.

“Because, you know, we’re dealing with the commodity, and commodities go through boom and bust cycles.”

“So resource owners want to position themselves to be able to dream off a bit of the extra profit during the boom periods.”

However, he said the proposal faced resistance from the mining industry at the time.

“At the time, I recall the gold price was around $1,600, so the industry kicked back and said, Look, this is not the time to be talking about extra profit tax.”

“Prices are depressed, and so let’s wait until the right time is ripe; we can talk about this....And so we left it.”

Dr Manteaw noted that while Ghana delayed action in the mining sector, a similar mechanism was incorporated into the country’s petroleum revenue framework.

“But in the oil sector, around the same time, when we’re developing the petroleum revenue management framework, we provided for an extra profit tax in the form of an additional oil entitlement.”

He said the system has already produced results.

“So as we speak, in fact, I think last year, one of the companies, I’m not too sure, it must be Petro SA, paid extra profit tax to the state because it had exceeded the threshold.”

“And without compulsion, willingly paid the extra profit tax.”

According to him, commodity-based industries require mechanisms that allow governments to capture additional revenue when prices surge.

“So every resource, especially if it’s a commodity that goes through a boom and bust cycle, you need an arrangement that enables you to clean off a bit of the extra profit that companies make during the boom periods.”

He explained that Ghana eventually opted for a sliding scale royalty system in the mining sector as an alternative to a windfall tax.

“So because we did not have an extra profit tax arrangement in the mining sector, we decided to go for the alternative, which is a sliding scale.”

The system adjusts royalties depending on commodity prices.

“Sliding scale allocates risk and benefits equitably.”

“So when the price goes up, we all share the enjoyment and the benefits of the boom, and when the price becomes depressed, we all the companies pay less and the government also gets less.”

However, he said the current debate around the royalty regime has exposed concerns among industry players and development partners.

“I do not think we had adequate consultations.”

He said some stakeholders believe the price thresholds that determine the royalty rates were not sufficiently discussed.

“Especially in establishing the price banks or the thresholds at which the various royalty rates kick in.”

Dr Manteaw also warned that the new regime may affect smaller mining companies more severely.

“The three biggest companies that produce the bulk of our gold are Newmont, Anglogold and Goldfields.”

“They have stability agreements, so this particular new royalty regime will not be applicable to them.”

He said this creates disparities within the industry.

“That you agree creates some discrimination.”

According to him, smaller mining firms, including some Ghanaian-owned companies, may bear the heaviest burden.

“The majority of the companies, the 15 or so that are on their own, a lot of them are struggling.”

“But some are Ghanaian, like ADAMUS resources, Asante Gold and all that. They are going to have to pay 12%.”

He warned that the new rate could pose challenges for companies already struggling with operational pressures.

“It’s a challenge for them, because even some of the bigger companies that have been around longer are struggling with the operations.”