The Ghana Extractive Industries Transparency Initiative (GHEITI) has provided context to the debate over the country’s new mineral royalty regime, stressing that sliding-scale royalties are not new to Ghana’s mining sector and highlighting potential risks to investment under the updated framework.

In a press statement issued on March 13, the organisation explained that Ghana first introduced a sliding-scale mineral royalty regime as far back as 1986 under the Minerals and Mining Act, which set a royalty range of 3 per cent to 12 per cent linked to mine profitability.

According to GHEITI, the regime was later revised in 2006 when the Minerals and Mining Act reduced the range to 3 per cent to 6 per cent, before it was subsequently changed to a flat rate of 5 per cent in 2010.

The initiative noted that earlier sliding-scale regimes faced major implementation challenges, as most mining companies ended up paying the lowest rate on the scale despite fluctuations in market conditions.

It attributed this to the complexity involved in calculating the operating ratio used to determine the applicable rate, as well as generous capital allowances granted to mining firms, which made enforcement difficult.

GHEITI explained that it had previously recommended two reform options: adopting a simpler sliding-scale system tied to commodity prices or introducing a fixed royalty rate of 6 per cent.

However, following consultations and industry pushback, the government eventually settled on maintaining a 5 per cent flat royalty rate.

Addressing the newly introduced mineral royalty framework, GHEITI said the new sliding-scale regime links royalty rates to gold price movements, with the lowest rate of 5 per cent applied when gold prices are around $1,900 per ounce and the highest rate of 12 per cent when prices reach $4,500 per ounce.

Under the arrangement, most mining companies operating in Ghana will transition to the new regime, except those with existing development agreements, including Zijin Mining, AngloGold Ashanti and Gold Fields.

GHEITI described the new regime as fair in principle, arguing that it allows the state to capture a greater share of revenue during periods of high commodity prices while also sharing risks with investors when prices decline.

However, it expressed concerns about how the royalty bands were structured, noting that industry players believe the new bands may be overly aggressive and insufficiently flexible when gold prices fall.

The organisation also dismissed suggestions that the policy had triggered threats from foreign governments, stating that while some stakeholders had appealed to the government to reconsider aspects of the reform, it would be inaccurate to describe those engagements as threats.

GHEITI further indicated that both industry representatives and some development partners are concerned about the transition thresholds between royalty bands, where roughly every $500 increase in gold prices results in a 1 per cent rise in the royalty rate.

Beyond the royalty changes, the initiative warned that the biggest risk to Ghana’s investment attractiveness may be fiscal uncertainty rather than the new royalty structure itself.

It pointed to the sudden introduction of the Growth and Sustainability Levy without prior consultation with industry as a disruptive factor for corporate investment planning.

According to GHEITI, maintaining the levy alongside the new royalty regime could significantly increase the fiscal burden on mining companies, potentially pushing the total levy on gross production to more than 16 per cent, a level it described as unprecedented in global mining fiscal regimes.

The organisation therefore recommended continued dialogue between government and industry to find a balanced approach that would help maximise state revenue while maintaining the competitiveness and sustainability of the mining sector.

It also urged the government to consider withdrawing the Growth and Sustainability Levy to ease the fiscal pressure on mining companies and support investment in the sector.

GHEITI further called on the Minister for Lands and Natural Resources to explore introducing a reduced mineral royalty rate for small-scale miners in order to bring more operators into the tax and royalty-paying system while supporting indigenous mining businesses.

The initiative is Ghana’s implementation of the global Extractive Industries Transparency Initiative programme, which promotes transparency and accountability in the management of revenues from the mining, oil and gas sectors.