The Third World Network (TWN) has condemned the Development Agreement signed between the Goldfields and the Government of Ghana over the Tarkwa and Damang mines. It’s called the agreement “flawed, immoral, illegal” and a “short change” of the Ghanaian people.
Under the deal, Goldfields will enjoy a 3% reduction in the corporate tax rate and a change in the royalty rate from between 3% to 5% effective January 2017.
According to the deal, when the price for an ounce of gold is $2,299 dollars, the company will be required to pay 5% as royalties and could pay as low as 3% when the price of gold is at $1,300 dollars.
Nonetheless, the TWN disclosed that with the price of gold hovering around $1, 895 in 2011 and having dropped since, Goldfields might demand that they pay less than the limited royalty rate.
Speaking at a press briefing in Accra, Dr Yao Graham, Executive Officer of the TWN cautioned that although every mineral resource is entrusted into the care of the President, the Ghanaian people are the beneficial owners of the resource and the government has a trustee relationship in how it uses the resource.
He said that that trustee relationship meant that there must be a system of effective accountability of how the minerals are exploited.
Why the Agreement Is Illegal
The Development Agreement under the Minerals and Mining Act demands that the Minister in charge of mineral resources can only enter into a development agreement under a mining lease with a person or company where the proposed investment by the company (in this case Goldfields) exceeds US $ five hundred million dollars.
But Goldfields has not brought the $500 million dollars required by the law.
Whilst speaking in an interview with an Accra based radio station, Joy Fm, Tony Aubynn, Chief Executive of the Ghana Minerals Commission justified the development agreement stating that “ Goldfields is perhaps the single largest investor across the two mines (Tarkwa and Damang) so they qualify by our own laws to sit with the Minister and get into a development agreement.”
He said that without an assurance of a stability agreement the mines will cease operations with dire implications for the economy.
This investment referred to by Tony Aubynn predates the day date Goldfields first set foot onto the shores of Ghana years ago and has no relation to the requirement of the law that the company had to propose an investment of $500 million dollars before a development agreement is granted.
Goldfields has also not made any commitment to save 2000 jobs at the Damang mines.
Furthermore, the stability agreement granted to the company will ensure that for 15 years, Goldfields will not be affected by subsequent changes to laws relating to exchange control, transfer of capital and dividend.
The company will also not be affected, by any new enactment, order or instrument that existed at the time of the stability agreement.
Dr Graham stressed that “a development agreement under the law can only be reached in respect of prospective investment of above 500 million dollars.
“It is not based on the fact that historically you’ve invested more than 500 million dollars and it cannot spring from the fact that gold prices have dropped and you may want to close your mine.”
The first public notice of the agreement came in an announcement by Goldfields to the Johannesburg stock exchange when the Ghanaian government had made no pronouncements to show how it was defending the best interest of the Ghanaian people in terms of the constitutional obligation under the minerals and mining act.
Abuse of Process by Parliament in the Goldfields Deal
On the 17th of March, parliament waived a 48 hour notice period, tabled a motion and unanimously adopted the Golfields agreement without debate.
Dr Graham, considers the move as an abuse of process as Ghana’s mineral resources are being handled as personal properties for a few people in government.
“It has become routine now for agreements on natural resources to be passed by waiving the terms of the standing order which require at least 48 hours notice,” he said
According to him, the purpose of allowing a notice period is for the reason that because parliament has an oversight responsibility and it is supposed to be acting in the interest of the people as a check on how the executive uses power, parliament must seek comments from the public before laws are enacted.
He said also that parliament has a duty to convince the citizens that the waiver of the notice period and the manner in which the agreement was passed through parliament is not arbitrary or capricious.
TWN demands that since the Mines and Energy committee of parliament held that the terms of the law had been met and based on that information parliament unanimously passed a motion that granted a development agreement to Goldields, government must be heard and it must give justification which is consistent with section 49 of the Minerals and Mining Act, which provides the framework for entering into a development agreement and which indicates that Goldfields was going to make an investment of more than 500 million dollars deserving of a stability agreement adding that anything else is an illegality.
According to Dr Graham, without that disclosure and if the agreement is made to stand, a precedent will have been set for other companies to demand a change in the taxes that they pay.
Mining Contract Review Committee
Goldfields’ development agreement also stand in contravention to the recommendation of the Mining Contract Review Committee, set by the government in 2012 chaired by Professor Akilagpa Sawyerr to review existing contracts and to make proposals for future stability and other developments in the gold mining sector.
The Committee recommended that the royalty rate should be raised to 5%.
By entering into the development agreement with Goldfields, the recommendations of the Akilagpa committee which sought to safeguard the interest of Ghana have been thrown away.
Dr Graham expressed worry at a tradition of policy incoherence and key decisions being taken in an incoherent manner to the disadvantage of citizens.
He recalled that when the Kufuor government signed an agreement with Newmont, it destroyed the fabric of the existing negotiating framework within the mining sector because it offered Newmont terms that nobody had before and some of which were considered unconstitutional.
“Are we getting a repeat of the Newmont type of thing, or this is a process which can stand scrutiny,” he questioned.
Dr Graham also called for full disclosure of existing agreement with all mining companies including the recently renegotiated Newmont agreement and the justifications that the committees that renegotiated them offered.
Meanwhile, the National Coalition on Mining has kicked against the Goldfields deal and is expected to start a fully blown campaign to reverse it.