Scrap Growth and Sustainability Levy, review royalties

The Ghana Extractive Industries Transparency Initiative (GHEITI) has called on the government to urgently withdraw the Growth and Sustainability Levy (GSL) and consider introducing reduced royalty rates for certain segments of the mining industry as part of efforts to ease the fiscal burden on operators under the country’s new mineral royalty regime.

The transparency body is also urging the Minister for Lands and Natural Resources to consider introducing a reduced mineral royalty regime for small-scale miners to encourage their participation in the formal tax and royalty-paying system while fostering a more supportive business environment for indigenous mining enterprises.

The call was contained in a statement signed by the Co-Chair of GHEITI, Dr. Steve Manteaw, as part of the organisation’s intervention in the ongoing national debate surrounding Ghana’s revised mineral royalty framework.

GHEITI is the Ghana chapter of the global Extractive Industries Transparency Initiative (EITI), an international resource governance programme that promotes transparency and accountability in the management of revenues from natural resources.

In its statement, the organisation sought to provide historical context and technical clarity to the debate over the new mineral royalty structure.

According to GHEITI, sliding-scale royalty regimes are not new to Ghana’s mining sector.
The country first introduced such a framework in 1986 under Section 22 of the Minerals and Mining Act, 1986 (PNDCL 153), which established a royalty range between three per cent and 12%.

This framework was further clarified by the Minerals (Royalties) Regulations of 1986 and 1987, which linked the applicable royalty rate to the profitability of mining operations through what was known as the operating ratio.

Under this system, the royalty rate would move up or down depending on the financial performance of a mine.

However, the regime underwent significant reforms in subsequent years. In 2006, Section 25 of the Minerals and Mining Act (Act 703) replaced the earlier 3–12 per cent range with a narrower band of three per cent to six per cent.

The law was later amended again under Act 794 in 2010 to introduce a flat royalty rate of five per cent for all mining companies.

Further changes were made in 2015 when the law granted the Minister for Lands and Natural Resources discretionary authority to determine the applicable royalty rate.

The amendment also provided that in the absence of a prescribed rate, the existing five per cent royalty would remain the effective rate.

GHEITI noted that its monitoring reports over the years revealed significant challenges with the earlier sliding-scale system.

According to the organisation, mining companies frequently paid royalties at the lowest band of the scale—three per cent—regardless of changes in global commodity prices or shifts in market conditions.

This outcome was largely attributed to the complexity involved in calculating the operating ratio, which made enforcement difficult.

The challenge was further compounded by generous capital allowances granted to mining companies, which influenced the profitability calculations used to determine the applicable royalty rate. To address these challenges, GHEITI had previously proposed two options for reform.

The first was the introduction of a simplified sliding-scale model tied directly to commodity price movements.

The second was the adoption of a fixed royalty rate of six per cent, which represented the maximum rate within the earlier royalty band.

Government eventually opted for a fixed-rate system. However, following strong pushback from industry players, the rate was reduced and settled at five per cent.

GHEITI observed that fixed-rate royalty regimes also present challenges. When commodity prices are low, a fixed royalty rate can impose an excessive burden on mining companies.

Conversely, when prices rise sharply, the state may lose the opportunity to capture a greater share of the economic gains generated from its mineral resources.

One potential solution to this challenge, the organisation noted, would have been the introduction of a windfall or extra-profit tax.

Such a proposal was considered in 2008 but was ultimately rejected after strong opposition from the mining industry at a time when gold prices were relatively low, ranging between US$800 and US$1,000 per ounce.

Against this backdrop, GHEITI said government’s decision to introduce a new sliding-scale mineral royalty regime is intended to promote greater equity in the distribution of benefits between the state as the resource owner and private investors.

Under the new system, royalty rates will now be tied to global gold price movements. The lowest band of five per cent will apply when gold prices are around US$1,900 per ounce, while the highest rate of 12 per cent will be triggered when prices reach US$4,500 per ounce.

Most mining companies operating in Ghana will transition to the new royalty structure, except those with existing development agreements, including Zijin Mining, AngloGold Ashanti and Gold Fields.

GHEITI said that, in principle, the new regime represents a fair approach to balancing risks and rewards between government and investors, particularly given the absence of a windfall tax provision in Ghana’s mining legislation.

However, the organisation expressed concerns about the way the royalty bands have been structured.
It noted that contrary to some public commentary, the mining industry is not fundamentally opposed to the concept of sliding-scale royalties.

According to GHEITI, the Ghana Chamber of Mines has acknowledged the policy objectives behind the reform but has raised concerns about the design and calibration of the royalty bands.

Specifically, the industry considers the bands to be overly aggressive and insufficiently flexible in adjusting downward when gold prices fall.

One key concern is that the minimum rate of the new sliding-scale regime remains the same as the existing five per cent royalty rate.

Another issue raised by both industry players and some development partners relates to the transition thresholds between the bands.

Under the current design, roughly every US$500 increase in the gold price triggers a one percentage point increase in the royalty rate.

GHEITI also addressed claims circulating in the public discourse that Ghana may face pressure or threats from countries such as the United States and China over the introduction of the new royalty regime.

The organisation described such claims as inaccurate, noting that while some development partners and investors have made diplomatic overtures urging government to reconsider aspects of the policy, these cannot reasonably be interpreted as threats.

GHEITI further noted that the mining industry had proposed an alternative sliding-scale framework with a royalty range between four per cent and eight per cent, with an additional one per cent contribution allocated to a community development fund.

According to the organisation, this proposal deserved further consideration as part of efforts to find common ground between government and industry.

GHEITI therefore encouraged the Ghana Chamber of Mines and the Ministry of Lands and Natural Resources to continue engaging in dialogue to identify a mutually acceptable approach that balances government’s revenue optimisation objectives with the need to maintain industry competitiveness.

The organisation also warned that the most significant threat to Ghana’s investment attractiveness is not necessarily the new royalty regime itself but the issue of fiscal predictability and policy certainty.

According to GHEITI, the sudden introduction of the Growth and Sustainability Levy without prior consultation with industry stakeholders disrupted corporate investment planning.

The levy currently stands at three per cent of gross production, which translates to approximately 4.6% when expressed in royalty-equivalent terms because it is not tax deductible.

If maintained alongside the new sliding-scale royalty regime, GHEITI estimates that the combined fiscal burden on mining companies could exceed 16% of gross production—an outcome the organisation described as unprecedented within global mining fiscal regimes.

In light of these concerns, GHEITI has called on both government and industry stakeholders to sustain dialogue and explore practical options for compromise as Ghana seeks to optimise revenues from its mineral resources without undermining the operational sustainability and long-term competitiveness of the mining sector.