The government must institute an incentive scheme to reduce cost of exploration and attract more investments into the mining sector, the President of the Ghana Chamber of Mines (GCM), Eric Asubonteng, has said.
According to him, mineral exploration investment in Ghana was declining and that was not good for the country, which mining was critical for forex and fiscal revenue generation.
Speaking at the 93rd virtual annual meeting of the GCM in Accra at the weekend, Mr Asubonteng indicated that Ghana was losing mineral exploration investments to its West African neighbours such as Cote d’Ivoire, saying this did not portend well for the country.
He observed that, exploration was the single most critical activity that guaranteed continuous production of minerals and discovery of new mineral resources to supplement production from existing mines.
“It is therefore crucial to put in place an incentive scheme that will reduce the cost associated with exploration and attract the required critical investments into this high-risk business of mineral exploration,” Mr Asubonteng said.
To this end, he entreated the government to exempt exploration companies from the payment of VAT on big ticket cost items such as drilling and laboratory services, saying the “extent of actual exploration activity is diminished by upfront costs such as VAT on inputs and landholding costs.
“Thus, relieving the usually illiquid exploration companies from the payment of VAT as well as reducing the cost of landholding would not only improve their cash flow and reduce their operational costs but also enhance Ghana’s image as a competitive destination for exploration investment,” he said.
Mr Asubonteng indicated that providing a congenial environment for mineral exploration in the long run would guarantee continuous mineral production and flow of fiscal and forex receipts as well as other benefits from the minerals sector.
He said figures from the Ghana Revenue Authority showed that the mining and quarrying sector regained its position as the leading source of direct domestic revenue in 2020.
“The sector’s contribution to the national fiscal purse increased from GH₵ 4.013 billion in 2019 to GH₵ 4.172 billion in 2020. The 3.97 per cent increase in fiscal revenue was primarily due to the increase in mineral royalty receipts, which partially made up for the reduction in the other sources of revenue from the sector,” he said.
Mr Asubonteng said the mining industry remained the main anchor of Ghana’s trade balance as data from the Bank of Ghana showed that the mining sector was the foremost source of foreign exchange receipts in 2020.
“The mineral sector alone accounted for 48.4 per cent of gross merchandise exports in 2020. This compares favourably with the 42.6 per cent recorded in 2019 and far outstripped the combined contribution of crude oil and cocoa in 2020 by more than 12 percentage points,” he said.
The President of GCM said the mining industry continued to support the economy by reducing the pressure on the local currency and its resultant impact on prices and other parameters, adding that proceeds from export of minerals increased from $6.678 billion in 2019 to $6.998 billion in 2020, representing a growth rate of 4.8 per cent.
BY KINGSLEY ASARE