Reversing developmental challenges in Ghanaian mining communities through Mineral Revenue Holding Fund


Eighty-one percent of people in mining communities in Ghana oppose mining because they believe it destroys livelihoods, causes pollution and results in mining related diseases.

This is according to a study titled: “The Right to Decide: Free Prior Informed Consent in Ghana” conducted by WACAM in four mining communities in the Eastern and Western Regions in 2012.

Article 257 (6) of the 1992 Constitution of the Republic of Ghana states: “Every mineral in its natural state in, under or upon any land in Ghana, rivers, streams, water course throughout Ghana, the exclusive economic zone and any area covered by the territorial sea or continental shelf is the property of the Republic of Ghana and shall be vested in the President on behalf of, and in trust for the people of Ghana.”

This right as exercised by the President in the granting of mineral rights to companies diminishes the right of mining communities in determining their choices of livelihood and what constitute development for them.

The communities are thus compelled to live with problems that threaten their survival and the responses in the protection of their right to self-determination had turned such areas into hot spots of conflicts.

It is therefore not surprising that after well over a century of mining, communities including Akwatia, Obuasi, Prestea, Bogoso, Tarkwa, Nsuta etc. have seen little or no development as poverty and under-development is evident.

The government in response to the developmental gap in mining areas passed the Minerals Development Fund (MDF) Act, 2016 (Act 912) to provide additional revenue to fund developmental projects in such areas.

Under Section 21 of the MDF Act, 80% of revenue accrued from the mining sector goes to the Consolidated Fund while 20% goes to the MDF through the Office of the Administrator of Stool Lands (OASL).

Half of the 20% is distributed as follows; 1% to the OASL for administrative purposes, 4.95% to the District Assemblies for development, 1.8% to the Traditional Councils and 2.25% to the Stools in the mining communities.

The remaining 10% is distributed as follows; 0.8% to the Ministry of Lands and Natural Resources, 2.6% to the Minerals Commission and 4% to the Community Development Scheme (CDSs). The rest are 1% for research and development in the mining sector and 1.6% to carry out geological survey.

However, many experts have found the MDF to be engulfed with many challenges making it practically impossible to respond to the growing developmental needs of mining areas.

An expert in the extractive industry is calling for a comprehensive mineral revenue law similar to the Petroleum Revenue Management Act (PRMA) in the oil sector to replace the MDF Act.

Abdallah Ali-Nakyea, Managing Partner, Ali-Nakyea & Associates and tax expert says the country’s laws on mining needs total overhaul.

He told this reporter in an interview recently Ghana’s MDF Act has several challenges making it difficult to engender the needed socio-economic development in mining communities.

He is calling for the establishment of a Mineral Revenue Holding Fund with clear distribution formula for distributing mineral revenues just as happens under the PRMA.

The expert proposes the establishment of a Sovereign Mineral Fund, made up of Stabilization and Heritage funds; in which part of the proceeds from mining could be invested for future generation like the PRMA does.

Ali-Nakyea further proposes the establishment of a civil society body similar to the Public Interest and Accountability Committee (PIAC) under the PRMA, but with funding benefits, as well as prosecutorial and surcharge powers as an additional oversight layer for mining revenue.

“I think we can do PIAC in the mining sector. If we do not want to establish another body, we could add it to the functions of PIAC to monitor revenues from mining,” he observed.

Ghana’s PRMA 2011, Act 815 as amended has established clearly how revenue from the oil and gas sector should be allocated.

Under the law, 55% of total revenue generated by the state to the Petroleum Holding Fund (PHF) is paid to the Ghana National Petroleum Corporation (GNPC) as Carried and Participating Interest (CAPI).

The remaining is allocated as follows; 70% goes to the Annual Budget Funding Amount (ABFA) while 30% is paid to the Ghana Petroleum Funds (GPFs). The ABFA supports the budget in four priority areas –expenditure and amortization of loans for oil and gas infrastructure, agriculture modernization, road and infrastructure and capacity in oil and gas.

The use of the ABFA has however been reviewed as Section 21(5) of the PRMA clearly stipulates to include agriculture, road, rail and other critical infrastructure development, physical infrastructure and service delivery in health as well as physical infrastructure and service delivery in education.

Apart from funding the above mentioned priority areas, the ABFA also funds the Ghana Infrastructure and Investment Fund (GIIF) and the Public Interest and Accountability Committee (PIAC), an oversight body that monitors the judicious use of oil revenue in the country.

The GPFs is made up of the Ghana Stabilization Fund (GSF) which receives 21% out of it and the Ghana Heritage Fund (GHF) is allocated 9%.

The Sinking/Contingency Fund has been established under the GSF to take care of debt servicing and national emergencies while the GHF is invested for future generation.

Emmanuel Kuyole, Executive Director, Centre for Extractives and Development Africa (CEDA) expressed discontent about the level of under-development in mining communities here, urging government to take steps to improve conditions in such areas.

He said, “In terms of development, we have not seen commensurate development and so going forward one of the areas we need to take note of is the fact that our environment is so important so in the signing of agreements, we should ensure that we don’t give-away a lot; we should ensure that the communities and the social and the environmental environment with which mining takes place takes precedence over what we do and therefore initiatives such as the CDSs and also investment in mining areas is a priority.”

Dr. Gad Akwensivie, Principal Stool Lands Officer, OASL says the establishment of mines has its associated problems hence the non-release or delay in paying funds meant for such communities retard development.

“Whenever a mine goes to a place, it brings a lot of problems; social vices, garbage, pressure on health facilities, schools etc. because people rush to such communities and so this money is basically to augment this pressure to help them provide those services they are required so when these monies delay, in effect, you are just compounding the problems of the people within the mining communities,” he stated.

In Nigeria, the federal government receives 45.83% of revenue from its oil and gas industry, 23.25% to the 36 states, 17.92% to all municipalities as well as 13% to all 9 producing states in the country for development projects.

84.5% of oil revenue is used to support the Indonesian government’s budget while 15.5% is allocated to local government authorities for their development projects.

Alaska in the United States of America (USA), Bolivia and Mongolia are examples of places where governments make direct transfers from extractive revenue to the people.

Mining here dates back as far as 1493 and Gold Coast produced 35% of world production between 1493 and 1600.

A total of 17 billion United States Dollars (USD) have been invested in the mining sector between 1983 and 2016 making it the highest gross foreign exchange earner.

However, little is seen by way of development in infrastructure in mining areas across the country.

Ghana commenced oil and gas production in November 2010 and has funded various projects across the country with oil revenue and the establishment of a MRHF, it is anticipated, would engender rapid development in mining communities.

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