Gov’t sidelines Mining Review Committee

 …in a “give-away” deal with Gold Fields

 

Professor Akilagpa Sawyerr, Chairman of the National Mining Review Committee (MRC), says negotiations on the development agreement between government and Gold Fields were carried out on the blind side of the Committee.

“I feel obliged as Chairman of the MRC to state categorically that MRC was not involved in the development of positions, nor the conduct of the negotiations that produced the Gold Fields development agreements ratified by Parliament on 17^th March, 2016. Indeed, those negotiations were carried out on the blind side of the Committee.”

In a statement that follows requests by Third Word Network Africa (TWN-Africa) for government to disclose details of the deal, the chairman of the committee set up by government to review mining deals in a bid to win better terms for the nation said: “As Chair of the MRC, I did not get to hear about the negotiations till after they had been concluded, even though I was in regular contact with the Ministry of Lands and Natural Resources at all times”.

He indicated that: “When I finally got the news I asked for and was given a copy of the proposed agreement, together with a request from the Minister of Lands and Natural Resources for a review of the documents. After a hasty review I sent critical observations to the supervising ministries and to the Minerals Commission on two separate occasions”. 

He explained that the negotiations with Gold Fields had been conducted on the basis of fundamental misconceptions about the limits of powers given the minister under the relevant provisions of the Minerals and Mining Act, 2006 (Act 703); and  the import of the revised Newmont Agreements negotiated by the MRC and signed less than a year ago.

He added that the tax and royalty concessions granted Gold Fields in the stability clauses (reportedly estimated by Gold Fields to be worth US$26million this year) were serious fiscal giveaways, for which no justification is apparent: and that the entire approach to the negotiations, especially by-passing the Mining Review Committee and the rush to conclude, had the tendency to undermine the national position in future negotiations.

This is a response to Third World Network Africa’s demand made in regard to the Gold Fields Development Agreements signed by government with Gold Fields Ghana Ltd.  

TWN-Africa said even though it has written to the Speaker of Parliament, Majority and Minority Leaders, the Parliamentary Committee on Mines and Energy, the Ministry of Lands and Natural Resources, the Attorney-General, the Minerals Commission among others, they have not found it worth their while to respond to the concerns. 

TWN-Africa expressed concern that till date there has not been any public disclosure of any detail of the development agreements between government and Gold Fields Limited that were rushed through Parliament.

“Gold Fields’ public disclosure to its shareholders is in stark contrast to the failure of our government to disclose details of the agreements with Gold Fields. The only official pronouncements have been in response to questions from the media, including those provoked by TWN-Africa’s press conference -- and these have not provided any details of the Agreements.”

On 29th March 2016 Gold Fields announced in Johannesburg that it had concluded “development agreements” with the government of Ghana, reducing corporate tax in respect of its Tarkwa and Damang Mines from a rate of 35.0 percent to 32.5 percent, and royalty from a flat rate of 5 percent to a sliding scale starting from 3 percent.

TWN- Africa submits that “from Ghana’s perspective, we are foregoing US$26m of tax and royalty income from the Tarkwa and Damang Mines this year”.

Section 49 of the Minerals and Mining Act, 2006 (Act 703) provides that a Development Agreement involves government granting concessions or privileges to a mining company in exchange for the investment of more than US$500million under a mining lease.  Among such concessions is a stability agreement on fiscal issues in conformity with section 48 of Act 703.

TWN-Africa expresses grave concerns about the massive concessions granted the company and questions their legality, while seeking more convincing responses from government.

It insists that the tax and royalty cuts offered to Gold Fields Ghana Limited are illegal. It demands government to publish the Development Agreements with Gold Fields, as well as disclose the enforceable investment commitments made by the Company which justify the Development Agreements.

The Network again demands that Parliament publish the Report of the Mines and Energy Committee that recommended approval of the Development Agreements, and explain what circumstances justified rushing the approval through Parliament -- while calling on government to make public the roles played by various public institutions, structures and individuals in the development, negotiation and approval of the Development Agreement.

TWN-Africa blamed government officials for using the claim of saving jobs and threats of potential mine closure as excuses to justify government’s action.

“Ironically, rather than respond to the issues raised about the Gold Fields agreement, public officials and Gold Fields officers have put forward the spectre of an Obuasi-style closure of Gold Fields’ mines as a threat in defence of the agreements,” the Network observed.

Senior Vice-President and Head of Gold Fields West Africa Region, Alfred Baku, was quoted as saying that the firm plans to invest more than US$500m. “The amount we are calling is the amount we are going to invest going forward; and we think that between the two operations we have in Ghana we are going to invest in excess of the US$500 million.” 

However, Mr. Baku did not indicate the period within which the investment would be made and what precise form it will take.

In a related development, Chief Executive of the Minerals Commission Dr. Toni Aubynn told media that the Development Agreements are based on an investment plan.

Dr. Aubynn asserted that the requirements for a Development Agreement have been met, and that Gold Fields “has indicated it is willing to invest more” – saying that Parliament assured itself of this before approving the Agreements. 

He however gave no details of the clear and enforceable commitments made under the investment plan. Neither did he indicate a readiness by government to publish the Agreements and terms of Gold Fields’ investment plan so as to definitely clear the air.

According to the TWN, Dr. Aubynn also offered two other justifications for the Development Agreements, including the fact that Gold Fields has been in Ghana for a long time and already invested over US$2billion; and the difficulties facing the company due to the drop in gold prices, as well as the need to help the struggling Damang Mine.

The Network said: “While being vague on the exact nature and terms of new investments, officials of Gold Fields have also been quick to talk-up the potential benefits of the tax cuts for responding to problems of the sector, such as saving jobs.

“The challenges facing the gold mining sector and its knock-on effects on public revenue are real, and Gold Fields is not the only affected company. However, past investments and current financial distress due to price drops or a desire to stave off redundancies are not a legal basis for a development agreement under the terms of Act 703.

“Actually, to avoid a repeat of the Obuasi experience, it is important that Gold Fields development agreements contain firm and measurable commitments. The public interest in such a commitment is one of the bases of our demand for a full disclosure of the agreements,” it said.