Vice-President Dr. Mahamudu Bawumia has said government is working on a roadmap that when adopted will ensure a ‘significant’ portion of gold and cocoa beans produced locally are also processed locally.
Dr. Bawumia, speaking at a conference on Fiscal Management of Mining and Petroleum in West Africa organised by the International Monetary Fund (IMF) and government, said it is unjustifable that West Africa, which produces and exports 65% of cocoa beans in the world, earns only between 3.5% and 6% of the final price of a chocolate bar.
“We are considering a progressive process that will hopefully require refining a significant proportion of all gold ores and cocoa beans locally in about five years. This will not only create private sector jobs and ease the pressure off the public sector, but also increase the potential sources and value of resources for government spending on critical infrastructure and social services.
“While gold is currently the most important one, there is potential in the development of other minerals such as manganese, limestone and bauxite in order to boost our supply chain development. Value addition is imperative if we are to maximise the potential to pursue resource-based regional industrialisation,” the Vice-President added.
Dr. Bawumia further stated that discussion is currently ongoing about a process that ensures every single bar of gold leaving the shores of Ghana is properly weighed, tested, valued and accounted for.
“While the process may not be as robust as we want, it is a positive step in the right direction; and we are impressed with the collaboration between the Ghana Chamber of Mines and Precious Minerals Marketing Company in making sure we expedite the full spectrum of accounting for our gold resources,” said the Vice-President.
The three-day conference being held in Accra brings together government officials from selected countries in West Africa with current or prospective mining and petroleum activities. The conference will focus on how to improve fiscal management of mining and petroleum, integrating fiscal regime design, revenue administration, and macro-fiscal policy.
Dr. Bawumia, opening the conference, stated that already there is a re-energised push by many African countries for a paradigm-shift from the minimalist view of ‘local content’ to a maximalist one of ‘local participation’ when it comes to our natural resources.
Resource-rich countries in Africa, he added, must not be in a situation where concession-holders rather create selective space for ‘local content’, instead of them being ‘at the table participating in main the meal.
“This trend is particularly strong in markets where the natural resource sectors have long been de-risked, and for which the countries need not be paying premium to attract foreign capital and participants any longer,” the Vice-President said.
Fiscal management of extractive industries
Speaking at the conference’s opening ceremony, Carla Grasso-IMF Deputy Managing Director, identified the main areas for fiscal management of natural resources as: design and evaluation of fiscal regimes for extractive industries; fiscal regime implementation and revenue administration; and public financial management of the resulting revenue flow, including the design of macro-fiscal frameworks and integration of revenue flows into the budget framework.
According to Ms. Grasso, there are no simple answers on how to escape the so-called Resource Curse. “But countries that have derived sustained benefits from natural resources have one common factor, and that is sound fiscal management. And sound fiscal management is made possible only when there are strong economic institutions that can formulate effective policies,” she added.
“Through the IMF’s capacity development mandate, governments around the world have worked with us—and with each other—to strengthen their economic policies and institutions. Our capacity development activities cover precisely the areas described in the four pillars: designing good tax policies, improving revenue administration, effectively managing public resources, and strengthening governance frameworks,” she said.
The conference over the next few days focuses on pillars for sound fiscal management. There will be emphasis on the interaction and dependency between the pillars.
“To give two examples: the best designed tax policy is not of much use without the capacity to administer it; and even if substantial revenue is collected, this will only improve the life of citizens in a sustained manner if the revenue is well-managed through the budget.
“Fiscal management requires effective collaboration and information-sharing between different government institutions. No one institution can by itself achieve sound fiscal management of the mining and petroleum sectors. This requires the Ministry of Finance, the Revenue Authorities, Mining and Petroleum Ministries, and regulatory agencies to work together in terms of both policy design and implementation,” the IMF Deputy-MD stated.