By Kizito CUDJOE
The Africa Centre for Energy Policy (ACEP) has criticised government’s plan to triple the Growth and Sustainability Levy (GSL) on mining companies, warning of potential risks to investment and sector stability.
The levy, which currently stands at 1 percent of gross production, is set to rise to 3 percent if parliament approves the 2025 budget. Finance Minister, Dr. Cassiel Ato Forson, presenting the proposal justified the increase as a means for the country to claim a greater share of windfall profits from a 45 percent surge in gold prices.
“We are proposing to increase the Growth & Sustainability Levy from 1 percent to 3 percent on the gross production of mining companies to enable the nation to have its fair share of the windfall from rising gold prices,” he said.
Additionally, he said: “We also propose to extend the sunset clause to 2028, along with the Special Import Levy”.
It is given this development that the Policy Lead for Petroleum & Conventional Energy at ACEP, Kodzo Yaotse, warned that the proposed adjustment would push the effective royalty rate for mining firms to approximately 8 percent – potentially discouraging investment.
“Royalty is the most sensitive fiscal tool for capturing state revenue,” he said, noting that “any increase at the base level of production could negatively affect project returns, the ability to sustain capital and future expansion plans,” said Mr. Yaotse.
The GSL, introduced in 2023 to support economic growth and fiscal sustainability, is calculated as a percentage of profit before tax for most businesses. However, for the extractive sector it is applied directly to gross production, effectively functioning as an additional royalty.
The country’s average royalty rate for mining firms already stands at 5 percent.
In its assessment of the 2025 budget, ACEP argued that mining companies with stability agreements are likely to resist the hike – just as they did with the initial 1 percent levy, citing threats to the sanctity of their contracts.
“The proposal increases political and fiscal risks. Companies may push for stronger stability clauses in their agreements to mitigate uncertainty and high political risk could result in asset divestment from capable, compliant firms to less competent operators,” ACEP noted.
Rather than imposing levies that could signal policy unpredictability, ACEP urged government to consider introducing windfall taxes as part of contract renegotiations, particularly as some agreements are set to expire.
“Uncertainty and arbitrariness are bad for the extractive business,” the think-tank warned.
“The Ministry of Finance must recognise that in-situ gold assets are valuable only when extracted – and bringing them out of the ground costs money. A balanced fiscal approach should consider both production costs and market prices to ensure fair and sustainable revenue collection,” they added.
Also, ACEP acknowledged the budget proposal on allocating all Annual Budget Funding Amount (ABFA) revenues to infrastructure projects.
“This budget proposal marks a departure from previous practices, where 70 percent of ABFA revenues were allocated to public investment expenditure as prescribed by the Petroleum Revenue Management Act (PRMA), with the remaining portion directed toward goods and services in the selected priority areas.”
ACEP maintained that the key advantage of this new approach is its increased focus on infrastructure development, which is essential for addressing Ghana’s significant infrastructure deficit.
“By allocating all ABFA revenues to infrastructure, the proposal has potential to expedite critical projects such as roads, health and education infrastructure, railways and more.”
However, ACEP said: “To fully realise the benefits of this strategy, careful attention must be given to ensuring transparency, the quality of project delivery and value for money considerations in the procurement and delivery of these infrastructure projects”.
It reckoned that these issues have been persistent challenges in ABFA-funded projects which need to be addressed to achieve long-term success.
