Government’s plan to triple the Growth and Sustainability Levy (GSL) on mining companies has been criticised by the Africa Centre for Energy Policy (ACEP).
ACEP warns of potential risks to investment and sector stability. 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.”
The country’s average royalty rate for mining firms already stands at 5 percent.
ACEP argues 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.
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 indicates.
Alternatively, ACEP urges government to consider introducing windfall taxes as part of contract renegotiations, particularly as some agreements are set to expire.
Additionally, the Ghana Chamber of Mines also criticised government’s decision to triple the Growth and Sustainability Levy from one percent to three percent on gross production.
Mining executives argue that beyond the immediate financial burden, unpredictability of fiscal policies creates an unstable business environment. The levy, which applies to revenue before cost deductions, could significantly impact profitability – making Ghana a less attractive destination for mining investments.
Meanwhile, former Deputy Finance Minister Mona Quartey has expressed concern over government’s decision to raise the Growth & Sustainability Levy on mining companies from 1% to 3%, warning of its potential impact on the extractive sector.
She acknowledged the need for revenue generation but cautioned that the increased levy could place undue pressure on the industry at a critical time.
