Mining Firms could push back against 3% Growth and Sustainability Levy – ACEP

The Africa Centre for Energy Policy (ACEP) has warned that Ghana’s decision to increase the Growth and Sustainability Levy (GSL) on mining firms from 1% to 3% of gross production could trigger resistance from industry players, jeopardizing investments and fiscal stability.

The GSL, introduced in 2023 to support economic recovery, is applied as a percentage of profit before tax for most businesses. However, in the extractive sector, it is levied on gross production—effectively functioning as an additional royalty payment. With the new increase, mining companies will now face an effective royalty rate of about 8%, up from the standard 5%.

The government estimates that the revised GSL will generate GHS4.6 in 2025, a significant jump from previous years. While this is expected to boost state revenue, ACEP warns that the burden placed on mining firms could have negative consequences for the sector.

“What is certain about this proposal is that the mining businesses with stability agreements are likely to resist the increase as they did with the earlier 1 percent, as it threatens the stability and sanctity of their contracts,” the policy think tank stated in its 2025 Budget Insights.

ACEP further cautioned that such a move could create political and fiscal risks, as firms may demand stronger stability clauses in future mining agreements to protect against unexpected tax hikes. “A high political risk could also lead to divestment of assets from capable and compliant companies to the less capable ones,” ACEP warned.

Beyond the risk of resistance, ACEP also criticized the government’s approach to revenue collection from the mining sector, arguing that Ghana could have adopted a more strategic fiscal tool. “Rather than signaling arbitrariness, government needs to learn lessons and introduce windfall taxes, especially when some mining contracts are due for renegotiations,” the report suggested.

ACEP emphasized that Ghana’s extractive industry taxation should balance revenue generation with investment incentives. “Uncertainty and arbitrariness are bad for the extractive business. The Ministry of Finance must have an equal understanding of how much it costs to produce gold as it fixates on how much it is sold for—the two variables are useful for really understanding the fiscal take,” the think tank further noted.

With Ghana struggling to close a GHS35 billion energy sector funding gap, the government is looking to the mining industry for additional revenue. However, ACEP’s warning suggests that the move could backfire if firms challenge the tax increase, creating long-term instability in the sector.

Source: Ceditalk