Mining Sector Budget of Ghana: Analysis of Allocations and Performances in 2017 and 2018 Capping of the MDF Undermines Development of Mining Communities

HIGHLIGHTS

  1. The mining sector constituted 1.5% of the GDP (non-oil) of Ghana in 2017, the lowest in the last decades. This is a critical pointer to rethink our reliance on mining revenues for our national budget support and fiscal rules employed in the management of revenues. Ghana in October, 2018 passed the Minerals Income Investment Fund Act as a safeguard against fiscal unsustainability and pro-cyclical spending.
  1. The Minerals Income Investment Fund (Act 947) failed to state the fiscal rules. It only empowers the Board of the Fund to issue Investment Policy Statements under Section 40 of the Act. While the Policy Statements may spell the fiscal rules and bring flexibility in the utilization of the revenues, this approach will lead to non-adherence to the rules as a result of political pressures. It will also be difficult to enforce it since it is not binding.
  1. It is recommended that a Legislative Instrument is passed detailing fiscal rules in terms of what proportion goes into investment, savings for future generations and stabilization funds to support the budget in times of commodity price collapse. Critical in such piece of legislation is the provision of escape clauses to give some level of flexibility to manage commodity busts.
  2. An amount of GH¢43.7million representing 12.6% of the total budget for Ministry of Lands and Natural Resources (MLNR) was allocated to Minerals Resource Development and Management programmes (Minerals Commission and Geological Survey Authority) for 2018. This is a one per cent (1%) increment on previous year, 2017.
  1. Twelve and half percent (12.5%) of the mineral royalty -was allocated to the Minerals Development Fund (MDF) in 2017 and 2018, a violation of Section 3(a) of Minerals Development Fund (MDF) Act, 2016 (Act 912) which requires that ‘20% of the mineral royalty received by GRA on behalf of the Republic from holders of mining leases in respect of the mining operations of the holders’ to be allocated to the MDF.
  1. The application of the Earmarked Funds Capping and Realignment Act, 2017 (Act 947) is viewed to be responsible for the allocation of the 12.5% instead of the prescribed 20%. Since the Minister of Finance has a discretion to determine allocations to earmarked Funds under Act 947, the Minister should be prevailed upon to adhere to the formula prescribed under the MDF Act (Act 912) as the application of the Act 947 in this way undermines the novel object of establishing the MDF.
  1. In 2017, receivables from mineral royalties was GH?855.8million, exceeding the budgeted receivables by 36.6%. Actual disbursement for the year, however, was GH?73.1million, representing 8.5% of the mineral royalty. This is even less than the 12.5% allocated. This has implications for disbursements to the Minerals Commission and Geological Survey Authority under Section 21 of Act 912.
  1. In 2018, GH¢39.5million was allocated to the Minerals Commission, an increase of 8.7% on the previous year, 2017. While its Compensation, and Goods and Services budgets have performed well, that of the capital expenditure budget has underperformed for the two consecutive years under review.
  1. In 2018, GH¢4.2million was allocated to the Geological Survey Authority (GSA), a decrease of 1% on the previous year, 2017. No allocation for capital expenditure was made in both years. This could undermine retooling of the laboratories of the GSA and procurement of equipment needed to sustain their operations.
  1. Intensifying efforts to implement the Geological Survey Authority Act, 2015 (Act, 928) to deal with the perennial inadequate funding for activities of the Authority. The Authority must begin the commercialization of some of its activities such as consultancy services and sale of geological data to generate more resources to undertake its critical activities and also to better remunerate its staff.
  1. GH?91,530.00 was generated internally by the Geological Survey Authority and lodged into Government’s chest; there is the need to review retention policy to improve on the budgetary situation of the Authority in addition to commercializing its activities

By CENTRE FOR EXTRACTIVES & DEVELOPMENT, AFRICA (CEDA)

CENTRE FOR EXTRACTIVES & DEVELOPMENT, AFRICA (CEDA) is an extractive and development policy research and advocacy organization working with partners around the continent and beyond to promote better governance of the mineral resource endowment of the continent for improvement of national life.

 

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