Dr. Toni Aubynn Chief Executive Officer The Ghana Chamber of Mines
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Transcript of Dr. Toni Aubynn Chief Executive Officer The Ghana Chamber of Mines
Harnessing Africa’s Minerals Resources for Sustainable Development.
A change from Cash-cow to Integrated mining-led Sustainable Development. Some realities from Ghana’s Mining Industry
International Economic Forum of the Americas (IEFA)Toronto Global Forum
Toronto Canada 1-3 October
Dr. Toni Aubynn
Chief Executive Officer
The Ghana Chamber of Mines
OutlineAmbivalence about the benefit of
mineral exploitation
Some Global facts about Mining
Some realities from Ghana
Conclusion
Key message: Minimise the focus on mineral rent; adopt more creative, integrative mining-led sustainable development
Key message: Minimise the focus on mineral rent; adopt more creative, integrative mining-led sustainable development
• Africa is loosing out• ‘Ghana is not receiving any benefit from
mining’ or ‘is not benefiting enough......’• ‘No physical transformation in our mining
communities i.e. Tarkwa and Obuasi vs. Johannesburg?’
• ‘Tax them more’
Ambivalence and Common Perceptions
4
Basis of the ambivalence and ‘losing out’ Perception
Source: Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)
Eleven African countries are among the top ten global resource countries inat least one major mineral.
Eleven African countries are among the top ten global resource countries inat least one major mineral.
Basis of the ambivalence and ‘losing out’ Perception cont’d
Some leading African mineral resources (2005)
Mineral Production Rank Reserves Rank
PGMs* 54% 1 60+% 1Phosphate 27% 1 66% 1Gold 20% 1 42% 1Chromium 40% 1 44% 1Manganese 28% 2 82% 1Vanadium 51% 1 95% 1Cobalt 18% 1 55+% 1Diamonds 78% 1 88% 1Aluminium 4% 7 45% 1Also Ti (20%), U (20%), Fe (17%), Cu (13%), etc.*PGMs: Platinum Group Minerals
…And Yet: Persistence of poverty, inequality and unemployment Inadequate visible local content Africa mining
business No significant reflection on the communities where
mining takes place ….Plus Africa’s resilience to the recent global economic
crises and descent economic growth providing it a new confidence
Past history of industry not very transparent (enclave) Industry Mining Industry, ‘a bad story teller’ Positive commodity price particularly gold and oil in
the last decade Perception of Revenue equating profit
Attempt at ‘Resource Nationalism’ in South Africa. A clear NO from SA Government
Zimbabwe: increase in royalty on gold from 4.5% to 7% and proposed changes in ownership structure
Zambia attempted introduction of Windfall profit tax among other fiscal changes
DR Congo to increase taxes Ghana
Reaction to these perceptions
SOME GLOBAL FACTS
Global mining - 1984
Source: Raw Materials Data, 2012.
CIS 22.1 %
Europe excl CIS 7.7 % North America 13.7 %
Asia 11.0 %
Latin America excl Mexico 16.0 %
Africa19.5 % Oceania 9.4 %
Global mining - 2010
Source: Raw Materials Data, 2012.
CIS 10.5 %
Europe excl CIS 2.4 % North America 8.2 %
Asia 25.0 %
Latin America excl Mexico 22.1 %
Africa10.4 % Oceania 14.4 %
Global mining 2010
Strong demand drivers•Extended period of growth.
• China/Asia major engine.
• Infrastructure & industrial/personal use.
• Decline less dramatic than expected – long term growth will slow down but remain steady.
Increasing Supply constraintsCosts increasing
Price volatility but increasing
Host countries demading more share – more state intervention Increasing competition between countriesRemote locationsLower oregradesHuman resources
Some realities from Ghana: Contribution of the mining
sector
14
Leading Mining Regions of Africa
Source: Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)
Traditional minerals • Gold• Manganese • Bauxite and • Diamonds.
Others not fully exploited include• Kaolin• Salt• Clay• Marble• Mica• Limestone etc.
Recent airborne geophysical survey confirms traces of several other minerals including iron ore, platinum, uranuim, lead, copper, etc.
Traditional Minerals in Ghana
Figure 2: Gold Production Figures
(1958 to 1983)
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
1958 1962 1966 1970 1974 1978 1982
Source: Ghana Minerals Commission 2012
Over $7billion attracted to Ghana since 2000
‘Gold price soaring’ 2000-2012
20
Has reflected in the Contribution to Has reflected in the Contribution to GDP GDP
21
Contribution to Merchandise Exports by Key SectorsContribution to Merchandise Exports by Key Sectors
Performance of the Mining Sector in 2011 (cont’d)
Number One Tax Payer and highest contributor to GRA: Contributed about Us$540million to GRA representing
27.61% of total Internal Revenue collections in 2011. paid Us$360 million, in corporate tax to the GRA, representing
38.26% of the total company tax collected in 2011. The sector voluntary contributed an amount of about Us$27
million to their communities and the general public Contributed about 42% of gross merchandise exports
earnings companies returned about Us$3.1 billion representing 75%
of their mineral revenue through the BOG and the Commercial Banks in 2011 against statutory requirement of 25%.
Industry grew by 14.3% in 2011 as compared to 8.3% in 2010
Continues as the leading attractor of FDI
Government revenue increased with rise in gold price
Imposed the fiscal measures on the mining companies in 2012:
– Changed mineral royalty from a range of (3 to 6)% to a flat rate of
5%
– Changed capital allowance from 80% in the first year and 50% on
declining balance to a straight line amortization over 5 years at
20% each year
– Ring-fencing of assets for the purposes of determining tax payable
– Corporate tax increased from 25% to 35%
– Review of Stability Agreements
– Proposed windfall profit tax of 10% (Suspended temporarily on 6
September 2012 a welcome news)
Ghana’s policy response to ‘losing out’
Note: Cost inflation after 2012 estimated based on historical CAGR 2001-2012; Crude Oil Prices for West Texas Intermediate delivery to Cushing, TexasSource: Economist Intelligence Unit, International Energy Agency, Eskom website, Government of Western Australia website, press searches, Bloomberg
Cost of production have increased dramatically
Total taxes and levies
Value Proposition: Create Value through Integration:
Notable sectors that have benefited from the mining industry
in Ghana include:
― Banking & Financial Services,
― Transport & Logistics,
― Hospitality and Catering,
― Consulting-Environmental &Engineering Services
― Manufacturing & Fabrication
Chamber, Ghana Minerals Commission and the IFC
collaborated Project on Local Content
Conclusions Africa host significant mineral resources. Minerals price
environment has never been better The needs for more creative ways to leverage the current
environment for Afica’s development Excessive reliance on rent/taxes may be a slippery-slop.
There is need for a balance between profitability and equity.
Ghana still the best destination for mining investment evenn beyond the West Africa region. BUT can lose it if cost issues including fiscal impost are not seriously addressed
Mining should not be a ‘stand-alone’ economy, it must be integrated into the broader national and regional economy
Local Content and Value addition is the surest way to optimising the benefits of mining
Thank You