Newmont-Zijin mining deal irrational – IFS

THE Institute for Fiscal Studies (IFS) has strongly criticized government’s concession agreement involving Newmont’s Akyem Gold Mine and China’s Zijin Mining Group, calling it irrational and urging immediate withdrawal.

 The deal, which involves the sale of the Akyem Mine for $1 billion, has sparked widespread concerns over Ghana’s management of its natural resources.

In an exclusive interview with Zed 101.9fm, Dr. Said Boakye, a Senior Research Fellow at the IFS, highlighted the flaws in the current arrangement, arguing that the deal effectively transfers control of Ghana’s valuable mineral resources to private companies in exchange for minimal returns.

Dr. Boakye underscored that the country’s royalty-based revenue from the mine, typically no more than 6%, is far below the value of the resources being extracted.

Minimal Returns for Lucrative Resources

“If you give state resources to a company and only tax their profit, you have essentially sold those resources,” Boakye explained.

 He pointed out that while private individuals and businesses are taxed on their income, Ghana’s mineral wealth should not be treated the same way.

“Royalties are capped at 6%, and in some cases, it’s as low as 3%—which means we are effectively selling our mineral wealth for next to nothing,” he stated.

Dr. Boakye lamented that this approach leaves the state with only a small fraction of the true value of its mineral wealth. He called for an immediate reassessment of the concession model, warning that continuing with such agreements would deprive the country of critical revenue needed for development.

“We have been advocating for the government to rethink these deals, but so far, they have not listened,” he said.

“It is irrational for a country with such lucrative resources to sell them off for royalties amounting to just 3% or 6%. The government must exit this concession arrangement immediately.”

The IFS’s call comes on the heels of mounting opposition from other organizations, including the Institute of Economic Affairs (IEA).

The IEA recently voiced its objections to the Newmont-Zijin deal, arguing that it not only undermines Ghana’s long-term economic interests but also breaches key provisions of the lease agreement, which expires in January 2025.

IEA and IFS Push for Broader Reforms

In its statement, the IEA called for a constitutional amendment to strengthen resource governance in Ghana and curb corruption in the sector.

The institute’s proposals include amending Article 257(6) of the Constitution, which currently vests control of Ghana’s natural resources in the President.

The IEA argues that this gives the President undue authority to sign off on resource deals without sufficient oversight, thereby opening the door to mismanagement and corruption.

Instead, the IEA proposes that natural resources should be vested in the state, and all agreements should require parliamentary approval under Article 268(1) of the Constitution. This would ensure greater accountability and transparency in the management of Ghana’s mineral wealth.

The IEA also recommended introducing a provision in the Constitution or the Minerals and Mining Act (2006, Act 703) that would prohibit the government from signing major resource contracts within six months of the end of its term.

According to the IEA, this would prevent “eleventh-hour” deals that benefit political elites, families, or friends, rather than the nation.

“The sale of the Newmont Akyem Mine not only violates critical terms of the existing lease agreement but also compromises Ghana’s ability to fully benefit from its natural resources,” the IEA stated.

Both the IFS and IEA are calling for a fundamental rethink of Ghana’s approach to managing its mineral wealth, emphasizing the need for more equitable and transparent contracts that prioritize national development.

The IFS stressed that Ghana should no longer rely on the argument that it lacks the capital or expertise to manage its resources independently. Instead, the country should focus on leveraging its resources as collateral to secure financing, build local capacity, and pursue sustainable management practices.

Growing Public Concerns

Public sentiment is increasingly aligning with these calls for reform, as Ghanaians become more aware of the significant economic benefits being lost due to poorly negotiated deals. Civil society groups and local mining communities have voiced frustration over the lack of transparency in how resource revenues are managed and distributed.

The ongoing debate over the Newmont-Zijin deal has also reignited discussions about how Ghana can better protect its resources from exploitation by foreign corporations while ensuring that mineral wealth translates into tangible benefits for the country’s citizens.

As the January 2025 expiration of Newmont’s lease approaches, pressure is mounting on the government to reconsider the deal and address the underlying issues that have long plagued Ghana’s mineral resource governance.

With both the IFS and IEA advocating for more prudent and transparent management of Ghana’s mineral resources, the government faces increasing pressure to exit the Newmont-Zijin agreement and pursue contracts that yield higher returns for the nation.

As Ghana seeks to navigate its path to economic growth, the debate over resource governance will remain a crucial issue in determining the country’s future.