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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
Outline
Ambivalence 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
Ambivalence and Common Perceptions
• 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’
Basis of the ambivalence and ‘losing out’ Perception
Eleven African
countries are among
the top ten global
resource countries in
at least one major
mineral.
4
Source: Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)
Basis of the ambivalence and ‘losing out’ Perception
cont’d
Some leading African mineral resources (2005)
Mineral
Production Rank Reserves
PGMs*
54%
1
60+%
Phosphate
27%
1
66%
Gold
20%
1
42%
Chromium
40%
1
44%
Manganese
28%
2
82%
Vanadium
51%
1
95%
Cobalt
18%
1
55+%
Diamonds
78%
1
88%
Aluminium
4%
7
45%
Also Ti (20%), U (20%), Fe (17%), Cu (13%), etc.
*PGMs: Platinum Group Minerals
Rank
1
1
1
1
1
1
1
1
1
…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
Reaction to these perceptions
 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
SOME GLOBAL FACTS
Global mining - 1984
CIS 22.1 %
Europe excl CIS
7.7 %
North America 13.7 %
Asia 11.0 %
Latin America excl Mexico
16.0 %
Africa
19.5 %
Oceania 9.4 %
Source: Raw Materials Data, 2012.
Global mining - 2010
Global mining
2010
CIS 10.5 %
Europe excl CIS
2.4 %
North America 8.2 %
Asia 25.0 %
Latin America excl Mexico
22.1 %
Africa
10.4 %
Oceania 14.4 %
Source: Raw Materials Data, 2012.
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 constraints
Costs increasing
 Price volatility but increasing
 Host countries demading more share –
more state intervention
 Increasing competition between countriesRemote
locations
Lower oregrades
Human resources
Some realities from Ghana:
Contribution of the mining sector
Leading Mining Regions of Africa
14
Source: Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)
Traditional Minerals in Ghana
 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.
Mining industry prior to start of Economic Recovery Programme (ERP) (1983):
• not attracting new investments
• no new mine opened from 1945
• falling levels of production
• worn out & outdated
infrastructure/machinery
• exodus of skilled personnel
Figure 2: Gold Production Figures
(1958 to 1983)
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
Source: Ghana Minerals Commission 2012
0
1958
1962
1966
1970
1974
1978
1982
TREND IN TOTAL INVESTMENT INFLOW INTO THE MINING INDUSTRY
2000-2011
900
799.5
765.3
800
In Million US Dollars
770
780
670.22
661.98
700
762.26
556.44
600
500
400
300
313.72
330.43
2002
2003
INVESTMENT
275.53
231.78
200
100
0
2000
2001
2004
2005
2006
2007
2008
2009
2010
Years
Over $7billion attracted to Ghana since 2000
2011
‘Gold price soaring’ 2000-2012
Has reflected in the Contribution to GDP
Contribution of Some Key Sectors to GDP
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0.00%
1990
Percentage of GDP
7.00%
Years
Mining
Cocoa Products
Forestry and Logging
20
Contribution to Merchandise Exports by Key Sectors
Contribution to Total Merchandise Exports by Key Sectors (%) [1984 - 2010]
80.00%
70.00%
Merchandise Exports (%)
60.00%
49%
50.00%
47.44%
40.00%
30.00%
20.00%
20.34%
10.00%
0.00%
YEARS
Cocoa Prod. & Marketing
Timber
Non Traditional
Minerals
21
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
Royalties Paid to Government (GH¢) From 2003-2011
Government revenue increases with rise in Gold Prices
250,000,000
218,922,903
200,000,000
150,000,000
133,278,248
104,244,553
100,000,000
68,358,429
43,226,713
50,000,000
35,107,983
19,054,625
18,585,970
21,655,540
2003
2004
2005
2006
2007
2008
2009
2010
2011
Government revenue increased with rise in gold price
Corporate Tax (GH¢)
700,000,000
649,902,536
600,000,000
500,000,000
400,000,000
300,000,000
Corporate Tax (GH¢)
200,000,000
100,000,000
6,604,989
-
3,309,517
2004
2005
70,002,249
22,877,347
26,939,694.64
18,137,127
2006
2007
30,169,771
2008
2009
2010
2011
Ghana’s policy response to ‘losing out’
 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)
Cost of production have increased dramatically
Total taxes and levies
Note: Cost inflation after 2012 estimated based on historical CAGR 2001-2012; Crude Oil Prices for West Texas Intermediate delivery to Cushing, Texas
Source: Economist Intelligence Unit, International Energy Agency, Eskom website, Government of Western Australia website, press searches, Bloomberg
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