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In an effort to attract foreign direct investments into the country in the 1980s, the Government of Ghana, under the supervision of the International Monetary Fund (IMF) and World Bank, introduced a number of reforms in the mining sector, which was used as a growth pole for reviving an almost comatose economy. The reforms formed part of the general Economic Recovery Programme (ERP) undertaken by the government. As part of these reforms, a number of incentives were introduced to make Ghana a competitive destination for foreign direct investment in the solid minerals sector. Some of these incentives include tax holidays of up to ten years, low royalty payments, exemption from the payment of import duties on equipments, non-payment of VAT on furnished accommodation, and a number of others.

In addition to the general incentives that the Ghana Investment Code offered to investors who come into the country, the Minerals and Mining Act, 2006, Act 703 also consolidates these incentives to multinational companies operating in the mining sector.

While acknowledging the fact that the 1980s presented serious challenges to the economy and governance systems in the country, almost over two decades of political stability has rendered these incentives irrelevant. From the heady days of one military coup after the other, the country has seen a very stable political system, with 19 years of constitutional democracy. This has been achieved against the backdrop of an increasingly stable political environment in the West African sub-region. For instance, Nigeria which was ushered into constitutional rule in 1999 successfully underwent its most peaceful elections in its 51 – year history, Sierra Leone and Liberia are recovering from brutal civil wars through the installation of democratically elected regimes, and Togo went through a smooth constitutional change in leadership after the death of President Gnassingbe Eyadema in 2005. Guinea for the first time in her history has successfully organised democratic elections and installed a President. Ghana, meanwhile successfully managed elections in 2008 with the then opposition candidate beating the ruling party’s candidate by the slimmest of margins. These positive developments in the sub-region defeat any fears of political instability that has been used as an excuse by investors to force our governments into signing unfavourable stability agreements with them.

Apart from the political stability that the country has enjoyed, the economy has also grown averagely above 5 percent over the past decade. Even when the global economic recession hit several economies around the world, the Ghanaian economy showed great resilience successfully weathering these difficult times. Inflation has been managed fairly well over the years, interest rates have consistently fallen, and budget deficits have also been managed well by successive regimes. There is currently a very vibrant banking sector that can compete with any in the world. In addition to this robust banking industry, the Ghana Stock Exchange has also consistently been ranked as one of the best performing in the world, indicating massive confidence in the economy.

Additionally, state institutions that can be relied on to serve as arbiters in cases of dispute are relatively strong, independent and have shown that they have the capacity to deal with any investment related problems. An example is the Commercial Courts that have been established by the Chief Justice to deal with commercial disputes expeditiously. The Commission on Human Rights and Administrative Justice (CHRAJ) also exists to protect the rights of both the multinational companies and their employees. A vibrant media and civil society that reflect different shades of opinion in the country also exists to check the excesses of an over-exuberant government that may attempt to subvert a company’s investment agreement.

In the midst of all these positive indicators, arguments for the continued retention of the Stability Clauses in the country’s investment agreements with multinationals are untenable. For instance, it makes no economic sense for the government to forgo its mandatory 10 percent stake in Newmont Ghana Gold Limited, very much in contravention of Section 43 (1) of the Minerals and Mining Act, 2006 (Act 703). Furthermore, multinational mining companies in the country are still paying 3 percent royalties, even though Parliament has reviewed the rate to 5 percent. The reason is that these companies have stability agreements with government that will hold the 3 percent royalty for a period of 15 years! Again, Newmont and other multinational mining companies do not pay any VAT because of the same stability agreement. We find it strange that the country can mortgage the payment of royalties, considered as the most reliable source of mineral revenue to the country. If mining companies were paying the right levels of royalty to the nation, government could make enough to finance national development. For instance, a study by Akabzaa and Ayamdoo (2007) indicates that if royalties were paid at 6 percent between 1990 and 2007, the nation would have earned up to $388 million in mineral revenue.

The presence of these stability agreements robs the nation of much needed revenue to finance her development, particularly in an era when commodity prices are rising steadily on the international market (Gold, for instance is selling at record levels above 1,500 dollars an ounce). Sadly, whiles the nation loses revenue, these multinationals enjoy periods of economic boom.

It is against this background that the Centre for Social Impact Studies (CeSIS), a non-governmental research and advocacy organisation, is calling on government to urgently begin a process towards reviewing all the Stability agreements with multinational corporations operating in the extractive sector to ensure that the nation reaps maximum benefits from her natural resource endowments in periods of commodity boom. By agreeing to review these clauses, Ghana would be joining countries like Australia, Tanzania, Guinea, Liberia and Zambia who have all either reviewed their laws or are in the process of doing so, to ensure that their countries benefitted from the current commodity boom. We further call on government to be mindful of the national interest when signing future agreements with multinational companies operating in the mining, oil and gas sector. Furthermore, government should embrace international best practices of transparency by expunging confidentiality clauses in the Minerals and Mining Act so that citizens can know the nature of agreements entered into on their behalf by their elected government. In line with this, we join the Coalition on the Right to Information to call for the immediate passage of the Freedom of Information Act by Parliament to empower the citizenry to hold their government to account.



Clement K. Asiedu-Menlah

(Director, Research and Advocacy)



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(Senior Research Officer)

0246 416382

  1. Stephen Yeboah

(Senior Research Officer)

0271 103318

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