Phyllis D. Osabutey
5 August 2008
GHANA IS richly endowed with mineral deposits, particularly gold. Presently, mining occurs mainly in three areas, usually referred to as the Tarkwa, Ahafo and Obuasi mining districts, with about nine major companies engaging in mining operations in the country.
The country derives many benefits from the industry, such as the payment of mineral royalties. Currently, mining companies pay 3% mineral royalty, on their gross revenues, irrespective of the profitability of a gold mine. As this increases, so does the quantum of money companies pay to government, in addition to dividends and corporate taxes. Additionally, the industry contributes 5% to Gross Domestic Product (GDP) annually.
This is, however, not limited to fiscal imposts, because through the industry's linkage with other sectors of the economy, there is a multiplier effect through the supply of goods and services. Particularly, mining creates employment, and by their existence in rural communities, contribute to the development of the country through social multipliers, as banking, telecommunication, and information communication technology, among others.
In spite of these benefits, the mining industry is often involved in controversies, mainly in the area of compensation payments. Others simply think Ghana was not deriving maximum benefit from the industry, which at times gives rise to the controversies.
Very often, there are reports of scuffles between mining companies and communities, and sometimes involving non-governmental organizations, or other stakeholders over payment of what is right compensation, to farmers whose lands are affected by mining activities.
The Problem This situation sometimes degenerates into clashes between, especially youth in mining communities, and mine workers. Industry players have blamed this on the absence of a standardized system, or rates for compensation payment.
According to the Head of Corporate Affairs and Social Development of Gold Fields Ghana, Mr. Toni Aubynn, "The biggest problem comes from the fact that we don't have any standardized rates," and the law requires companies to negotiate with communities, to pay a fair and equitable price.
This, he pointed out, was subjective, and often created problems, mainly because communities and some interest groups, are of the view that mining companies just cheat people, saying, "this is not so, because mining companies also have their reputation to protect. There are values, and if a mining company is known to be cheating, it will have enormous adverse effects on the company."
He said though there is a tendency for people to get more for what they have, people tend to believe that what is paid for a cocoa tree, in one area, for example, the same should apply to another area. He explained that this was not possible, since the value placed on the cocoa tree depends on the zone, stressing, "The value for cocoa in the Eastern, Western and Brong Ahafo cannot be the same as cocoa in the north."
Another major problem, he expatiated on, was the fact that mining companies have to go through all negotiations with government to obtain a concession, and then later negotiate differently with communities, even though a company may not mine the whole of its concessions.
In spite of this, communities or individuals often demanded compensation, once they got to know the area they occupied was part of the concession, though they might not be affected, in the event that the company realized that operating in a particular area or spot may not be profitable, he said. "Even if you are not affecting them, they find a way for you to affect them, because they see it as a chance to get bulk money. If a company wants to have peace, you just settle everybody, but the law is that if you are not affecting them, you don't pay compensation," he stressed.
Mr. Aubynn noted that the situation was further worsened, because some people confuse compensation with monies or payments for consumption, instead of investing it and reap benefits periodically, as they would from farming. Some invest in unproductive ventures, such as huge buildings in the village, he stressed, saying, "Once the money is finished, they want to agitate for more, forgetting that there is no compensation that takes care of life forever."
This notwithstanding, he noted that the mining companies had been meeting regularly, especially with affected parties, to review compensation, "otherwise, the situation would have been chaotic."
Chamber of Mines Concern
The Ghana Chamber of Mines, which is the umbrella advocacy body for mining companies in the country, is worried that compensation procedures, for the land claimed for mining concession and even general construction by government, has become a problem for mining companies, government and other stakeholders.
The Director of Public Affairs of the Chamber, Mr. Ahmed Nantogmah, said under the current Minerals and Mining Act 2006, Act 2007 (section 73 (3)), there are no standard compensation for mining concessions, and property values on the land in mining areas.
In addition, owners and holders of mining rights, determine the compensation to be paid, giving rise to compensation variations, which often leaves room for controversies, and eventually creating an unhealthy business environment.
"The law, in its current form, does not also make provision for alternative land to be used for agriculture or sustainable livelihoods," he stressed, and lamented, "these problems have assumed such proportions that many civil society groups confuse the issues, and thereby create a very bad image for mining companies."
According to him, this has made it difficult for needed investment to flow into the sector, and in most cases the issue of compensation delays commencement of active mining operations in various mining areas.
On his part, the President of the Chamber, Mr. Jurgen Eijgendaal, noted that "among the notable challenges the mining industry faces in pursuit of its business, is the thorny issue of compensation," adding that the controversy arises when parties fail to reach an agreement, on the kind and quantum of the compensation.
He said unlike other developmental activities like road construction and estate development, "compensation in the mining sector is like an albatross, which when mentioned, sends shivers down the spines of investors and state agencies mandated to mediate between companies and relevant stakeholders."
What is therefore needed is a standardized and systematic compensation regime, which stakeholders say is long overdue.
Chamber's Advocacy Project
In view of the challenge the problem poses to the industry, the Chamber has embarked on an advocacy project, titled, "Advocacy for the Establishment of Standards of Compensation for Mining Concessions," with support from the Business Sector Advocacy Challenge (BUSAC) Fund, to address the issue.
By this project, the Chamber would provide inputs into the draft regulations on the current Minerals and Mining Law 2006 (Act 703), which would form the basis for establishing clear principles, and procedures of compensation payment for mining companies.
According to Mr. Nantogmah, the current Minerals and Mining Law 2006, Act 703, awaits guidelines and the outcome of the advocacy project would bring about business improvement. It would also prescribe negotiation procedures and dispute resolution mechanisms, especially in dealing with variations in compensation payments, using, Replacement Value, Real Value or Future Value.
Together with partners, such as the Ministry of Lands, Forestry and Mines, Minerals Commission (MC), Environmental Protection Agency (EPA), Land Valuation Board (LVB), Ministry of Food & Agriculture Crop Services Department, Attorney General's Department and Ministry of Justice, and the Parliament and the Select Committee on Mining, they hope to provide a policy on speculative developers in the mining concessions.
Other stakeholders in the project include traditional authorities, community and youth leaders, representatives of small-scale miners, non governmental organizations with mining interests, and relevant civil society organizations.
Achieving objectives
The Chamber has a target date of January 2009, by which it hopes to provide a basis for input into the Legislative Instrument (L.I), on issues of compensation.
The Director of Public Affairs of the Chamber believes the project fits well in their action plan, and also has the capacity and capability to effectively execute the action, to meet set objectives.
First in the methodology, was the approval and signing of the BUSAC Grant Agreement, and a kick-off meeting that notified, informed and educated member firms and the Chief Executive Officers of mining companies in Ghana, of the project objectives, among others.
This week, a five-man research team from the Chamber of Mines, LVB, MC, EPA, and a representative from the research consultants for the project, would leave for Tanzania for a five-day study tour. This is to understudy and compare best practices, applicable in the area of compensation for land used for mining concession, and how it could be applied to the Ghanaian situation.
As such, the team would collect data, analyze and synthesize data, to provide evidence to support the case for inputs into the draft regulations, to back effective implementation of the current Minerals and Mining Law 2006.
Also as part of process, there would be sensitization workshops at different levels, media campaigns, petitions, policy dialogue and negotiations, follow-up and dissemination, as well as internal monitoring and reporting.
It is expected that the Chamber's input into the L.I, would help set a standard compensation payment policy, which would spell out procedures for resolving controversies, and deal with issues of speculative developers on mining concessions.
Mr. Nantogmah said it was the Chamber's expectation, that the action would greatly reduce the number of disputes, tension and potential conflicts that arise due to payment of compensation, and rather increase the number of foreign direct investment (FDI) into the sector.
He believes that total jobs created by the sector, would also increase, and "overall, a growth in Gross Domestic Product (GDP) in the sector, from the current 5% to about 8% in five years."
Particularly, the project is expected to benefit thirty existing mining companies, and hundred potential mining companies by 2010, while 2,000 existing small-scale mining interests, and potentially, 5,000 of them, would benefit by 2010. Indirectly, this would be beneficial to government and the mining communities, thereby ensuring a gain for all.
According to Mr. Aubynn, the Chamber's Project was in the right direction, since the current law gives room for abuse and manipulation, and also "ensure that people know exactly what they will get for compensation.
"If there is a standard that you can apply, when there is an issue of compensation, you just pay the required rates and people will not feel cheated. The rates will only have to be reviewed with time," he added.
He also believes that a standardized system, would make payment of compensation easier, and create a healthy environment for mining, as well as understanding between mining companies and communities, to promote development.
He further pointed out the need for NGO's with mining interests, who are perceived as neutral, to help educate beneficiaries of compensation in the mining communities, to put the money they receive into viable projects, which would be "sowing their seeds in a different form," for future use.
The President of the Chamber of Mines also believes there is the need for mining communities to be further educated on the subject of compensation, because "most of the time, members of the communities are made to believe that the only way they can benefit from a mine, is to collect huge sums of money as compensation, before the companies start operations.
"This is an attitude stakeholders must collectively fight, to erode the threat to foreign direct investment," he emphasized. On the benefit of the Advocacy Project, he stressed, "I believe that the outcome of this project, will be beneficial, not only to the mining companies, but also to the development of upstream services in the emerging oil sector."
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