 |
| Professor Akilagpa Sayerr |
Presidential
address delivered by Professor Akilagpa Sawyerr, FGA, PRESIDENT, GHANA ACADEMY OF
ARTS AND SCIENCES. 15/11/2016
INTRODUCTION
In my Address
last year, I reported that the Council of the Ghana Academy of Arts and
Sciences had been engaged in a vigorous exercise to rethink and re-vision the
Academy, its ways of work and its relations with its stakeholders and society
generally.
Among the main
elements of this drive were the strengthening of the Academy to undertake and
manage funded research projects, the development of structured relations with
relevant public agencies and other stakeholder bodies and the initiation of a National
Dialogues series, to provide platforms for the informed discussion of critical
national and global issues.
It was
recognised that key to success in all this was the reorganisation and
strengthening of the Chapters of the Academy to provide focussed intellectual
leadership in the various thematic areas.[1] Now that the Chapters are
fully established and set to work, it is our hope that all the new initiatives
will in time contribute to extending the reach and effectiveness of the Ghana
Academy of Arts and Sciences in the fulfilment of its ambitious mandate as the
principal learned society in Ghana.
For this
evening’s address, I take the liberty of departing from the established form of
Ghana Academy Presidential Addresses in order to bring up a set of issues that
I believe ought to engage the attention of, not only the scholarly community,
but also the broader citizenry.
This will place
me in the role of a public intellectual, that is, one who “speaks and writes
about her or his discipline and how it relates to the social, cultural, and
political world around it”.
True to this
posture, I propose to
tell a story - about an
aspect of national life with which I have some
familiarity, namely, negotiating on behalf of the state, and, in the process, pose a few questions.
The expectation
is that some here may feel the urge to check the information, investigate and
follow up on some of the issues highlighted or, indeed, to challenge any
positions advanced.
THE GENERAL CONTEXT
The general
backdrop to my presentation is the arrangements we have adopted for the
exploitation and management of our natural resources, specifically, hard
minerals. As is well known, mining has for centuries occupied a significant
place in social, economic and political life in what is now Ghana. Wars have
been fought, empires erected and destroyed, and lives transformed in the course
of exploiting, trading and processing minerals, particularly gold. The
continuing significance of mining today is due to the fact that, together with
quarrying, it accounts for a substantial
portion of national revenue and hard currency earnings - between 23.7% (2010)
and 16% ((2014) of overall fiscal receipts by the Ghana Revenue Authority; 62%
(2010) and 34.7% (2014) of total merchandise exports; and 2.3% (2010) and 0.8%
(2014) of GDP[2].
The mineral
resource endowment of the country is, thus, a vital base for national
development, and arrangements for its exploitation and use are critical factors
in the quest for the improvement of national life. A further point of note is
that mineral resources are nonrenewable. This brings up the question of
intergenerational equity – how to use the fruits of such a wasting resource in
a manner that also benefits future generations, for instance by building up
social and capital infrastructure to enhance production and productivity into
the future.
 |
| President Nana Akufo Addo |
For these
reasons, the national Constitution provides that all minerals found within the
territory or offshore Ghana are vested in the President of Ghana in trust for
the people of Ghana. The clear implication is that the President, as trustee,
is obliged to ensure that all such minerals are exploited and managed
effectively and exclusively in the best interests of all the people of Ghana,
today and into the future.
Over the past
century and more, except for a brief period of state control in the 1960s and
early 1970s, Ghana has followed the general pattern in Africa of having the
bulk of its mineral resources extracted and exported in raw form by foreign
capital, the principal benefit to the state being revenue and, especially,
access to hard currency. The reasoning is that the application of such revenue
should form the basis for the continuous expansion and development of the
economy for the benefit of Ghanaians today and in the future. From this perspective[3], it
is vital to ensure that arrangements for the exploitation mineral resources
yield as much revenue to the state and the people of the country as
possible.
In recent
times, particularly since the mid-1980s, the strong focus on attracting foreign
direct investment into mining led to the granting of substantial fiscal and
other concessions in mining agreements with transnational corporations. While
this contributed to an acceleration of foreign investment in mining, especially
gold mining, it tended to reduce the proportionate share of the
state in the
resulting revenues. This contradictory movement became manifest when, following
the rapid increases in mineral prices on the world market, especially for gold
(Figure 1), the concessions regimes in mining agreements contributed to a
blatantly unequal distribution of the benefits between the state and foreign
investors. The mining companies, retaining the bulk of the revenues, generated
inordinate profits - estimated to have increased at an average annual rate of
20% between 2003 and 2011 for the major mining transnationals – without a
proportionate rise in the state’s take. The low take of the state from the
exploitation of such a wasting resource is illustrated by the case of Gold Fields
Ghana Limited, one of the three major mining companies in Ghana. (Table 1)
Table 1 GOLDFIELDS GHANA LTD (TARKWA
& DAMANG)[4]
Year
|
Production
(oz.)
|
Realized Value
(US$)
|
* Payments to
Gov't (US$)
|
% Paid to Gov't
|
2006
|
916,853.72
|
542,194,633.19
|
36,339,657.76
|
6.70
|
2007
|
841,382.71
|
572,948,032.35
|
28,227,370.90
|
4.93
|
2008
|
820,908.91
|
718,453,760.89
|
50,403,350.44
|
7.02
|
2009
|
866,635.10
|
843,047,075.14
|
57,502,861.98
|
6.82
|
2010
|
961,264.00
|
1,164,401,217.26
|
238,333,271.83
|
20.47
|
2011
|
936,334.68
|
1,468,917,096.93
|
541,141,657.36
|
36.84
|
* Payments
include: mineral royalties, property rates, corporate tax & dividends,
except 2010 & 2011, which did not include property rates and dividend
As similar
stories unfolded elsewhere across the continent the model came under criticism,
with pressure building up for policy change, essentially, to tie minerals
exploitation more directly into national production and to increase the share
of the state in the economic rent generated by mining. The movement was
spearheaded by the African Union, the Economic Community of West African States
and other regional economic bodies.
In time, this
led to a series of measures including (a) changes in the law to increase taxes
and royalties and (b) renegotiation of existing agreements to remove or limit
concessions - in the Democratic Republic of Congo, Guinea, Namibia, Sierra
Leone, South Africa, Zambia and Zimbabwe.
Ghana was very
much a part of this movement. Among the measures we introduced were:
•
a
change in the royalty rate from a range of 3%–6% (invariably stuck at 3%), to a
flat rate of 5%;[5]
•
an
increase of the corporate income tax rate for mining companies from 25% to
35%;
•
changes
in the methods for calculating income tax to close vital loopholes; and,
•
more
recently, the renegotiation of mining agreements, starting with that covering
the mines of Newmont Ghana Gold Ltd. and Newmont Golden Ridge Ltd, to remove or
limit excessive concessions granted in the original agreement.
In what
follows, and against the backdrop of this quick sketch of the continent-wide
push towards the transformation of mining regimes and enhancement of the
state’s share of mineral rent, I hope to surface two sets of issues in Ghana’s
recent practice in this area.
The first set
relates specifically to the negotiation of mining agreements on behalf of the
state, in order to secure the most from investments in mining. This covers
(i)
institutional
arrangements and processes for effective negotiation of natural resources
investment agreements; and
(ii)
the
experience and technical expertise of those charged with the conduct of the
negotiations – including adequacy of preparation and freedom from political or
other interference.
A second, more
general set of issues, touches on the commitment of office-bearers to act truly
in the public interest, not for individual or narrow partisan advantage.
1. THE STORY OF THREE
MINING INVESTMENT AGREEMENTS
This is the
story of three sets of mining agreements - the background and histories of
their negotiation. In the time available, I can do no more than present the
briefest outline of the relevant
features of each of the stories.
v Newmont
I
In 2003 a draft
Investment Agreement was submitted to the Government of Ghana by Newmont Mining
Corporation of Denver, Colorado, USA[6], in respect of mining leases
held by its local subsidiaries for prospects at Ahafo in the Brong Ahafo Region
of Ghana and Akyem in the Eastern
"It is the view of the Commission that Government would be setting a
bad precedent if approval is given to this Agreement in its current form quite apart from the fact that a number of
the provisions . . . are contrary to the laws of this country." (Minerals Commission to Minister of Mines, Aug 26, 2003) (Emphasis supplied)
With no
reaction from the Minister, as far as records show, with no further engagement
with the Minerals Commission, and with none of the issues raised by the
Commission addressed, the Investment Agreement was signed on 17 Dec., 2003. It
was ratified by Parliament on Dec 18, 2003, one day after signature. That, in
brief, is the story I call Newmont I.
v Newmont
II
Six years
later, in 2009, in the spirit of the continent-wide movement earlier referred
to, the newly-elected President of Ghana, President J E Atta Mills, took
advantage of a courtesy call by the head of Newmont Mining Corporation to press
the point that the terms of 2003 Agreement needed urgent adjustment to bring it
in line with contemporary realities. Newmont readily agreed to a renegotiation
of the 2003 agreement.
Between 2009
and 2011, a series of meetings were held between Newmont and various
Ministerial and
Inter-Ministerial committees, sometimes simultaneously! Finally, in June 2011,
a Technical Review Committee was set up to review Newmont I, and help move the process on.
In its report[8], the
Technical Review Committee listed as grounds for renegotiation, much the same
issues as those raised by the Minerals Commission before the signing of the
Agreement in
2003 (mentioned
above). The Committee concluded that the Agreement had to be renegotiated
because
“several provisions contravene the Constitution of the
country and the Minerals and Mining Act, 2006 (Act 703)”, and that to do the negotiation,
“a team of seasoned negotiators [should be assembled]
to engage Newmont on the issues outlined in this report . . . .”
Following the
recommendation of the Technical Review Committee, a National Mining Review
Committee (MRC) was inaugurated on 31 January 2012, to review the national
mining regime generally, and undertake the renegotiation of mining agreements
with stability provisions. I had the honour to be appointed Chair of the
Committee and Chief Negotiator for Government.
The MRC
initially engaged separately with Newmont and the two other major mining
companies – AngloGold Ashanti and Gold Fields Ghana – which had stability
provisions. It was decided to focus on Newmont to begin with. After extensive
preparation, the Committee went into hard negotiations with Newmont over a
period of 2½ years. In November 2014 we concluded the negotiation of new
Investment Agreements (Newmont II)
with the two local affiliates of Newmont Mining Corporation – Newmont Ghana
Gold Ltd. in respect of the mine at Ahafo, and Newmont Golden Ridge Ltd. in
respect of the mine at Akyem.
The terms of Newmont II addressed virtually all the
excesses pointed out by the Minerals Commission in 2003 and repeated by the
Technical Review Committee in 2011. Briefly put, the new agreements altered in
our favour, the fiscal regime (income tax, mineral royalty, duty exemptions,
forex repatriation, etc.) and many other terms. Several other fiscal and
non-fiscal terms, such as use of aircraft, private security and provision for
the agreement terms to override national and international laws, were discarded
outright. In addition to all these other positives, we got Newmont to agree to
pay what amounted to a “signing on premium” – an upfront cash payment of
USD27million9, duly paid to the Ministry of Finance a month after
Parliamentary ratification of the agreements!
It is this
successful move to correct the lop-sidedness of Newmont I to the extent possible, and remain consistent with the
continental drive to increase the share of the state in natural resources rent
that is referred to in the title to this lecture as a forward march.
To round up, it
might be noted that the Newmont II
agreements were concluded in November 2014; signed in May 2015; approved by
Cabinet and submitted to Parliament for ratification in June 2015; and ratified
by Parliament in November 2015 – a total of 12 months
from conclusion
to ratification. Quite a change from Newmont I - ratified by Parliament ONE DAY
after signature!
v Gold
Fields
Now for the
third section of the story. As part of its original mandate, the Mining Review
Committee (MRC) established and maintained contact with Gold Fields Ghana Ltd.,
one of the three leading mining companies in Ghana, building up a dossier of
background information and statistics on the company as well as Gold Fields
Ltd., its parent company[9], in
preparation for direct negotiations.
Following the conclusion of the Newmont Agreements (Newmont II), the MRC
began formal negotiations with Gold Fields in May 2015. This involved a series
of meetings, information gathering and options development, culminating in Gold
Fields submitting a draft proposal for negotiation. It became clear from the
proposal that the concern of Gold Fields was to take advantage of Section 49 of
the Minerals and Mining Act (Act 703) to obtain a stability agreement with
appropriate fiscal concessions for investments it proposed to make at its mines
in Tarkwa and Damang – concessions of the sort enjoyed by Newmont and AngloGold
Ashanti. In August 2015 the MRC, therefore, suspended the negotiations in order
to enable Gold Fields bring up its proposals for new investment in the usual
manner, that is, through the Minerals Commission, which was the proper body to
receive such proposals, and the best equipped to do the necessary initial
assessments.
 |
| Ex President John Dramani Mahama |
The MRC heard
nothing further about this till February 2016, when it received the surprising
news that a draft agreement had been settled between Government and Gold
Fields, awaiting Cabinet approval and signature. As Chairman of the MRC, I
asked for and received a copy of the draft agreements for review. After a
hurried review I sent in comment on the draft, pointing out a number of what I
considered serious flaws in the draft, concluding that:
“… on the basis of a quick assessment and for the reasons given above,
the Gold Fields
Development
Agreements are …. unsupportable in their present form.” [Chair, NMRC to Min of
Lands and Natural
Resources/Min of Fin. /Minerals Commission, Feb 8, 2016]
Though Cabinet
reportedly took note of our comments and asked for appropriate modifications in
the final draft, the Agreements were signed on 11 March 2016, virtually unchanged.
They were
tabled in Parliament on 16 March 2016 and referred to the Select Committee on
Mines and Energy the same day. The Committee reported back the following day,
17 March! As reported in the Hansard[10], Parliament first waived
the Standing Order requirement for a 48hour wait, thereby enabling the motion
for approval to be immediately put for consideration by the House. The motion,
which was tabled at 9.30 pm, was approved and the Gold Fields Agreements were
ratified at 9.40 pm. Thus, the substantial
and complex investment agreements were ratified by Parliament after fully 10
minutes of discussion on the floor of the House, one day after they were first
tabled, and one week after they were signed![11]
It is difficult
not to see the similarity between the circumstances surrounding Newmont I and Gold Fields – receiving Parliamentary ratification one day and one
week, respectively, after conclusion of the agreements - in contrast to Newmont II, ratified a year after
conclusion!
However, the
similarity/difference go beyond the rush and superficiality of the approval
process in the first two cases. As will become clear from what follows, they
pertain as well to the substance of the agreements, since the terms of Gold Fields, like Newmont I, but unlike Newmont
II, run counter to the continental trend and recent Ghana efforts to
increase the state revenue share from mining enterprises.
Hence the
reference to “MARCHING FORWARD TO THE PAST” in the title of this lecture.
But, enough of
storytelling! What does all this amount to? Simply put, in addition to the
circumstances of their negotiation and the rush to ratification, the terms of
the Gold Fields agreements take us away from the direction pointed by Newmont II, and run counter to trends
elsewhere on the continent, as described above.
2. FLAWS IN REVISED GOLD FIELDS AGREEMENTS
There is not
enough time to detail all the flaws in the agreements. What I propose, instead,
is to demonstrate the general proposition by reference to a few illustrative
items.
a. Fiscal Give-Away
The first issue
relates to the concessions made in respect of the fiscal regime. The rate of
corporate income tax, which, at the time, stood at 35% for mining companies,
was reduced to 32.5%, and that of royalty from a flat 5% to a range of 3% - 5%,
indexed to the gold price. Other concessions affected the basis for calculating
corporate tax and import duty charges. According Gold Fields’ own estimates,
the new fiscal concessions would have saved the company up to USD33million for
the 2015 tax year, and will save it USD26million for 2016.
What is the
basis for these give-aways by Government? The official justification has two
elements. The first was the desire to level the playing field by giving Gold
Fields what Newmont got in Newmont II[12] - a
rather naïve argument in the circumstances. For a start, while the terms of Newmont II represented a substantial enhancement
of the benefits Ghana enjoyed under Newmont
I, the same terms in the Gold Fields agreement represented a reduction of
what we had prior to the negotiations. In any event, we did not consider the
outcome of Newmont II as ideal, such
as would constitute a proper benchmark for future agreements. Given the
overgenerous concessions in Newmont I, we could do no more than claw back as
much as we could. Had we started with a clean slate, we would undoubtedly have
allowed fewer concessions than we had to in the circumstances. To use the
outcome as a benchmark for negotiations about a fresh investment, where the
investor is seeking extra benefits under the agreement, is a major misjudgement
of the situation.
The second leg
of the official justification was the need to give relief to Gold Fields, which
was supposedly in dire straits, putting local jobs at risk14. Clearly, this is not a sustainable line
either. Nothing in the relevant legislation authorised giving relief to
hard-pressed mines through the grant of fiscal concessions in a stability
agreement. Putting that aside for a moment, one wonders, did the Minister of
Lands and Natural Resources and his advisers really believe that, without these
particular fiscal give-aways, Tarkwa and Damang were both on the brink of
disaster? Local jobs at risk? Really?
For a start,
the mines at Tarkwa and Damang, being separate mines, owned by separate
companies under separate leases, in different locations, and under different
economic and material conditions are separate entities under the law, and
should, therefore, be considered separately. Taking Tarkwa first, the panic
about impending disaster is difficult to reconcile with the following
observation made by the Chief Executive Officer of Gold Fields about a month
after the ratification of the agreements:
“Tarkwa is doing reasonable well, but we
have to remember the gold price has come down from the highest of $1,900
dollars in 2013 to currently $1,200 dollars an ounce. So we have to tighten our
belts in a number of areas.”[13]
On what basis,
then, could government negotiators have formed the view that Tarkwa, for one,
could not survive without the bailout?
Turning to the
mine at Damang, it had undoubtedly been in difficulty, with poor returns in
2013, leading to job lay-offs, etc. But could this be justification for the
substantial fiscal concessions, locked in for 11 years? Did the Minister and
his advisers not know that:
-
Damang
had reportedly already laid off some 500 workers, who had been accommodated
within the mining sector?[14]
-
given
the cyclical nature of gold price movements on the world market, a price
rebound and profitability were entirely predictable?
-
in the
5-year period to 2014, with the exception of 2013, Damang had been in profit
(as had Tarkwa), paying dividends, and earning returns on equity (ROE) at rates
higher than those of their parent company and the average for the industry?
(See Table2)
Table
2: RATES OF
RETURN ON EQUITY (%)
Abosso Gold Fields Ltd. (Damang)
|
Gold Fields Corp. (Parent company)
|
Industry
Average
|
|
2010
|
39.01
|
3.78
|
26.52
|
2011
|
61.86
|
28.45
|
27.39
|
2012
|
27.83
|
13.00
|
13.63
|
2013
|
-140.51
|
-15.2
|
8.19
|
2014
|
3.90
|
3.78
|
11.46
|
It is clear
from all that has been said that, had there been a fuller grasp of the relevant
information and sharper thinking by our negotiators, the panic that led to the
granting of such concessions, even beyond what was allowed by the law, would
not have occurred.
b. Technical Deficiencies
Besides
difficulty in justifying the concessions under the prevailing circumstances,
there were serious technical flaws in the agreements as finally signed and
ratified.
i. Some concessions almost certainly illegal
The fiscal
concessions in the agreements were granted under Section 49 of the Minerals and
Mining Act, 2006 (Act 703), which
gives the Minister power to grant enhanced concessions in a development
agreement with the holder of a mining lease, “where the proposed investment
will exceed”
a stated amount. Such concessions will
typically include the stability arrangements set out in Section 48 of the
Act.
The first
point of note is that the enhanced concessions under Section 49 are explicitly
intended to attract and encourage new investments into mining, not to reward
investments already made (nor to bail out companies in trouble!). The relevant
portion of Section 49 reads:
“(1) The Minister on the advice of
the Commission may enter into a development agreement under a mining lease with
a person where the proposed investment by the person will exceed US$ five
hundred million.
(2) A development agreement may
contain provisions,
(a)
.
. .
(b)
.
. .
(c)
on
stability terms as provided under Section 48.
In spite of
the clear words of the provision, the preamble to the agreements states,
strangely, that Gold Fields, having already invested in Tarkwa and Damang, “therefore
qualifies under Section 49 [of Act 703] to enter a development agreement with
enhanced investment terms…”!
A second,
more serious issue is that, the stability terms available under Section 48
provide for the fixing of the fiscal regime as it exists under the applicable
law at the time of the grant, so that, for the duration of the stability
period, rights acquired by the investor “shall not be adversely affected by
subsequent changes” in the fiscal law. Nowhere in the section, nor anywhere
else in the Act, nor in any other legislation I am aware of, is the Minister
given power to alter or reduce existing rates, or soften the provisions for
calculating taxes, etc. Thus, the purported reduction of corporate income tax
and royalty rates in the stability provisions of the Gold Fields Agreements
would appear to be ultra vires and of no effect!
ii. Government interest inadequately secured/protected
As indicated,
a condition for invoking Section 49 is a commitment by the leaseholder to make fresh
investments in a new or existing mine. Thus, the preambles to the Gold Fields
agreements refer to a commitment by Gold Fields “to invest in the future an
amount of ...
during the
life-of-mine of the Tarkwa and Damang Mines”.
As expressed
during the ratification process in Parliament, the agreements would pave the
way
“…for the
investment of two billion, five hundred and fifty million United States dollars
... over the life of the mines…
and
“The investment is expected to increase current production to one million
ounces per year.”[15]
Surprisingly,
one looks, in vain, for any provision or term in the agreements committing Gold
Fields to make this or any investment at all, or setting out sanctions for
non-performance!
What we
have, instead, are expressions of naïve hope by Government representatives that
Gold Fields will honour promises it had made, presumably off the record, to our
negotiators or to Government!
The
situation is, therefore, that, in place of a legally enforceable obligation set
out in the agreements, our negotiators opted to rely on off-the-table
assurances!
That the
picture is nowhere near as rosy as Parliament was led to believe, can be gauged
from the following excerpt from an interview granted by Nick Holland, the CEO
of Gold Fields, a month after the ratification:
“Citi Business News: With this arrangement [i.e., the new
agreements], what is the lifespan and what is your gain, was it a win-win
situation?
“Nick Holland:
It is a win-win because what we can do here is; we think there is a good
opportunity now for us to come up with reinvestment, case for Damang we still
working through the numbers we haven’t finished yet. We should be finished with
the analysis and recommendation to our board by the middle of the year and then
we would be able to make a decision but certainly, I think the development
agreement puts us in a strong position to bring about a longer term profile for
Damang and for Tarkwa.”[16]
To the same
effect, another interview granted days after the agreements by a spokesman for
Gold Fields:
“… the
company … had not yet decided whether to inject more cash into Damang, one of
two mines operated by Gold Fields in Ghana, or suspend operations there,
company spokesman Sven Lunsche said.
"This [the new agreement] is obviously a positive input into our
decision-making process, though we are
considering many other economic, financial and mining variables in the
process," Lunsche added, referring to the agreement with the government.”19
(Emphasis supplied)
Thus, in return
for binding ourselves to the enhanced concessions in the agreements, and locking
them in for 11 years in the case of Tarkwa and 9 years in the case of Damang, what
did GF commit to? Answer: nothing – not one cent!
What is our
legal recourse, should Gold Fields fail to invest or, indeed, proceed to lay
off more workers while enjoying the concessions? Answer: none!
Can we
unilaterally withdraw any concessions in response to non-performance of the
off-therecord promises? Answer: definitely not!
Let us be clear
- while Gold Fields may yet decide to invest, the bottom line is that it
remains uncommitted, undecided and unbound, within the terms of the agreements!
Leaving the
Government so exposed is a glaring instance of technical incompetence on the
part of our negotiators. What is surprising is that they had access to the
Revised Newmont Agreement (Newmont II), which had addressed this
particular defect! It was precisely to close what is an obvious gap in Section
49 of Act 703 that we devised and inserted what we describe as the “extended
stability principles” in Article 4.3 of Newmont
II. The Article provides that[17], in
order to enjoy the enhanced concessions for a period beyond the agreed
stability period, Newmont has to present an extension plan acceptable to the
Minister,
committing to invest
o a stated minimum amount (Art. 4.3 (a));
o
within
a set time (Art. 4.3 (a));
o
with
a stated expected outcome - specified increases in gold production, or
extension of life of mine, or local employment (Art.
4.3 (b);
o
subject
to sanctions for failure to perform, i.e.,
“Should the conditions [for the grant] fail to be satisfied on the basis
and within the period described … the Government may rescind the Extended
Stability Period and [Newmont] will thereafter become liable for any additional
Taxes and Duties that would have accrued but for the extension of the Basic
Stability Period.” (Art. 4.3 (d))
Clearly, this
was not applicable in Newmont II,
nor was it intended to be, because that agreement dealt with pre-existing, not
prospective investments. There was, nevertheless, a definite understanding
that, in order to close the gap in the law, the extended stability principles were
to be applied to all future grants of enhanced concessions under Section 49 of
Act 703. That is, for the future, all grants of enhanced concessions under
Section 49 must be conditioned on an explicit and enforceable commitment by the
investor to make fresh investments. Presuming to follow the Newmont II example, the negotiators of
the Gold Fields Agreements applied the principles only to future additional
investments (Clause 4.3). This represents a critical failure to appreciate that
in Newmont II, because we were
dealing with
pre-existing
concessions balanced by pre-existing investments, we had had to limit
application
of the
principles to future investments. The case of Gold Fields was quite different
to the extent that the quest of the company for Section 49 concessions could
only be founded on fresh (proposed) investments, according to the express terms
of the section. Therein lay the fatal problem for the Gold Fields negotiations
– the negotiators were (mis)applying Section 49 to grant enhanced concessions,
effectively, for pre-existing investments, contrary to the clear terms of the
section!
To sum it up, it
is difficult to avoid the conclusion that, just as in Newmont I (2003),
§ Ghana gave away more than we had to
in the revised Gold Fields Agreements;
§ the enhanced concessions given in the
agreements were almost certainly illegal, and
§
all
this could have been avoided, had there been competent and committed negotiations
on behalf of Ghana!
But could this
be put down solely to naivety? Ignorance? Incompetence? Hardly!
The negotiators
had available to them Newmont II
that, as shown above, provided the bases for a more professional effort. They
had at their service the MRC, negotiators of Newmont II – indeed, several of
the public officers involved in the Gold
Fields negotiations had been members of the MRC!
So, what happened?
Who, by-passing the collective experience of the Newmont II negotiators, chose to concede so much to Gold Fields,
without, at least, securing our interests? For what considerations – policy?
Political advantage? Personal gain?
 |
| John Agyekum Kufuor, the master negotiator! |
LESSONS
What lessons
are we to draw from this story? I am sure each of us will have our own list.
Mine, briefly put, are as follows:
a. Technical/Political
The use of
politician-dominated, non-expert bodies to conduct technical negotiations in Newmont I and Gold Fields - in the latter case bypassing a negotiating team that
successfully renegotiated Newmont II
and was available to undertake or back the technical negotiations. This wilful
playing down of technical competence, professionalism and experience raises serious
questions about the good intentions of the decision-makers and their commitment
to the public good.
Table 3: Meetings between
Government of Ghana and Vodafone Group between November 2007 and May 2008*
Date
|
Location (if known)
|
Vodafone
|
Government of
Ghana
|
Other
|
9th Nov 07
|
Accra
|
Arun Sarin
Gavin Darby
Herbert Osei-Baidoo
|
HE President
Kufour Menna Rawlings, Dep.
High
Commissioner
|
James Cribb
|
13th-14th
Nov 07
|
Accra
|
Gavin Darby
Herbert Osei-Baidoo
|
(no record)
|
|
9th Mar 08
|
London
|
Arun Sarin
Gavin Darby
Matthew Kirk
Herbert Osei-Baidoo
|
HE President
Kufour
|
|
19th Mar 08
|
Accra
|
Simon Murray
Warren Finegold
Peter Nelson
|
Benjamin Ntim
Kwaku
Ofosu-Adarkwa
Vickie Bright
|
|
6th Apr 08
|
London
|
Arun Sarin
Simon Murray
Paul Donovan
Gavin Darby
Matthew kirk
Herbert Osei-Baidoo
|
HE President Kufour DK Osei
|
|
2nd May 08
|
Accra
|
Gavin Darby
Matthew kirk
Herbert Osei-Baidoo
|
HE President
Kufour
DK Osei
Anthony
Akoto-Osei Benjamin Ntim
Kwaku
Ofosu-Adarkwa
|
|
14th-15th May
08
|
Accra
|
Gavin Darby
Matthew kirk
Herbert Osei-Baidoo
|
HE President
Kufour
DK Osei
Kwadwo Mpiani
Anthony
Akoto-Osei
Benjamin Ntim
|
* Supplied by Vodafone
The prime
instance of this phenomenon was the famous Ghana Telecom-Vodafone case (2008),
in which the President of the Republic, together with a few officials and close
associates, and to the exclusion of the designated technical team, personally
conducted and concluded the immensely complicated negotiations for the sale of
Ghana Telecom, the national telecommunications company! The outcome has been
widely criticised as a sell-out of the national interest.[18] However, for present
purposes, the relevant feature emerges from the only publicly available record
of the dramatis personae at the negotiations (see Table 3).
To anyone with
the slightest commitment to the public interest and the barest understanding of
how such investment negotiations go, this record of Ghana’s representation at
the negotiations makes chilling reading – an emphatic visual of how not to do it!
To address this
aspect of our concerns it may be suggested that we
i.
develop
and use a cadre of expert negotiators, within the public service and outside
it, but available to be engaged on behalf of the state;
ii.
ensure
a minimum of politician involvement in the technical preparations and actual
negotiations;
iii.
keep
a comprehensive record of the negotiation process and background material in
every case; and
iv.
make
the agreements and background material immediately accessible to the public.
b. Failure of institutional responsibility and oversight
The Ministry of
Lands and Natural Resources and the Minerals Commission failed in the discharge
of their duty to ensure that the 2016 Gold Fields negotiations had the proper
institutional base, and was conducted with diligence, competence and honesty.
Such disregard of institutional responsibility and of the public interest, is
compounded by the impunity of office bearers, which increasingly characterises
our public management system.
At least as
grievous, was the complete failure of Parliament - both sides of the House - to
treat the ratification process with the slightest seriousness. The records show
no evidence of any discussion or questioning of anything at the hurried
Committee stage, nor on the floor of the House, with the result that the
supposed positives of the agreements were routinely recited and unquestioningly
endorsed. It will not be too much to consider such conduct a betrayal of the
people’s faith that their Parliament will, through the ratification process,
diligently protect their interests by double-checking executive action, as
provided for in the Constitution of the Republic.
But,
ultimately, the buck stops with the President of the Republic, in whom the
Constitution of the Republic vests primary responsibility for safeguarding our natural
resources and ensuring their optimal exploitation and management. It is the
direct responsibility of the President to ensure that there are appropriate
natural resources policies in place and that the implementation of such
polices, including investment in resource exploitation, yields the most benefit
for present and future generations of Ghanaians. In this instance, this
obligation was not met, even though the attention of the Cabinet, of which the
President is Chair, was drawn to potential deficiencies in the proposed
arrangement.
c. Failure of civic vigilance and follow-through
The third
broad lesson is that such failure of executive and parliamentary
responsibility, in turn, thrives in an atmosphere of civic inertia. When criticisms of the Gold Fields
Agreements
went public in April last year, it received scant civil society attention. With
the singular exception of the Third World Network-Africa (TWN-Af), no civil
society body raised the obvious questions that should have been put to the public
institutions with responsibility in such matters. Again, the media - print and
electronic - gave little attention to the matter, and the few that did, failed
to do any independent checks or follow-up, or to demand answers from public
officers. The matter, like many others of its kind, gained little traction and
quickly died in the public domain, without a trace.
CONCLUSION
I conclude with
one simple observation: failure to raise and address issues such as I have
outlined this evening is not without consequence. In the specific case of the
negotiation of natural resource investment agreements, the direct results
include (i) haemorrhage of potential national revenue, and (ii) dissipation of
non-renewable resources.
More generally,
failure to confront and deal with such matters has contributed to the
entrenchment of mediocrity, corruption and cynical disregard of the public
interest as the norm
for managing
national resources and public affairs. This feeds popular disaffection for the
political class and national institutions generally, posing a medium- to
long-term threat to the sustainability of the polity.
[1] The thematic areas are: Education; Health and Sanitation; Political,
Constitutional and Legal Affairs; Food and Agriculture; Language, Culture and
the Arts; Natural Resource, Energy and Environment; Social and Economic
Affairs; and Science, Technology and Engineering.
[2] Final GHEITI Report on the Mining Sector- 2014, Ghana Extractive
Industries Transparency Initiative (GHEITI), Ministry of Finance: December 2015
[3] Other perspectives
emphasise not so much the state’s revenue take, but more the integration of
mining into the local economy so as to expand and diversify local production.
See, e.g., African Mining Vision,
2009; ECOWAS Directive on the
Harmonisation of Guiding Principles and Policies in the Mining Sector,
2009.
[4] While it is the case that
the costs of production were rising at the same time as the gold price, their
rise was nowhere near as steep as the rate of increase in the realised value of
gold exports. Incidentally, the figures for the other major mining companies in
Ghana - AngloGold Ashanti and Newmont Ghana Ltd. - are similar.
[5] Minerals and Mining
(Amendment) 2010, Act 794
[7] While this Newmont draft
represented a substantial departure from the then existing minerals regime
(under the Minerals and Mining Law, 1986 (PNDCL 153)), it anticipated a new
regime then under discussion, finally enacted in 2006 (Minerals and Mining Act,
Act 703).
[8] Executive Summary, Review of Newmont Ghana Gold investment Agreement,
June 30, 2011 9 This was made up of payments in lieu of past
dividends under a new provision, as well as payments in consideration of the
concessions retained in the agreements. The Parliamentary Select Committee on
Mines and Energy, welcoming this innovation, recommended that “all future
mining leases should incorporate such provisions” [Parliamentary Debates, Official Report, 26 Nov. 2015, Col. 828.
[9] Gold Fields Limited is one
of the largest gold mining firms in the world.
Headquartered in Johannesburg, South Africa, the company is listed on both the
Johannesburg Stock Exchange (JSE) and the New York Stock Exchange (NYSE), and
owns and operates mines in South Africa, Ghana, Australia and Peru.
[11] Curiously, neither the
Select Committee nor the full House commented on the absence of a provision for
a signing on premium, which the Committee had recommended be copied from
Newmont II and applied to all future leases! (See footnote 12, above)
[12] See Dep. Minister of
Finance, Ato Forson, in interview with Maxwell Adombila Akalaare,
http://www.graphic.com.gh/business/business-news/gold-fields-to-invest-us-2-5bn-over-11yrs.html. 14
Nii Osa Mills, Minister of lands and Natural Resources
(http://thebftonline.com/business/mining/18945/niiosah-mills-justifies-govt-gold-fields-agreement.html#sthash.U9YL3Ega.dpuf);
Ato Forson, Deputy Minister of Finance (http://pulse.com.gh/business/goldfields-ghana-finance-minister-justifies-goldfieds-tax-exemptionsid4965795.html); Tony
Aubyn, CEO, Minerals Commission
[14] http://www.ghanaweb.com/GhanaHomePage/business/Goldfields-rules-out-layoffs-despite-declining-goldprices-428080
[15] ORDER PAPER for the
Thirty-Second Sitting of the First Meeting of Parliament, Thursday, 17th March,
2016, para. 3580.
[18] See Report of the Inter
Ministerial Review Committee on the Vodafone Transaction (Justice Emmanuel
Akwei Addo Committee), Sept 2009
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