Ghana reviews mining laws

Ghana is concluding a major review of its mining laws in a bid to revive investment and protect its biggest export earner, gold. The reforms, which Ghanaian officials are expected to flag at a mining conference in South Africa on Tuesday, are set to go before parliament shortly.

Mining industry officials in Ghana, Africa's second largest gold producer after South Africa, have been concerned for several years about declining investment in the face of low gold prices and mounting competition from other African countries with more liberal laws and plenty of ore in the ground.

To address this, President John Kufuor initiated the review shortly after winning elections a year ago.

Gold production has risen dramatically in Ghana over the past decade but it dipped last year to 2.1m ounces,according to provisional figures, from 2.45m in 2000.

Applications for new exploration licences have also declined, according to Ghana's Minerals Commission, from an annual average of 80 a year in the mid-1990s to 52 in 2000 and even fewer last year, although opportunities for fresh exploration and expansion around existing mines are there.

A sustained fall in world gold prices has made it more difficult for companies to finance exploration, but this is only part of the problem.

In 1986 when the government collaborated with mining companies to create an attractive legislative and fiscal environment for investment, Ghana was a pioneer. Up to $2bn of mining money flowed in.

However, countries such as Tanzania, Guinea and Mali, which followed Ghana's lead, have modernised their own mining codes and now have a competitive edge.

"Any investment in gold at the moment is going where it's competitive. Ghana isn't any more," said Sam Jonah, managing director of Ghana's flagship gold miner, Ashanti Goldfields.

Unless this changes, production of the country's top export earner, which brought in $756m in 2000, is likely to slide.

"The mining code has three sections: legal, fiscal and environmental. We think all three areas need improvement," said Joyce Wereko-Brobby of Ghana's chamber of mines.

Among laws under scrutiny is one that allows the government to hold a golden share in mining operations, giving it power to intervene in corporate decisions. Another allows the government to claim the assets of mining operations that fail.

Despite concern over Ghana's long-term revenue profile, the proposed changes are unlikely to have an easy ride in parliament. They come at a time of national debate over the consequences of more liberal trade and investment policies brought in during years of World Bank sponsored reforms.

A lobby group believes the Ghanaian public has been excluded from the profits of the mining boom and inadequately compensated for environmental damage. And recent job losses as companies sought to bring gold production costs below $200 an ounce have added heat to the debate.