37_G15_Spotlight_Ghana

Global Issue 15

Spotlight Ghana fall in the international price of gold, has made its dreaded appearance. However, even before gold lost 25 per cent of its value between April and June – the biggest quarterly drop since 1968 – it was clear that all was not well with the Ghanaian economy. Expenditure had severely outrun revenue and left a 12 per cent defi cit black hole that is threatening to undermine many of the gains made leading to 2012. The Minister for Finance, Seth Terkper, has blamed the defi cit on shortfalls in corporate income taxes and grants from development partners, higher interest costs, fuel and utility subsidies, and higher spending on goods and services. While Ghana’s upgrading to middle income status confi rms the success of its economic policies and makes it much more attractive to foreign investors, it also means that the country loses a number of its sources of donor support. “As we consolidate our middle income status and these facilities become less available to us, we should be in a position to borrow effectively from the capital markets,” says Terkper. In June Ghana issued a $1 billion Eurobond which Terkper says will help reduce the defi cit to six per cent of GDP by 2015. But this will not be enough, according to the IMF. “The government’s defi cit target of six per cent of GDP by 2015 will keep public debt high and buffers low so the mission recommended an additional fi scal adjustment of three per cent of GDP by 2015,” says Chistina Daseking, leader of an IMF mission to Ghana. This will be a tall order for the government, especially as its tax assessment and collection regime is ineffi cient and many still avoid paying taxes, while the large informal sector remains outside the system. The Finance Minister has promised reforms of the system and says he will widen the net to plug loopholes. In the meantime, efforts to claw back the defi cit by raising the taxes of corporations that do pay their taxes, such as those in the mining industry, could rebound badly, especially when the outlook for gold is becoming dimmer by the day. Corporate mining tax was increased from 25 per cent to 35 per cent, capital allowance standardised to 20 per cent and a bill to introduce a 10 per cent windfall tax is on its way. The mining sector is already the largest taxpayer in the country, contributing 27 per cent of total direct taxes to the Ghana Revenue Authority’s domestic collections. It also contributed 37 per cent of the total corporate tax collected in 2012. Mining companies complain that the cost of production in Ghana is already steep and ate up 70 per cent of the $4.6 billion in revenue gener- Benin Guinea Ghana’s upgrade to middle income status con rms the success of its economic policies and makes it much more attractive to foreign investors, but it means the country loses donor support global thi rd quar ter 2013 www.global -br ief ing.org l 37 Sudan Niger Mauritania Mali Nigeria Namibia South Africa Uganda Tanzania Angola Botswana Burundi Zambia South Africa (Walvis Bay) Swaziland Lesotho Malawi Togo Ghana Ivory Liberia Coast Burkina Sao Tome & Principe Zimbabwe Equatorial Guinea Sahara Senegal South Atlantic Ghana Key data  Population: 24,966,000 (2011)  Religion: Christian (69%), Muslim (16%) with traditional animist religions often practiced alongside  Literacy among 15 to 24-year olds: 81% (2010)  Life expectancy: 64 years  Capital: Accra  Infl ation: 13.1% pa 20072011  GDP growth: 8.2% pa 20072011  GNI: US$35.1 billion  Main exports: cocoa, gold, diamonds, oil ated from gold mining in 2011. The extra burden could be the last straw. “Excessive taxation on mining could be disruptive and kill the goose that lays the golden eggs,” director of analysis, research and fi nance at the Chamber of Mines, Sulemanu Koney, points out. In June, Nick Holland, Gold Fields CEO, said: “The industry is not sustainable at $1,230 an ounce, which is where the gold price is at the moment. We’re going to need at least $1,500 an ounce to sustain this industry in any reasonable form.” Some 40 per cent of Gold Field’s output comes from Ghana. Other major miners include AngloGold Ashanti and Newmont. In 2011, Ghana produced 91 tonnes of gold, contributing roughly 12 per cent Going for gold: the Ghanian gold mining industry had a turnover of $4.6 billion in 2011 


Global Issue 15
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