The latest move is expected to excite struggling gold firms but could undermine efforts to reduce the country’s budget deficit.
President John Mahama last week Wednesday told the World Economic Forum in Davos that his government has not been able to implement the policy due to threats from the mining companies to lay—off many workers should the tax be rolled-out.
“They threatened to layoff workers if we implemented the windfall tax, and because we needed the jobs and you don’t want workers laid-off you are coerced to go along. So these are major issues we have,” he said.
“…They will not allow us to implement a windfall tax in our country,” President Mahama added.
Implementing the the windfall regime would mean mining companies being
compelled to pay an extra 10 percent of their profits to government.
The Ghana Chamber of Mines had earlier warned that the windfall tax dampens the
resolve of investors in Ghana’s mining sector.
The Finance Minister, Seth Terkper, told parliament during the annual budget in November that government would impose the tax, which it has been trying to push through since 2012.
However, the planned tax highlights tensions between an industry feeling the pinch from a 28 percent fall in gold prices last year and a government facing pressure over a range of economic indicators.
These include inflation, which hit a fresh three-year high of 13.5 percent in December, and a budget deficit provisionally expected to land at 10.2 percent for 2013 as well as a weakening currency.
Ghana’s GDP growth, which plunged to a record low on quarterly basis between July and September last year, may at best be 4.8 percent for 2013 according to a new forecast by the Centre for Policy Analysis (CEPA).
Economic growth rose by a paltry 0.3 percent year-on-year between July and September – sharply below the 6.1 percent and 6.7 percent growth rates in the second and first quarters ‘respectively and the strong 7 percent expansion in the same period of 2012, said data released by the Ghana Statistical Services.
Growth could even be lower, at 4.5 percent, if the fourth quarter data – set to be
released in April – do not show a significant improvement over the prior three months, Dr. Joe Abbey, CEPA’s Executive Director, told the B&FT last week.
Both the GSS’s report and CEPA’s forecast come as bad news for the government’s efforts to narrow the wide budget gap – seeing that the 2013 fiscal deficit of 10.2 percent of GDP forecast in November depended on a
healthier growth rate.
With inflation rising and the cedi losing value by the day, Ghana’s growth
performance – averaging more than 8 percent since 2008 – had hitherto remained the cheeriest aspect of the total economic picture. But with GDP faltering, the government will find it more difficult to getthe deficit down and stabilise debt ratios which have been climbing rapidly with the huge
Toni Aubynn, chief executive of the Chamber of Mines, told Reuters that
government’s decision to delay implementation is prudent given market conditions.
“Our argument has been the timing, and we believe government has taken the right decision to prevent further losses of jobs,” Aubynn said, adding that the tax could be reintroduced later if the situation improves.
“I don’t think this is the final death of windfall profit tax. If companies are making
windfall profit it’s only fair that they s h a r e that with stakeholders,” Aubynn added.
Get the latest news and updates on Ghana’s oil and gas value chain by following us Reporting Oil and Gas on twitter @oilgasghana and like our facebook page and get at us on Google+. Subscribe to our group to get update