Mr Abdallah Ali-Nakyea, a Tax Consultant has proposed the enactment of a new law similar to the Petroleum Revenue Management Act (PRMA) to replace the existing Mineral Development Fund (MDF) Act, 2016, Act 912.
The proposal according to him was highly needed as there was a number of lapses with the MDF Act, especially in terms of mineral revenue distribution or sharing.
He was speaking to a group of journalists at a workshop organised by the Institute of Financial and Economic Journalists (IFEJ) in partnership with the German Development Cooperation (GIZ) to build their capacity in reporting on the sector.
Mr Ali-Nakyea, who is also a Managing Partner of Ali-Nakyea and Associates (Tax Attorneys, Solicitors and Consultants), noted that, the poor public financial management, under Act 912, made it difficult to track mineral revenues and development projects that were funded with the money.
He said the current model of revenue sharing lacked intergenerational equity considerations in its formula as no percentage of the mineral revenue had been allocated for investment into the future, unlike the PRMA, 2015, Act 815, which establishes a stabilisation and heritage funds.
He noted that the current model did not allow for strong oversight, comparative to the oil sector model under the PRMA, Act 815 saying that: “Oversight can protect mining revenues from the challenges of popular political demands and corruption”.
Mr Abdallah also noted that the MDF model lacked strong legal sanctions against anyone who took government funds or misused the power of their office. He said the current model lacked transparency of the rules that regulate decisions on when, where and how the 20 per cent revenues that went into the Mineral Revenue Development Fund are allocated, adding that “transparency is limited to the Extractive Industries Transparency Initiative process”.
It is based on the above hitches in the MDF Act, 2016, Act 912 that Mr Ali-Nakyea had called on policy makers to initiate steps to enact a new law similar to the PRMA, 2015, Act 815, taking into consideration the peculiar context of mining.
He called for the establishment of a Mineral Revenue Holding Fund with a clear distribution formula for distributing mineral revenues between the Central Government and communities. He said “The community share of revenues should be transferred to the District Assemblies for community development and disbursed in the same or progressively revised manner as currently enforced under the Mining Community Development Scheme in Act 912.”
He said provision should be made for the establishment of sovereign funds, including a Sovereign Mineral Fund, as well as stabilisation and heritage funds. He urged policy makers to establish a public interest and accountability body similar to PRMA’s Public Interest and Accountability Committee (PIAC).
Mr Abdallah said the accountability body’s role should be with funding benefits, as well as prosecutorial and surcharge powers as an additional oversight layer for mining revenue, adding that, “alternatively PIAC could be made to handle this function as well”.
“The current Mineral revenue sharing model under the Minerals Development Fund Act, 2016 (Act 912) only succeeds (with little modifications) in legalising the long practiced formula, where by administrative fiat, only 20% of total mineral revenues accruing to the state are properly allocated.
The remaining 80% mineral revenues goes to the Consolidated Fund and largely used to meet government’s recurrent expenditures,” he added. He said the law should also come with sections to regulate the collection, allocation and management of all mineral revenue derived from mining operations in Ghana, not an insignificant percentage of total mineral revenues.
The Tax Policy Expert strongly advocated the revision of the Act 912 benefit sharing ratio of 80:20 in favour of central government to a ratio of 70:30 in the new law.” He said both the Central Government and beneficiaries at the community level must be compelled to spend their respective mineral revenue allocations on capital infrastructure (visible projects), rather than on recurrent expenditure.
“Priority areas should be limited to projects that have social and economic multiplier effect on the development of the country education, health, agriculture, road and rail infrastructure (applicable mostly to central government),” he added.