Ghana: Tracing mining royalties to local government

Ghana

Lawmakers meet during a session of Parliament in Accra, Ghana. Photo by World Bank.

Local communities in Ghana had become increasingly wary about the operations of mining companies.

Ghana is the second largest gold producer in Africa. It is also a decentralised country, divided into ten administrative regions and sub-divided into 275 districts.

Local communities in Ghana had become increasingly wary about the operations of mining companies and the level of contribution they make towards local development programmes. Awareness of the companies’ contribution was also considered important for the companies’ social license to operate. Ghana EITI therefore decided in its 2010-2011 EITI Report to include data on sub-national transfers and payments, as well as how the revenue is used.

The Standard

The EITI Standard requires disclosure of material transfers from the central government to sub-national entities if the transfers are mandated by a national constitution, statute or other revenue sharing mechanism (Req 4.2.e). Payments made by companies directly to sub-national government entities should be included, if the MSG deems them material (Req 4.2.d).

The 2010 and 2011 GHEITI report

Royalties represented approximately 99% of the sector’s contribution on the sub-national level.  10% of royalties are earmarked to be transferred from central government to local government authorities and traditional land-owning authorities affected by mining activities. Funds are channelled through the Office of the Administrator of Stool Lands (OASL). Another 10% is transferred to the Mineral Development Fund. The GHEITI showed that, for example, between 2006 and 2011 six district assemblies in the mining areas of the Ashanti Region (where many of the country’s richest mines are located) had received a total of roughly US $1m in royalties.

Using data to inform policy reforms

The report showed that actual payments by the Office of the Administrator of Stool Lands (OASL) to district or municipal assemblies were often smaller than they should have been based on royalty payments. It was found that regional offices did not always forward the full sum received from Head Office to districts and municipalities. OASL discussed GHEITI’s recommendation to address this issue in its mid-year conference in July 2013, and agreed to correct the practice. Key findings from the report have also led to shifts in how royalties and other payments intended for local communities are used. The report revealed that most Metropolitan, Municipal and District Assemblies (MMDAs) used their share of mineral revenues for recurrent expenditures rather than development projects.

The report, published in February 2013, contained recommendations that led to concrete reforms in how revenue is used at the sub-national level.  MMDAs have established guidelines on the use of royalties to ensure maximum community benefits and set clear rules on how to implement corporate social responsibility programmes. Designated bank accounts have been established to easily track and monitor royalty transfers to local communities. These measures intend to prevent misuse of funds and ensure projects are in line with the communities’ development priorities.

 

This article is drawn from a piece by the Ghanaian EITI National Coordinator, Franklin Ashiadey and analysis of the 2010-2011 GHEITI Report and 2013 Annual Activity Report.