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Begin New Search Topic Revenue Management Political Geography Ghana

1. Assessing the Fiscal Regime in Ghana’s Lithium Agreement

Author:
Thomas Scurfield and Denis Gyeyir
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
NRGI modeling indicates that the Ghanaian government has negotiated a government take for the country’s first lithium mine that is higher than Ghana’s legislated fiscal regime and the regimes of many other current and imminent lithium hard rock producers, such as Australia, the Democratic Republic of Congo and Zimbabwe. Modeling suggests an average effective tax rate (government revenues as a share of mine profits) of 58 percent (excluding paid state equity). Seventy percent of these government revenues depend on the profits that mine leaseholder Barari DV Ghana reports. To limit the risk of revenue shortfalls, the agreement should define the process for pricing the lithium, limit the deductibility of interest from taxable income, ensure state equity is non-dilutable and establish rules in the shareholders’ agreement about dividend payments. Given that modeling indicates an after-tax internal rate of return for investors in the Ewoyaa mine of around 102 percent (after debt financing), the government may be able to negotiate an even higher take in future deals for similarly profitable mines. A variable rate royalty could help achieve this higher take. To increase the prospects for a lithium refinery in Ghana—the government’s other key objective—the government should ensure Barari conducts a rigorous feasibility study, publish it and then hold a multistakeholder consultation to agree on subsequent actions.
Topic:
Tax Systems, Fiscal Policy, Lithium, Revenue Management, and Minerals
Political Geography:
Africa and Ghana

2. Resource-Backed Loans in Ghana: Risks, Opportunities and Lessons

Author:
Denis Gyeyir
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Developing countries have trouble financing development mainly due to limited access to capital markets, high cost of borrowing, slow growth, or a mix of these. Countries with natural resource endowments have attempted in the last few decades to leverage these endowments to surmount those challenges. Many of their development efforts focus on closing huge infrastructure gaps. Ghana is a producer of cocoa, minerals, oil and gas—assets that have increasingly featured in the government’s infrastructure financing plans. Ghana’s infrastructure financing totaled USD 23 billion between 2007 and 2020, and annual infrastructure investment will need to reach $9.3 billion by 2030 (13.9 percent of 2019 GDP). Official development funding and private sector financing have been inadequate to meet these infrastructure needs. As a result, the Ghana Infrastructure Plan identifies Chinese infrastructural funding as a source to fill the gap. Ghana’s infrastructure financing has in part relied on leveraging its natural resources. Through resource-backed loans (RBLs), governments (directly or through state-owned companies) borrow funds and repay the loans in physical natural resources or with money from resource-related future income streams. Ghana has entered into three such RBL deals, totaling more than $5 billion, in the last two decades; all three involve Chinese state-owned enterprises as lenders.
Topic:
Natural Resources, Infrastructure, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa and Ghana

3. NRGI Impact: Demystifying Ghana’s Agyapa Royalties Deal

Author:
Natural Resource Governance Institute
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
As the coronavirus pandemic struck Ghana in March 2020, its government introduced sweeping social and health measures, but with a hefty price tag: the IMF subsequently projected the government deficit to reach 9.5 percent of GDP. Ghana’s gold wealth was seen as a possible solution. The government proposed creation of a new company, Agyapa Royalties Ltd. The Agyapa plan involves assigning most gold mining royalties from Ghana’s industrial gold production to an offshore company and selling 49 percent of the shares for approximately $500 million. When information on the Agyapa IPO surfaced in social media in early August 2020, NRGI convened discussions with a group of key Ghanaian civil society organizations (CSOs). This group coalesced into a 25-member “Alliance of CSOs Working on Extractives, Anticorruption and Good Governance.” Analysis by NRGI and the CSOs exposed important governance vulnerabilities in the deal, including risk of undervaluation; loss of control over gold sector governance; loss of ability to repay existing loans; limited consultation and questions on transparency and accountability provisions; and corruption risks. NRGI helped the alliance to broaden its advocacy agenda beyond just seeking transparency around the deal terms and politically exposed persons involved. NRGI suggested solutions to ensure an adequate valuation of Ghana’s gold and to protect the sovereign rights of the government to adjust fiscal terms and control decisions made by Agyapa Royalties. The alliance held several press conferences which led Ghana’s top media to actively report on the deal. NRGI connected with key international media outlets, with the Financial Times and the Economist citing NRGI analysts and Ghanaian members of the alliance. Following two months of coordinated pressure from civil society, a special prosecutor’s report outlined potential corruption risks and infringement of procurement legislation, validating some of the risks raised by civil society. The future of the deal is still pending, but civil society successfully placed the issue at the top of the national agenda.
Topic:
Civil Society, Media, Journalism, COVID-19, and Revenue Management
Political Geography:
Africa and Ghana

4. NRGI Impact: Safeguarding Ghana’s Petroleum Funds and Ensuring a Resilient Recovery

Author:
Natural Resource Governance Institute
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Before the coronavirus pandemic struck Ghana, the country’s economy was relatively strong, with growth forecast at around 5.8 percent in 2020. A month after the country’s first recorded coronavirus case, with both national and global restrictions put in place, the IMF revised this figure down to 1.5 percent. The pandemic also exposed Ghana, with its reliance on mining and oil revenues, to sudden volatility in commodity prices. A significant drop in oil prices caused by the pandemic delayed government plans to increase oil production and reduced expected oil revenues, on which Ghana’s 2020 budget forecasts were built. In order to address short-term needs and raise funds to finance an ambitious coronavirus alleviation program, the government obtained a credit line of $1 billion from the IMF in April 2020, as well as support packages from the World Bank and the African Development Bank. But, with aims to reduce dependence on foreign funds, the government turned its attention to oil revenues to fund the pandemic response. Officials floated plans to free up around $200 million for contingency spending by amending the Petroleum Revenue Management Act (PRMA) to allow the use of the Ghana Heritage Fund and to request a cap on the Ghana Stabilization Fund. These were met with protests. The Ghana Heritage Fund was established to save and invest a portion of oil revenues in safe assets to benefit future generations once oil deposits are depleted. Around nine percent of petroleum revenues flow into this fund annually, which, as of June 2020, held around $608 million in allocations and interest on investments. The Ghana Stabilization Fund was set up to balance the budget in times of shocks to the economy and unanticipated shortfalls in oil revenues. The minister of finance, subject to parliamentary approval, can cap accruals to the fund. Excess funds above the cap can then be used for debt servicing or for contingency spending.
Topic:
Natural Resources, COVID-19, and Revenue Management
Political Geography:
Africa and Ghana

5. Resource-Backed Loans: Pitfalls and Potentialloan

Author:
David Mihalyi, Aisha Adam, and Jyhjong Hwang
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Through “resource-backed loans” (RBLs) countries access finance in exchange for, or collateralized by, future streams of income from their natural resource wealth. The authors of this report reviewed countries’ past experiences with RBLs across sub-Saharan Africa and Latin America from 2004 to 2018. They identify risks and opportunities RBLs pose and provide recommendations for countries considering taking RBLs in the future. The researchers identified 52 RBLs, 30 of which were taken by countries in in sub-Saharan Africa and 22 in Latin America. They are distributed across 14 countries in the two regions. Thirty-eight were lent by Chinese policy banks, seven are from commodity traders, four are from other Chinese state-owned enterprises, one is from Korea Exim, one is from Nigeria and one is from Russia's Rosneft. Forty-three of the loans are backed by oil, six by various minerals, two by cocoa, and one by tobacco. The total loan amount represented in the dataset is $164 billion, of which $66 billion went to Africa and $98 billion to Latin America.
Topic:
Natural Resources, Finance, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa, Sudan, Brazil, South America, Venezuela, Nigeria, Angola, Ghana, Ecuador, Guinea, South Sudan, and Congo

6. Forecasting Ghana's Oil Revenues for the 2015 Budget Using a Fiscal Model of the Jubilee Field

Author:
David Mihalyi
Publication Date:
12-2014
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
In order to help Ghanaian MPs and the general public understand the potential impact of volatile petroleum prices on the implementation of the 2015 budget, we have built an oil revenue forecasting model. The tool uses only publicly available data and information. It is provided in Microsoft Excel (.xlsx), and released under an open licence so that it can be used by anyone. It can also be edited ,refined, and updated as events in Ghana and the world evolve. This modeling was only made possible due to the advanced state of oil sector disclosures in Ghana: contracts for the most important producing oil field (the Jubilee oil field) are published, the country is EITI compliant, national laws require transparency and regular reporting, and international oil companies such as Tullow and Kosmos disclose further key information.
Topic:
Oil, Natural Resources, Budget, and Revenue Management
Political Geography:
Africa and Ghana