$259 Million Tax Exemptions for AGA is a Misguide - Part 2 | AK Mensah

On the "Stabilisation agreement with AngloGoldAshanti (AGA), where AGA, a foreign based mining company in Ghana is granted total tax exemption worth $259 million (includes $40 million waiver on royalties, $2 million in income tax exemption, $56 million in capital allowances due in 2020 and 2021 and import duty exemption of $161 million)". My argument here is that these tax exemptions will benefit the mining company to expand their profit base but will rather breed and deepen poverty in the affected mining communities. Again, their production process will leave their environmental resources (land, soil, water, air, food chain, the ecosystem) polluted with heavy metals.

Heavy metals such as arsenic, manganese, cadmium, lead, copper, etc., are non-biodegradable and can stay in the soil for many years even after the mine decommission stage and will affect the posterity yet to come in such mining regions and communities. People's livelihoods will be lost as the mines expand their production into more concessions, displacement of people, cultural disruptions, loss of arable lands with consequent pending food insecurity in gold mining regions and the country as a whole. This is more explained in the following sessions.

Extractive industries like that of bigger mining companies exacerbate the resource-curse. The resource curse ("paradox of plenty") refers to the paradox that countries with an abundance of natural resources (E.g. fossil fuels, oil, minerals such as gold, bauxite, diamond, etc.), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources (See Gamu et al., 2014; Weber-Fahr, 2002).

This curse is also more evident in countries, where there is centralized government, less devolution and less decentralization. It is evident in countries and systems, where revenues generated from mining communities go to the central government and where little of the revenue goes to the communities where the mineral is mined. In Ghana, the evidence of resource curse is most seen in especially the gold mining regions and communities, where mining activities had resulted in deepening poverty, environmental degradation and social impacts.

I give here the reasons why extractive industries, no matter the tax exemptions and lax granted them, will only operate for their profit gains but cannot solve unemployment problems in mining communities and will further leave such communities in abject poverty. Large scale mining companies create "enclave economies", where only a fraction of the total Ghanaian labour force are employed in the sector. The sector usually depends on highly technical and skilled labour, which are limited in rural communities where gold mining is done.

Large scale mines exist to boost national incomes and foreign exchange earnings for the national economy but positive economic impacts on the local communities where they operate are minimal. Rather, highly devastating environmental impacts are evident in gold mining communities in Ghana - generation of waste lands, air pollution, soil fertility depletion, loss of ecological integrity, vegetation removal, conflicts and clash between large scale mines and mining communities, displacement of indigenous people, amidst other social impacts such as high cost of goods and services in mining communities, prostitution, bad roads, abject poverty, among others. Several past studies had supported my argument. Garvinet al. (2009) posit that large-scale mines employ estimated 20,000 people in Ghana, far below the estimated number artisanal gold mining sector absorbs.

Artisanal small scale gold mining in Ghana employs over 1 million people. In 2001, Aryee pointed out that despite huge investment injected into the Ghanaian economy from bigger scale mines, the distribution of income remains uneven with rural communities where mines are located receiving little benefits from the gold mining income. Akabzaa and Darimani (2001) indicated that poverty abounds in gold mining and resource-rich communities, with lower absorption and employment of the local people into the large-scale mines. Garvin et al. (2009) further add that Ghanaian communities that house mining companies get real little local benefits from the industrial gold mining operation and exploration activities.

In my next series, I will take you through other reasons why these tax exemptions are misplaced and why poverty will be deepened in mining localities by this action taken by government



AK Mensah

is a senior research fellow and the second vice-president at ILAPI. He is also the CEO of Center for Better Society Advocacy and Research

Source: ILAPI