"Ghana\u2019s transition minerals; no time to lose"

" Ghana\u2019s transition minerals; no time to lose \r\n\r\nThe government of Ghana\u00a0 launched \u00a0its\u00a0 energy transition framework \u00a0in November 2022 at the COP27 climate conference in Egypt. The plan is to guide the country\u2019s transition plans and map its resource needs for the coming 50 years. With global demand for oil anticipated to fall, Ghana\u2019s oil revenues will soon begin to decline. That will have a direct impact on the government\u2019s domestic revenues and subsequently on spending on critical areas such as healthcare, education and social protection. The oil sector contributes\u00a0 approximately 16 percent annually to Ghana\u2019s domestic revenue and 4 percent to its GDP \u00a0and absorbs a further\u00a0 30,000 \u00a0of the country\u2019s labor force through direct, indirect and induced employment opportunities. But Ghana\u2019s future is not in oil.\r\n\r\n An aging fiscal regime \r\n\r\nGraphite and lithium (recently\u00a0 discovered \u00a0in large quantities in Ghana) are critical for the energy transition beyond fossil fuels, as these minerals are crucial inputs to green technologies. Ghana\u2019s energy transition framework identifies graphite and lithium as future opportunities for state revenue.\r\n \r\n \r\n \r\nBut while Ghana\u2019s fiscal regime includes revenue management laws specific to the waning oil sector, it has no such revenue management provisions for mining. Ghana\u2019s\u00a0 petroleum revenue management \u00a0laws require the government to report both revenue and expenditure and compel it to allocate a significant portion of oil revenues to specific programs and sectors.\r\n\r\nTo maximize revenue and broader benefits during the transition years, Ghana needs a new fiscal regime that specifically governs its transition minerals. A business-as-usual approach will hurt the country\u2019s domestic revenue and slows plans for its own transition.\r\n\r\nRegulations specific to transition minerals will offer a context-specific framework to guide and govern the sector as well as respond to ongoing global regulatory reforms on transition minerals.\r\n\r\nGhana can learn from other countries\u2019 examples. In 2020, Canada and the United States finalized a\u00a0 Joint Action Plan on Critical Minerals Collaboration . The Canadian government subsequently published a list of 31 minerals identified as \u201ccritical.\u201d In 2022, it released a policy statement on how the Investment in Canada Act will apply to investments in Canadian entities and assets in transition minerals sectors. Among others, acquisition of control in companies in this sector will now require\u00a0 ministerial-level approval \r\n\r\nThe U.S. passed the\u00a0 Energy Act 2020 \u00a0to introduce reforms and increase investments in technologies to help the country\u2019s energy transition. There are specific provisions for a\u00a0 national strategy on critical minerals production \u00a0and the country\u2019s\u00a0 independence \u00a0in the production of such minerals.\r\n\r\nIn response to the\u00a0 2022 Versailles Declaration , European Union President Ursula von der Leyen announced the\u00a0 Critical Raw Materials Act \u00a0in March 2023 to address the EU\u2019s dependency on imported critical raw materials by diversifying and securing a domestic and sustainable supply of critical raw materials.\u00a0 (Though the draft CRMA\u00a0 does not adequately protect against corruption .)\r\n\r\nThese exact objectives of these regulatory reforms may differ slightly from what Ghana may need. However, they all aim at maximizing states\u2019 interests in these \u201ccritical minerals\u201d in the context of the energy transition. Ghana can thus take a cue and act proactively.\r\n\r\n Fiscal frameworks designed for Ghana\u2019s transition \r\n\r\nThese examples indicate that the world is moving at a very fast pace on transition minerals access and control. Can Ghana afford to revert to its old mineral fiscal regimes in this highly competitive environment for transition minerals? To do so may lead to substantial revenue losses and would reduce the country\u2019s status in the transition race to that of a mere producer of raw materials. (The existing regime has several provisions such as development agreements and exemptions that are not tailored to the transition minerals.) The current fiscal regime for mining provides several stability clauses, development agreements and other tax exemptions that erode the country\u2019s domestic revenue. Ghana\u2019s mining sector is prone to illicit outflows, and loses an estimated\u00a0 USD 2 billion annually \u00a0through smuggling. The government can address these loopholes with targeted sets of regulations.\r\n\r\nGhana needs a transition minerals law to govern the contracting, extraction, processing, export and usage of revenues. The country will benefit from specific regulations to ensure that our transition minerals are refined domestically, and not exported in their raw states as has happened for over a century with Ghanaian gold, bauxite and other minerals.\u00a0 Adding value \u00a0to these minerals will enhance Ghana\u2019s export revenues to compensate for the expected decline in proceeds from the export of fossil fuels.\r\n\r\nThe regulation should also guarantee access to secure, affordable and sustainable transitional mineral supplies for the country\u2019s own nuclear and other energy generation operations dependent on green technologies. Most importantly, the government must enforce the law when passed so that it does not suffer the fate of so many other laws that remain toothlessly unimplemented.\r\n\r\nAnd the law should include specific provisions for investment in the sector, including foreign ownership and controls.\r\n\r\nWithout a new set of regulations that are fit for purpose, Ghana will soon find itself playing catch-up to the rest of the world amid the energy transition. Even with revenue from fossil fuels, Ghana continues to struggle with high unemployment, weak domestic revenue, negative trade balances and persistent balance of payment problems. Weakness in its governance of increasingly crucial transition minerals will only exacerbate these problems.\r\n\r\nTo conclude, having a new framework specifically for transition minerals will ensure fit-for-purpose governance structures that promote responsible access, increase investment and ensure Ghana\u2019s share of the revenue needed for its own energy transition. To achieve a\u00a0 triple win \u00a0for Ghana\u2019s minerals, the approach must be different this time.\r\n\r\n \r\n\r\n \r\n\r\n Alex Ampaabeng \u00a0is a senior economic analyst at the Natural Resource Governance Institute. Abdulkarim Mohammed is a team leader at Act Africa. Barnabas Anane is a program officer at Citizen Aid Africa. "

"Ghana\u2019s transition minerals; no time to lose"

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