Ghana faces rising resource nationalism risks amid deteriorating public finances
Fitch Solutions, a leading provider of credit, macro intelligence and risk management solutions, has issued a warning about persistent resource nationalism risks in Ghana, highlighting that the situation is likely to persist under the leadership of President Akufo-Addo.
According to the firm’s report on ‘Resource Nationalism in SSA: A Trend Towards Beneficiation Requirements’, the risks in Ghana are further compounded by deteriorating public finances in the country, which has been grappling with a debt-repayment crisis.
As a result of the crisis, Ghana has been attempting to restructure more than $30bn of domestic and international debt since late-2022. The report notes that default risks could incentivize the government to seek higher tax revenues from the mining sector, potentially by raising royalty payments.
The Fitch Solutions report also highlights that President Akufo-Addo has previously stated that fiscal incentives for mining firms in the country agreed by previous administrations are too generous. It argues that several countries in Sub-Saharan Africa (SSA) are facing rising resource nationalism towards their respective mining sectors, as part of a global trend towards greater government intervention in the industry, which has been underway since 2020.
The report identifies countries where resource nationalism risks are high and/or rising in SSA, including the Democratic Republic of the Congo (DRC), Guinea, Mali, Namibia, and Zimbabwe, in addition to Ghana. Increased government intervention in the mining sector of these countries will generally aim to extract greater value from the mineral supply chain for local stakeholders, including the government (through taxes), employees (through job creation) and the mining service industry (through increased business).
Resource nationalism is a growing trend worldwide, with governments seeking to increase their control over natural resources and ensure that they receive a greater share of the benefits from the exploitation of those resources. This trend is particularly prevalent in the mining sector, where mineral wealth is often seen as a vital resource for economic development. However, it is not without its challenges, with many experts warning of potential risks to investment and economic growth if governments pursue overly aggressive policies.
The report’s findings have significant implications for investors and mining companies operating in Ghana and other countries at high risk of resource nationalism. Companies will need to carefully monitor political and economic developments and ensure they have effective strategies in place to manage risks associated with government intervention in the mining sector.
Ultimately, the ability of governments to strike a balance between extracting greater value from their natural resources and creating an attractive environment for investment and economic growth will be key to the long-term success of the sector in SSA and beyond.
