The government of Ghana seems intent on concluding a deal related to gold exploration despite all the suspicions and criticisms, confirming that it will reap many of the necessary financial returns in light of the current crisis.
The British “Economist” magazine said that Ghana – the largest producer of gold in Africa – plans to sell gold exploration taxes in order to provide the necessary liquidity to deal with the economic consequences of the Corona crisis and to maintain public spending levels under the weight of debt that is expected to reach 70% of GDP. Total this year.
But this step – according to the newspaper – raises a lot of controversy and questions among experts and in the Ghanaian street who went out to demonstrate against the deal.
In 2018, Ghana exported more than $ 6 billion in gold, and the government now wants to collect up to 75% of the taxes on exploration rights in 16 large mines for Agyapa, and then plans to sell about 49 % Of the company for $ 500 million.
The government says the deal will provide cash without increasing public debt, but critics assert that this is false.
“The government is essentially selling its ability to pay off its current regular loan portfolio,” says David Mihaly of the Institute for Natural Resource Governance.
Critics question the terms of the deal, which are neither a specific amount of gold nor a clearly defined period of time.
According to the government plan, Agiaba will continue to receive its share of the proceeds if there is any renewal or extension of mining leases in the areas covered by the agreement, and this would give investors additional benefits without having to pay them to the government.
Documents reinforce suspicion
The Economist says it has obtained documents that reveal that the government put the value of Agiba’s company at one billion dollars. But the economist at the University of Aberdeen, Jacob Abdel Salam, believes that the value of the company is not less than $ 2.5 billion, even in light of the uncertainty about the amount of gold that will be extracted, and the price of gold when it is sold.
According to a spokesman for the ruling party in Ghana, the goal of valuing the company in one billion dollars is to attract investors, but the real valuation will come from the market when the shares are offered.
Bright Simmons, an expert at Imani Research in Accra, says the government has been in discussions with investors for two years, so setting $ 1 billion in revenue might reflect the value it expects before the IPO.
According to the magazine, one of the reasons behind the big difference between what the government has determined and what experts see is the risks Ghana poses to investors, but no one knows the full truth because the government was not transparent about the expectations or interest rates that it adopted in the evaluation process.
Charles Adu Bohin, Ghana’s deputy finance minister, insists there is “complete transparency” and that the London IPO will ensure the company is properly valued. But many people wonder, according to the magazine, about the reasons that led the government to register the company in Jersey, which is classified as a tax haven, instead of registering it in London.
The government responded by explaining that it chose Jersey because of the efficiency of its tax system, and assured that it would impose control over the company by owning a majority of its shares, and would receive annual dividends.
Insistence on the deal
The magazine adds that there are many doubts about the agreement. Although the government has been working on preparing it for years, Parliament was granted only 4 hours to scrutinize and ratify it, which made the opposition take to the streets to reject the deal.
Critics point to a lack of transparency over the appointment of the Agiappa president, as the position was assigned to the son of a Ghanaian government minister, a study friend of the deputy finance minister. Also participating in the deal is an investment bank set up by the Minister of Finance, according to the British magazine.
On 10 September, the Special Prosecutor in Ghana wrote to Parliament requesting information, saying that he is looking into whether any elements of the deal are corrupt. A leaked memo also shows that the public prosecutor wrote on July 22 to the finance minister saying the deal was “unreasonable”.
According to the magazine, the Ghanaian government is determined to implement the IPO before the end of this year, which will not leave much room for any change in the deal.
The largest gold producer in Africa
- Ghana topped the list of the six major gold producing countries in Africa, with a total production of 158 tons in 2018.
- Sudan came in second place, with a production of 127 tons.
- South Africa ranked third, with a total production of 119 tons.
- Mali ranked fourth, with a production of 49 tons.
- Guinea was followed by the fifth, with a production of 47 tons.
- Burkina Faso came in sixth place, with a production of 44 tons in 2018.