The Ghana Chamber of Mines has proposed to government to exempt exploration companies from the payment of VAT to reduce the risk and cost of the activity.
According to the president of the chamber, Eric Asubonteng, one of the main factors accounting for the decline in exploration capital is the surcharge of VAT on exploration expenditure.
Addressing Parliament’s Committee of Mines and Energy before it went on recess, he said exploration is the most critical activity that guarantees continuous production of minerals, as it provides a pipeline of new projects and reserves to replace depleted ore bodies.
He added that exploration is a high-risk activity without inflows of revenue and therefore relatively expensive, which is worsened by the imposition of VAT on services consumed by such firms.
“More so, a large share of the exploration licences—617—is held by Ghanaians, who are usually constrained in raising capital for finance their work programmes.”
Another factor hindering exploration is the high land-holding cost, with Mr. Asubonteng arguing that relative to the country’s peers in the sub-region, Ghana has a higher cost—comprising annual mineral rights fee, exploration permit fee, processing fee, EPA permit fee and ground rent—of holding land for exploration purposes.
“Land-holding cost for exploration firms in Ghana is about twice and thrice the equivalent rate in Burkina Faso and Côte d’Ivoire,” he said.
He also told Parliament that whilst there is limited scope for value addition to gold, there is significant potential for value addition to non-precious minerals, particularly bauxite and manganese.