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MOF/IMF HOSTS CONFERENCE ON FISCAL MANAGEMENT OF MINING AND PETROLEUM RESOURCES IN WEST AFRICA

Dr Bawumia in a handshake with Mrs Grasso

A conference on how to strengthen the fiscal management of mining and petroleum resources in West Africa has ended in Accra.

The three-day conference, jointly organized by the International Monetary Fund (IMF) and the Government of Ghana, brought together government officials from Ghana, Nigeria, Senegal, Sierra Leone, Niger, Mali, and Mauritania - countries in West Africa with current or prospective mining and petroleum activities.

The conference was financed by the IMF’s Thematic Fund on Managing Natural Resource Wealth with Australia, the European Union, the Netherlands, Norway, and Switzerland as supporting partners who have come together on this initiative that supports countries in building capacity to mobilize and manage their natural resource wealth effectively and in a socially-responsible way.

Delivering the key note address at the opening of the conference in Accra on Monday, Ghana's Vice President, Alhaji Dr Mahamudu Bawumia, noted that no fiscal management of revenue flows from natural resources could be robust without including measures aimed at properly accounting for the resources extracted.

Dr Bawumia said fiscal discipline an competent management were required to enhance the revenue envelope for African countries to create the space needed in order to borrow less to finance their budgets, adding that the concept of an 'Africa Beyond Aid' could be achieved without also paying attention to the central role of government behaviour in resource control and benefit sharing arrangements.

He described transfer pricing practices and “hard to verify” head office or management fees as arguably the major sources of concern, of erosion of tax bases, and conduits of illicit financial flows by resource companies, noting that increasingly across the continent, the “watchman” role of the state had not been seen as developmental enough

Dr Bawumia, therefore, called for the plugging of revenue leakages through proper accounting for extractive resources on the part of concessionaires; scaling up participation in the high-value ends of the value chains; ensuring full participation of indigenous businesses in resource industries, and not just be providing ‘content’, and working together to stem the illicit financial flows that takes place daily in the sector.

He said the search for new pathways was reviving the debate about state equity participation, especially in mining.

He disclosed that Government was considering a progressive process which would require the refining of a significant proportion of all gold ores and cocoa beans locally in about five years, adding that while gold was currently the most important one, there was potential in the development of other minerals such as manganese, limestone and bauxite in order to boost our supply chain development.

"We have now begun conversations about the process of making sure that every single bar of gold leaving our shores is properly weighed, tested, valued, and accounted for. While the process may not be as robust as we want, it is a positive step in the right direction and we are impressed with the collaboration between the Ghana Chamber of Mines and the Precious Minerals Marketing Company in making sure we expedite the full spectrum of accounting for our gold resources," he added.

This, the Vice President said, would not only create private sector jobs and ease the pressure off the public sector but also increase the potential sources and value of resources for government spending on critical infrastructure and social services.

In her remarks, Carla Grasso, IMF Deputy Managing Director at the Conference on Fiscal Management of Mining and Petroleum in West Africa, said there were no simple answers on how to escape the so-called Resource Curse; but that countries that had derived sustained benefits from natural resources had one common factor— sound fiscal management made possible only with strong economic institutions that could formulate effective policies.

Mrs Grasso identified four pillars critical for effective fiscal management that would help ensure sustained benefits from natural resources.

These pillars, she said, were having a tax system in place that ensured that the economic rent generated from mining and petroleum activities was fairly shared between investors and citizens; the capacity to effectively administer the tax system and ensure that mining and petroleum companies complied with the fiscal terms in the tax legislation or contracts; a macro-fiscal framework to manage well the revenue flows from mining and petroleum; and fiscal transparency about mining and petroleum fiscal terms and contracts, revenue collection, the ultimate use of revenues through the budget' and internal transparency by sharing information between government agencies.

Ms Grasso noted that the best designed tax policy was not of much use without the capacity to administer it.

She noted that fiscal management required effective collaboration and information sharing between different government institutions and that no one institution could by itself achieve sound fiscal management of the mining and petroleum sectors.

She, therefore, urged the Ministry of Finance, Revenue Authorities, Mining and Petroleum Ministries, and regulatory agencies to work together in terms of both policy design and implementation.

Ms Grasso pledged IMF's commitment to working together in building the capacity to formulate and implement sound fiscal policies to foster a stable environment that supports sustainable economic growth and your development goals.

Global Financial Integrity, using the World Bank and IMF models, estimates that IFF from Africa in the 39-year period between1970 to 2008 was about US$854 billion, while West Africa, (which) produces and exports 65% of cocoa beans in the world, earns only between 3.5% and 6% of the final price of a chocolate bar.

Source: ISD (G.D. Zaney)


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