Miners question why they should pay energy recovery levy
The Ghana Chamber of Mines has said it is unfair to slap its members with the energy recovery levy even though they did not enjoy the subsidies which led to the debt.
Unlike domestic and industrial consumers, mining firms typically procure electricity at a premium from the regulated market or through bilateral contracts with power utilities but have been asked to pay GH¢20 pesewas per litre of petrol/diesel as Energy Sector Recovery Levy, as well as 18 pesewas per kg on liquefied petroleum gas.
“In essence, mining firms neither contributed nor benefited from the subsidies that resulted in the legacy debt,” its President, Eric Asubonteng, said during a meeting with Parliament’s Select Committee on Mines and Energy in Accra.
The levy aims to recover legacy debts in the electricity sector which arose from a government subsidy to consumers, which according to Energy Minister, Mathew Opoku Prempeh, could surge more than fourfold to US$12.5 billion by 2023 unless concrete steps are taken to curb it.
However, Mr Asubonteng told the Select Committee that slapping the levy on miners, especially when they did not enjoy the subsidy, is unjust and, as such, is contributing to the rising cost of production.
As a result, he said the average cost of producing an ounce of gold domestically, using the all-in sustaining cost (AISC) metric, is higher than the continental and global average. For instance, at the end of 2020, Ghana’s AISC was US$1,190 per ounce, which was US$176 and US$246 higher than the corresponding average cost of producers in Africa and around the world, respectively.
“Expenditure on fuel constitutes a significant cost outlay for mining firms as they consume large quantities of it in the mineral production process. The price build-up of diesel has elements that are not directly or remotely related to the cost of supplying the fuel to the mines. As a result, the unit price of diesel consumed by the mines is relatively higher than that of their peers in the sub-region, including land-locked countries,” he argued.
“When you have companies that straddle various jurisdictions, one of the things they undertake is cross-country comparison, and when we did that, we realized that our diesel, which is a core part of mining operations, was priced way out of line compared to other jurisdictions,” adds the Chamber’s Chief Executive Officer, Sulemanu Koney.
“If you look at the levy’s component of our build-up, it is too high. And it is because of this Energy Sector Recovery Levy coming from the consumption of electricity,” he further noted.
Mr Koney also reiterated that mining companies have bilateral contracts with utilities to which they are fully committed, and hence, must be exempted from paying the energy recovery levy: “We are of the position that we should be exempted from it.”
He added that: “We need to be competitive and attractive, and investors will definitely look at these numbers. So, we need to remove all these top layers of the cost drivers.”
For his part, the Committee’s Chairman, Samuel Atta Akyea, assured the Chamber that all efforts would be made to make the sector more competitive. Ghana is currently Africa’s leading gold producer.