1. METROPOLITAN, MUNICIPAL AND DISTRICT ASSEMBLIES BY RICHARD KOFI AFENU, MANAGER SECTORAL POLICY & PLANNING, MINERALS COMMISSION, ACCRA 1 Guidelines for Use of Mineral Revenues, Tarkwa

2. Introduction Background Concerns About Application of Mineral Royalties in Ghana. Suggestions for the Application of Mineral Royalties The Guidelines Purpose Guidelines on the Usage of Mineral Royalties Allocation of Funds to Project Areas Development Budgeting Payments from Fund Supervision and Monitoring of Projects Accounting for the Utilisation of the Fund Strategies for Implementation Conclusion 2 Guidelines for Use of Mineral Revenues, Tarkwa

3. Gold accounts for 95% of all mineral earnings. Mining at large contributes : about 10% of Ghana’s total corporate tax earnings, 49% of total exports, 23% of government revenue and 6% GDP. The sector also employs 27,000 people in the large scale mining industry. Over 1,000,000 people are engaged in the small scale gold, diamonds, sand winning and quarry industries. In 2010, export revenues from the mineral sector amounted to US$3.9 billion. Total Foreign Direct Investment (FDI) into the minerals and mining sector from 1983 to 2010 amounted to US$10.7billion. 3 Guidelines for Use of Mineral Revenues, Tarkwa

4. What is Mineral Royalty?? A percentage of the revenue earned from the sale of minerals which is paid to the owner of such minerals, in this case to the State. Amount of royalties paid by mining companies depends on the gross revenue realised from the sale of the mineral product by the mining Company. Act 794 puts rate application at 5% of gross revenue of mineral won. 10% is paid to the Administrator of Stool Lands who in turn retains 1% of the amount as administrative charges Remainder distributed as follows: 55% of the royalty is paid to the relevant District Assembly, 25% to the Stool on which mining takes place and 20% to the Traditional Authorities. Should we have Guidelines for Stools and Traditional Authorities..? 4 Guidelines for Use of Mineral Revenues, Tarkwa

5. First EITI report (2004) revealed lack of regulations or guidelines existed for the use of mineral royalties. District/Municipal Assemblies and Traditional Authorities, of their due share of the are expected to use royalties and other mineral revenues to finance development projects in the communities Does not appear to be the case. Most District/Municipal Assemblies use these funds to finance recurrent expenditures. Monies accruing to the Traditional Authorities and Stools are often used on immediate consumption 5 Guidelines for Use of Mineral Revenues, Tarkwa

6. To develop standard guidelines to be applied for the use of mineral royalties returned to the communities through the Municipal/District Assemblies for the execution of tangible development projects. Methodology involved the gathering and compilation of both quantitative and qualitative data on mineral royalties received by District/Municipal Assemblies. Data collection methods to obtain primary and secondary information: include documentary review, focus group discussions, public meetings, stakeholder consultation/engagement, community profiling and mapping, stakeholder workshops and social audit of mining sites. 6 Guidelines for Use of Mineral Revenues, Tarkwa

7. Stakeholders consulted/engaged includes : community members (traditional authorities, farmers, women, youth, and concerned citizens), key informant interviews with mining companies, mining sector related institutions (Minerals Commission, Environmental Protection Agency, Administrator of Stool Lands) and District Assemblies. Public meetings; and stakeholder consultation and engagement workshops were held to discuss expected guidelines. 7 Guidelines for Use of Mineral Revenues, Tarkwa

8. Following districts: Bibiani- Anwiaso-Bekwai, Tarkwa-Nsuaem, and Prestea-Huni Valley all in the Western Region of Ghana. Obuasi Municipality in Ashanti Region, Asutifi District in Brong Ahafo, Dangme East and Weija Municipality in the Greater Accra Region. 8 Guidelines for Use of Mineral Revenues, Tarkwa

9. Royalties received by Traditional Authority have not been utilized for the benefit of the community. Royalties received by Municipal and District Assemblies are also not known to have benefited the community There has not been any transparency in the receipt and utilization of mineral royalties The running costs of Assemblies are high. There are no stringent measures attached to the use of royalties hence the Municipal/District Assemblies use them to support their recurrent budget 9 Guidelines for Use of Mineral Revenues, Tarkwa

10. The need for disclosure and transparency in the receipt and utilization of mineral royalties All projects funded with funds from royalties should be labelled as such Community members should be involved in determining priority projects for funding from mineral royalties At least one-third of all projects funded with mineral royalties should be allocated to frontline mining communities that bear direct impact of mining operations 10 Guidelines for Use of Mineral Revenues, Tarkwa

11. Community members should be informed about projects funded from mineral royalties by receiving authorities (Area Council, Unit Committee, Assembly Members, and Traditional Authorities). Royalty payments from the government to other recipients should be prompt The Municipal/District Assemblies’ share of royalties should be increased Need for mineral royalties received by Municipal/District Assemblies to be tracked and their utilization accounted for Amount received as royalties should be published The royalty account at the Municipal/District Assemblies should be separated from other accounts for easy auditing 11 Guidelines for Use of Mineral Revenues, Tarkwa

12. The Purpose to provide a framework to help District and Municipal Assemblies properly manage the selection of tangible development projects Following were based on majority views gathered. communities and 40% to the other communities in terms of project financing. Projects shall be evaluated and funded based on the proposal/request submitted to the Assembly. Amounts shall be released quarterly to finance projects in selected communities and the Assembly shall notify the Assembly Member of the beneficiary community. 12 Guidelines for Use of Mineral Revenues, Tarkwa

13. Where a memorandum has been raised to the District/Municipal Chief Executive for project to be financed under the Fund, the Assembly Member shall be given a reply within fourteen working days as to whether the request has been approved or whether a query has been raised. A separate record shall be kept in respect of each community. The District/Municipal Chief Executive shall report the physical progress of implementation of each project quarterly to Assembly Members. Contracts will be awarded in accordance with the Public Procurement Act, 2003, Act 663. Competent contractors from stakeholder communities should be given due consideration in the award of contracts. Standard designs and their variations approved by the relevant sectors should be used in the implementation of all projects involving the construction of infrastructure. 13 Guidelines for Use of Mineral Revenues, Tarkwa

14. Percent Allocation of All Revenues Received from Royalties Project Areas 25%Health Services and Infrastructure 20%Education services and Infrastructure 20%Water & Sanitation Services and Infrastructure 18%Social Services and Infrastructure 15%Agricultural and other income generating activities 2% 14 Guidelines for Use of Mineral Revenues, Tarkwa

15. 60% of all revenues should be allocated to stakeholder communities Projects to be based on proposals submitted to various Assemblies Quarterly releases to selected Communities. Assembly shall notify Assembly Member of beneficiary Community. District and Municipal Assemblies to notify Assembly Member of beneficiaries of approval of memorandum to project within 14 days. 15 Guidelines for Use of Mineral Revenues, Tarkwa

16. Separate Record maintained for each beneficiary Community Chief Executives shall report on progress of projects to Assembly Members periodically. Contracts are to be awarded in accordance with the Public Procurement Act Margin of Preference to be given to competent Contractors from beneficiary communities Standard designs and their variations approved by the relevant sectors should be used in the implementation of all projects. 16 Guidelines for Use of Mineral Revenues, Tarkwa

17. Assemblies shall each year prepare a Development Budget covering revenues received from mineral royalties. Development Budget to be approved by Resolution of the Assembly in accordance with section 112 of Local Government Act, 462. Assemblies shall ensure that all projects and programmes are in conformity with the Assemblies Medium and Long-Term Development Strategy. All Assembly Members shall be served with copies of the Development Budget for each year 17 Guidelines for Use of Mineral Revenues, Tarkwa

18. Separate account from Assembly account shall be kept for mineral royalty revenues No money shall be withdrawn from the account without a memorandum from sitting Members of the Assembly. All transactions shall be recorded in the Books of Account of the Assembly All transactions shall reflect in all Financial Reports All payments shall be made by the Finance Officer of the Assembly in accordance with existing financial regulations in force 18 Guidelines for Use of Mineral Revenues, Tarkwa

19. Unredeemed contractual retention should b e treated as a deposit and payment of matured retention monies should be paid out of the deposit account Chief Executives shall submit half-yearly progress report on the operation of mineral royalty receipts to offices of OASL with copies to the Presiding Member of the Assembly, Regional Minister (who shall compile the district half-yearly returns into a Regional returns to be submitted to the Minister of Local Government. 19 Guidelines for Use of Mineral Revenues, Tarkwa

20. Regional Co-ordinating Councils shall monitor use of all monies (mineral royalties included) allocated to the Assemblies. (section 141 (1)b of Act 462 Local Government Act) Assemblies to establish a Committee to oversee the utilization of funds Composition of Committee: Co-ordinating Director of Assembly (chairman) Planning Officer Finance Officer Chairman of Development Sub-Committee Community Relations/Development Manager of mining companies operating in the area Representative of selected community Representative of Minerals Commission, EPA, OASL, Traditional Council and Stools 20 Guidelines for Use of Mineral Revenues, Tarkwa

21. Assemblies shall prepare Financial Reports (amount utilized, balance in the account and outstanding contractual commitments) at the end of each quarter. Copies of Financial Reports shall be Distributed to : Assembly Members, OASL, Regional Co-ordinating Council, Controller Accountant General Dept (??) Auditor General) Assemblies shall prepare monthly Trial Balance, Receipt and Payment Statement and Bank Reconciliation Statement. All mineral revenue receipts and expenditures should be in monthly trial balance Assemblies shall provide financial information on a project-by-project basis Any unspent balance of an Assembly’s share of mineral revenues should under no circumstance be credited to Accumulative Surplus Fund. Balance to be treated as finances of Net Assets in the Balance Sheet. 21 Guidelines for Use of Mineral Revenues, Tarkwa

22. Carry out Road Shows at EITI workshops Facilitate the adoption of the guidelines through ENRAC (Environment and Natural Resources Advisory Council) Education of Assemblies on proper utilization of revenues from depletable natural resources (minerals) Ensure compliance of Guidelines through development of Reporting Templates for Assemblies (monthly, quarterly and annually) Establish Baseline Conditions and Develop Annual Tracking Tools for Monitoring Develop Communication Strategy to disseminate achievements in mineral revenue utilization 22 Guidelines for Use of Mineral Revenues, Tarkwa

23. Article 267 (6) of 1992 Constitution Article 267 (6) of 1992 Constitution (6) Ten percent of the revenue accruing from stool lands shall be paid to the Office of the Administrator of Stool Lands to cover administrative expenses and the remaining revenue shall be disbursed in the following proportions: (a)twenty-five percent to the stool through the traditional authority for the maintenance of the stool in keeping with its status; (b)twenty percent to the traditional authority; and (c)fifty-five percent to the District Assembly, within the area of authority of which the stool lands are situated. For (b) there is no question, guidelines and reporting templates need to be developed for them along those of Assemblies For (a).. who or what is a stool? A physical Stool or the SPIRIT/SOUL of the people who owns the land, held in trust by the Chief? Who then benefits from the revenue? The Owners OR Chief ? Then need to know how utilization is carried out. Guidelines for Use of Mineral Revenues, Tarkwa 23

24. This is the first Step in ensuring mineral revenues benefit the Communities in particular and the country as a whole. All stakeholders are required to ensure that the implementation of the guidelines succeeds Future legislation of these guidelines may be necessary when the guidelines fail to work. Remember minerals are non-renewable and revenues accruing from it should be used to catalyse the development of other sectors of the economy for use by current and future generations. 24 Guidelines for Use of Mineral Revenues, Tarkwa

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