The Executive Director of Mass Action for Sustainable Development in Africa (MASDA), Atik Mohammed on Monday, October 11, 2023 addressed the media on Ghana’s first-ever lithium mining lease agreement with Barari DV Ghana Ltd, saying the audacious move is not without concerns.
Before delving into the intricacies of the lithium mining lease agreement, Mr Mohammed provided insights into MASDA.
A not-for-profit organization dedicated to promoting good economic governance, democracy, peace, security, youth empowerment, and sustainable development in Africa through collective action.
Atik Mohammed, at the International Press Centre in Accra, underscored the critical role lithium plays in the global shift toward electric vehicles for decarbonization.
Quoting the BBC, he emphasized the exponential increase in global demand for lithium required to meet the goals of the Paris Agreement.
Mr Mohammed, expressed concern about the discretionary nature of the 10percent royalty rate outlined in the lease agreement, pointing out potential issues with fluctuating lithium prices and varying rates for different lease agreements. He highlighted the need for specific regulations through Legislative Instruments (L.I.) to set a fixed royalty rate for lithium revenue.
The urgency of the lithium mining lease agreement without wider consultations raised suspicions. Mr Mohammed questioned the timing and detailed the impracticality of all processes occurring on the same day. He called for transparency and wider engagements, akin to those preceding oil discoveries.
The provision for a 13percent free carried interest for the government was scrutinized. Mohammed stressed the necessity for a secure and explicit amendment of Section 43 of Act 703 to safeguard Ghana’s interest in future agreements.
Referencing Article 268(1) of the 1992 constitution, Mr Mohammed urged parliamentarians not to ratify the agreement in its current form. He called for rectifications to address concerns before approval.
Advocating for the recognition of lithium and green minerals as the “new oil,” Mr Mohammed proposed amending Act 703 to reflect the specificities of these minerals. This would include new percentages of free carried interest, value addition requirements, and a detailed royalty regime for processed lithium.
Alternatively, Atik Mohammed suggested the creation of a new legislation—Lithium and other Green Minerals Management Act—to provide clear provisions on royalty rates, carried interest, equity concerns, local participation, and value addition arrangements.
MASDA committed to holding public forums to engage stakeholders, increasing awareness about the need for comprehensive preparations before granting any mining lease for green minerals.
Atik Mohammed, thanked the media for their presence and reiterated the importance of safeguarding Ghana’s interests in the burgeoning lithium industry.
The press conference, he said, marked the beginning of MASDA’s advocacy journey, as they pledged to submit their concerns as a petition to parliamentary representatives in March the following year.
Below is the press statement by Mass Action for Sustainable Development in Africa
1. Good morning, ladies and gentlemen of the media. We appreciate your coming to today’s encounter. Today’s event is very important, as it is about the future of our country. As you may be aware, Ghana through the Minister for Lands and Natural Resources signed its first-ever lithium mining lease agreement with Barari DV Ghana Ltd on 10th October, 2023. This audacious move is not without concerns, a matter we seek to discuss today.
2. Before delving into the issues for the day, kindly indulge me to introduce Mass Action for Sustainable Development in Africa (MASDA) to you. It is a not-for profit organisation that focuses on such key themes as the promotion of good economic governance, democracy, peace and security, youth empowerment and sustainable development in Africa through collective action.
3. It is trite knowledge that, lithium and other green minerals represent the future. This is because, they are at the centre of the green transition. The global shift to electric vehicles as a means of decarbonisation is made possible because of lithium batteries. As a result, the demand for lithium has increased exponentially. According to the BBC, meeting the goals of the Paris Agreement, would require an increase in global demand for lithium by more than forty times its 2022 levels. The fact of lithium being the mineral of the future is beyond debate.
4. Be that as it may, Ghana as a lithium-blessed nation, must position itself in a good stead to reap the benefits from these green minerals. Geological survey data have shown that, Ghana has significant deposits of hard-rock and brine lithium. We must therefore avert the recurrence of the tragedy that has characterized the mining of gold, diamond, and related minerals in our country.
5. It is against this background that, we find the mining lease agreement between government of Ghana and Barari DV Ghana Ltd unacceptable and not fit-for purpose.
Royalty Rate
6. The lease agreement stipulates in clause 20 that, the company shall pay a royalty of ten percent (10%) of total revenue. Although section 25 of (Act 703) as amended, creates room for setting of royalty rates higher than the earlier 5%, it does not set a specific rate. Therefore, the 10% rate is discretionary and arbitrary. The implication is that, Ghana might be earning less royalty income in the future from lithium when prices skyrocket; a phenomenon that is most likely in the light of the projected mad lithium rush. Again, this arbitrariness could mean different rates for different lease agreements in the future. This will be tragic for investment in the sector.
7. It must be emphasized that, this shortcoming was anticipated when section 25 was amended. As a result, a cure was provided in section 110; subsection u of (Act 703) as amended. This provision entitles the Minister to make regulations through Legislative Instrument (L.I), to prescribe “the rate for royalty and the manner of royalty payments in respect of minerals”. If the Minister were minded to be diligent, he would precede this agreement with the relevant L.I. that prescribes the royalty rate for lithium revenue. A rate that cannot be changed capriciously.
Hasty And Suspicious Grant of Lease
8. Given that green minerals (especially lithium) will become substitutes for oil in the not-distant future, one would expect wider engagements and consultations at least in the likeness of those that characterised the discovery of oil prior to the grant of any mining lease. It is obvious this did not happen. The curious question then is, why the rush? What does it profit Ghana to rush into signing lease agreements only to be hurt in the long run?
9. An important and frankly, quite disturbing issue is the fact that, a careful study of the approval of recommendation letter by the Minister and the mining lease agreement, reveal they bear the same date. This is suspicious because, it is impracticable for all the processes after the approval of recommendation to be fulfilled and a lease granted in one day.
10. This mystery casts a dark cloud on the transparency and propriety of the lease agreement. We attach herewith, copies of the relevant documents for your perusal.
Government’s Free Carried Interest
11. Government is purportedly entitled to 13% free carried interest in the rights and obligations of the mineral operations of Barari DV Ghana Ltd according to clause 19(a) of the lease agreement. This provision in the agreement flows from section 43(1) & (2) of Act 703. Section 43(1) entitles government to acquire free carried interest of ten percent. It can however further this interest in a manner agreed upon by all parties as stipulated in subsection (2).
12. As a pioneer agreement that would guide future or subsequent agreements, government’s desire for 13% should be secured in a watertight manner. This would require an explicit amendment of section 43 of Act 703. Failure to do so is equivalent to negotiating a half-baked agreement which does not serve our interest going forward.
What must we do?
13. Article 268(1) of the 1992 constitution, presents us an opportunity to pull the brakes on the agreement as we work to rectify the leakages or concerns in the agreement. To this end, we are calling on our representatives in parliament (i.e. both sides of the aisle) not to ratify the agreement in its current form until the building blocks are laid. Furthermore, parliament must demand broader engagements from the Minister as a precondition before any lease is eventually granted.
14. As has been stressed, lithium and other green elements must be treated as the “new oil”. Hence, we must either amend the Minerals and Mining Act (Act 703) to reflect the peculiarities of these green minerals or have a separate green minerals regulatory and fiscal regime before any mining lease for lithium is granted.
15. With respect to the former, new percentages of free carried interest would be specified, requirements for value addition, royalty regime of processed lithium and other green minerals would be captured among others. An L.I. on lithium royalty would have to also be made as well.
16. The latter solution, however, means clear and specific provisions on royalty rates, carried interest, equity concerns, local participation, and value addition arrangements contained in a new legislation. In this regard, a Lithium and other Green Minerals Management Act for instance, will go a long way to help us streamline the management of lithium and other green elements in a manner that is beneficial and sustainable for Ghana.
17. This issue must be of concern to every Ghanaian especially the ordinary Ghanaian. We in MASDA, will continue to canvass the issues and increase awareness on the need for adequate preparatory works before the grant of any mining lease on green minerals. We will be holding public for to engage stakeholders on the subject with a view to helping government build a robust and sustainable framework for the management of green minerals in our country.
18. Furthermore, we will be sending our concerns in the form of a petition to our representatives in parliament for consideration as they prepare to receive the lease agreement sometime in March next year.
19. We thank you for coming and may God bless Ghana and Africa.
