Why the NDC's reduced lithium royalty rate for Ghana is strange and legally baseless

The Africa Policy Lens has expressed outrage at the decision of the Mahama Government to push for the reduction of Ghana's royalty rate in the Barari DV Lithium deal from the agreed 10% to 5%.

The previous government, following a Cabinet approval to review royalty rates for Ghana's lithium and associated minerals, reached a mutual agreement with Barari DV Ghana Limited, for an upward 10% royalty stake for Ghana.

But in a strange twist, the NDC, which criticised the 10% royalty rate in opposition as woefully inadequate, has now proposed a reduction from the agreed 10% to 5%, arguing that the previous government's negotiated and mutually agreed 10% royalty rate for the country was unlawful.

The government's strange stance has generated controversy, with the APL wading in and hitting out at government for not standing in for the interest of the nation.

In a statement the APL argues the previous government acted lawfully in negotiating an improved deal for Ghana, and slammed the NDC and the Mahama government for their strange and "illegal" move.

"Section 25 of the Minerals and Mining Act, 2006 (Act 703), as amended by Act 900 of 2015, provides unequivocally that “a holder of a mining lease, restricted mining lease or small-scale mining lease shall, in respect of minerals obtained from its mining operations, pay royalty to the Republic at a rate and in the manner that may be prescribed.” Act 900 repealed Act 794 of 2010, which had fixed the royalty rate at 5 percent."

"However, Section 6 of Act 900 stipulated that, notwithstanding the repeal, the royalty rate in force immediately before the commencement of Act 900 would remain applicable until formally altered. In line with established legal principles—particularly the non-retrospective application of mining laws—this savings clause was designed to protect companies and contracts executed under Act 794 or earlier regimes. Accordingly, from 2015 onwards, royalty rates in Ghana ceased to be fixed by statute and were instead determined through regulation and contractual arrangements. It follows, therefore, that the previous government acted fully within the law and in the supreme interest of the Ghanaian people, as trustees of the nation’s natural resource endowment, by securing a 10 percent royalty rate,"said the APL in its statement.

The APL, stated further that any assertion that the previous government acted illegally and that such claims justify a reduction in the royalty rate is both" misleading and unfounded," adding that the original agreement is in line with what other leading lithium producing nations have negotiated.

"The foregoing analysis demonstrates clearly that the previous government acted appropriately in securing what remains Ghana’s most advantageous mining agreement to date. The fiscal terms of the Atlantic/Barari lease are comparable to regimes in leading lithium-producing countries such as Chile, Argentina, Australia, and Zimbabwe, thereby aligning Ghana with international best practice."

The APL, which called in Parliament to consider the original agreement by the previous government without altering it downward, further warned that going ahead to reduce the royalty rate from 10 to 5% will cost Ghana a huge financial loss of up to $610m.