Last year, the Minerals Income Investment Fund (MIIF) made profit of GHc1.9 billion, up 300% over its 2023 profits , on revenue of GHc1.6 billion.
This makes it the third most profitable financial institution in Ghana after Ecobank and GCB Bank.
Effectively, MIIF is the closest institution to a sovereign wealth fund that Ghana has currently, receiving royalties and dividends from the country’s mining sector and investing them in both existing a new mining projects, as well as seeking to create alternative asset classes for Ghana such as a gold-backed Exchange Traded Fund on the Ghana Stock Exchange to broaden investment opportunities and a Minerals Investment Income Stabilization Fund to cushion the state against minerals income volatility.
MIIF also provides equity and debt financing support for Ghanaian firms in the mining supply chain and invests part of its assets in domestic and international financial instruments such as stocks, bonds, private equity, and the likes.
But in actual fact, Ghana stands to gain much more from MIIF if it is properly empowered as a minerals-focused sovereign wealth fund.
Indeed, MIIF has taken equity stakes in some companies like Asante Gold Corporation and Atlantic Lithium, but this is just the tip of a mountain of mineral wealth available to Ghana as country which hosts huge solid minerals mining operations, particularly gold mining where Ghana is the biggest producer in Africa.
Ghana hosts some of the most productive gold mines in Africa, but its equity stake in them is mostly restricted to the 10% freely carried equity which forms part of the conditions for granting a mining license to the foreign mine operator and majority owner. Thus Ghana’s take is primarily derived from corporate income tax and royalties.
It is instructive that some mining license agreements allow Ghana to take a further paid 5% equity stake, but this opportunity is rarely taken up, because of a reluctance by the state to pay up for the additional stake.
It is time to negotiate significantly larger paid up equity stakes in Ghana’s mines and fund MIIF to pay for those stakes. That would enable the state to earn much more of the profits those mines are making especially at a time the gold price is soaring skywards than is currently the case.
To be sure, this involves considerable sums of money; for instance an additional 10% stake in the new gold mine being developed by Newmont at Ahafo would cost about US$150 million. But it has been estimated that the mine could make gross profits of up to US$400 million a year.
This means an additional 10% equity stake, even after tax and levies, could fetch over US$200 million a year in extra revenue accruing to Ghana which translates to a more than a 10% yield on that equity stake alone.
Compare this with the yields of barely 2% per annum government earns on its Heritage Fund, from upstream oil sales, which cannot even provide that amount on a fund size of some US1 billion. Ironically, while Ghana’s investments in United States treasury bonds are earning the Heritage Fund this paltry yield, international Eurobond investors have been charging Ghana’s government between 7% and 10% per annum on the Eurobonds it issued between 2007 and 2022.
Surely government can source a couple of hundreds of millions of US dollars as a start if the monies are ring fenced into equity investments into profitable mines run by reputable international mining companies, with the investments themselves serving as collateral.
