Budget has no good news for miners – GGDMA, GMWO

The 2017 budget has no good news for miners, the two key groups in the sector said today.

A release from the two organisations follows:

The Guyana Gold and Diamond Miners Association (GGDMA) along with the Guyana Women Miners Association (GWMO) calls on the government to reexamine measures placed in the budget, to ensure that the local gold and diamond mining industry does not collapse. The 2017 budget along with the previously proposed 3% reduction in the gold board price for gold and the removal of concessions to the sector, can only lead to lower declarations and a decline in the sector that would take the economy into a negative spiral. There will be no growth in 2017 without mining.

We would like to congratulate all the hard working small and medium scale miners, without whose effort the country would have undoubtedly recorded negative growth. Despite the removal of our concessions, gold kept Guyana moving, when all other sectors have slowed down.

However, we are saddened to say that the 2017 Budget has no good news for miners. Despite championing the valiant efforts of miners, the Minister of Finance in the 2017 Budget has brought proposed measures that will hasten the sector’s decline. Already, despite the high declaration figures, there are clear signs of decline. The declarations this year were propped up by the two international companies which contributed 1/3 of the gold won. Our figures indicate that local mining was down. The Minister himself has recognized that there has been a significant slowdown in investment in the mining sector. In the budget speech, the minister recognized the threats the industry will face in 2017 and stated “the threat of gold prices declining in 2017, combined with rising oil prices and global issues such as derisking and climate change, will pose a major risk to our economy that will demand enlightened management.” We are shocked that despite this statement, no measures have been placed to help the industry regain its footing.

The 2017 budget affects us in several ways here are some examples:

  1. For about 30 years, miners have paid their taxes at the source, there was no need to file additional taxes, now we are given the few remaining days of 2016 to completely realign the sector. A sector that, because of its reactive nature and remoteness of operation, has a cash culture. The sector is dominated by non-accountants and people who are more familiar with machines than books. We cannot see how the Government of Guyana expects compliance in such a short time. The cultural norms of the sector prevent us from adjusting to this new measure overnight. We cannot be placed on the same level of compliance with coastal based business, which have ready access to non-cash financial instruments. This move will target the compliant larger miners and force the small miners (who contribute the bulk of gold production) underground. Guyana will lose in the long term and our associations will be powerless to convince them to become compliant outside of their capacity. We urge the Minister to rethink this strategy. We remind the minister of his statement “one, one dutty build dam”. The men who are supplying the one, one dutty cannot, overnight, comply with your requirements.
  2. The Government has forecasted a 35% growth in the sector in 2016. Careful examination will show that there has been a slowdown in the local small and medium scale operations. This is because of the hardships that the sector faced. Several concessions were removed from the industry. Despite the Minister’s utterances none of these have been returned. The sector in 2015 did not have to pay VAT on heavy duty equipment, matting, spares and other material used directly in the gold mining sector. In 2016 VAT was required on heavy duty vehicles and a phased removal of all other concessions was implemented. We cannot do more with less.
  3. No fuel concession has ever accessed by any local miner in the sector. There was an agreement, but unrealistic expectations by the Guyana Energy Agency made it impossible to be realized. This offer was subsequently taken away from miners. We currently have no fuel concession. The 2017 budget offers us no hope for any either.
  4. Increase in tributors tax from 10% to 20%. We already face serious objections, personal violence and harassment from employees who do not wish to have this deducted from their salaries. To ask for double is exposing operators to even more aggression. We do not welcome the burden of collecting tax for Guyana Revenue authority (GRA). We are asking the GRA to mount a public awareness campaign to ensure that workers understand that the increase is a GRA requirement. This would prevent many of the altercations in the interior over this matter. It would also help legitimate miners to convince staff not to leave and work with companies who prefer to pay off the books.

The GGDMA and the GWMO wants the Government to clearly understand that without the restoration of concessions, the gold mining sector will see decline rather than growth. If the concessions are not restored there will be a definite contraction of production. We will find it difficult to replace aging vehicles (an excavator has a life of 3-5 years in the interior). The sector will see additional downtime due to additional costs for quality equipment and fuel. The sector will see higher costs for startup and upkeep due to additional VAT on items previously acquired at concessionary rates. This downturn will see a significant spillover effect that will affect every sector of the Guyanese economy. There will be a fall in production and spending all around. This will make 2017 a very dismal year, one which we feel the government will not be able to tax itself out of.

We believe the Minister of Finance is not properly briefed about what transpires in the gold and diamond mining areas of Guyana. If he did, he would understand that additional pressures hurt not help the industry.  We are therefore extending an invitation to the Minister of Finance and the head of the GRA to accompany the GGDMA and the GWMO on a familiarization visit to mining areas. This is an open invitation and we remain willing to facilitate the Minister at his convenience.

We are calling on our sector Minister, Hon. Raphael Trotman to make urgent and strong representation for the sector and to vehemently object to any measure that would lead to contraction of the sector. This is the opportunity for the Minister to demonstrate that he truly understands mining and the culture and pressures miners face. The 2017 Budget in its current form spells doom. The mining sector will decline without help.

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