The mining industry: Difference between revisions

We investigate the situation of mining in Ghana with the perspective of the mining industry. The perspective is to learn of the prospects and challenges of the mining industry in Ghana.

In Ghana, there are about 237 companies prospecting gold. 154 of them are Ghanian. There are 16 operating mines, and 12 of them are 90% foreign owned <ref name=Arrye>Arrye, Benjamin N.A. (2000). Ghana´s mining sector: Its contribution to the national economy.</ref>. The number of small-scale mining companies is significant, as 60% of the known Ghanaian mining labour force is employed at small-scale mines <ref> Hilson, G. (2001). A Contextual Review of the Ghanaian Small-scale Mining Industry. Retrieved from http://pubs.iied.org/pdfs/G00722.pdf.</ref>, p.7.

Currently, the contribution of mineral mining to Ghana's economy is 5,7% of the GDP <ref name=Arrye></ref>, and it can be considered to be quite a small percentage, especially when you consider that Ghana is also the second largest gold producer in Africa. Still, as export products, minerals make up 37% of all Ghanian exports <ref name=Mining>Mining in Ghana
- Overview (2011). Retrieved from http://www.mbendi.com/indy/ming/af/gh/p0005.htm#5</ref>.

The main mineral product in Ghana is gold, the others being aluminium, bauxite, manganese, natural gas, petroleum, salt and silver <ref name=Mining></ref>. Also diamonds are an important mining product <ref name=Bermúdez-Lugo>Bermúdez-Lugo, O.(2011). 2009 Minerals Yearbook. Ghana. Retrieved from http://minerals.usgs.gov/minerals/pubs/country/2009/myb3-2009-gh.pdf</ref>

Still, in definition of the United Nations, Ghana does not have a mineral economy. The UN definition for a country to have a mineral industry is that it makes up at least 10 % of GDP and at least 40 % of foreign exchange should be in the mineral industry <ref name=Arrye></ref>

There are several important actors in Ghana concerning the mining industry, the most important ones being the Chamber of Mines and the The Precious Minerals Marketing Company. The Chamber of Mines is the association for and owned by the mining companies in Ghana. It “represents the collective interests of companies involved in mineral exploration, prospecting and processing in Ghana.” <ref>Ghana Chamber of Mines (2011). Retrieved on [2012-01-20] from http://www.ghanachamberofmines.org/site/home/</ref>.

The Precious Mineral Marketing Company is owned (100%) by the government of Ghana and is operated by the Ministry of Land and Natural Resource. The company is responsible for marketing mainly diamonds and gold. It buys and sells these materials<ref>The Precious Mineral Marketing Company. Retrieved on [2012-01-20] from www.pmmcghana.com</ref>

The larger mining companies have taken an interest in helping communities local to their mining operations by investing a small percentage of their income in the development of: for example infrastructure, healthcare or education.

The potential for mining has been known for a long time, but until the 90.1990's the country has had problems in attracting investors. This is mainly because of the lack of economical, financial, institutional and legal framework <ref name=Arrye></ref> This can be seen in several developing countries as they have opened the market for international companies, however, the lack of governance in certain areas can be a serious problem <ref name=Jenkins>Jenkins, H., & Obara, L. (2006). Corporate Social Responsibility (CSR) in the mining industry – the risk of community dependency.  Retrieved from www.crrconference.org/downloads/2006jenkinsobara.pdf</ref>.

The lack of governmentalgovernment control also affects the environmental issues. This can also be seen in the actions of the mining companies in Ghana. Historically, the mining companies have not taken responsibility on social legitimacy and sustainable development of the region, but this is changing over time. Companies actually accepted a Corporate Social Responsibility programmes (a means how companies can embrace responsibility for their actions in relationship with other stakeholders) in different areas of their activities, however the effectiveness of the CSR programmes has been discussed increasingly <ref name=Jenkins></ref>.

In the mining industry, it must be noted that there is a risk of developing a dependency of local people upon the company, which can have devastating consequences on the area if the mine closes. The dependency is created through bad governance in the area (vs. the power of the mining company in the community), the environmental damage and loss of agricultural land actually due to mining, the benefits the mining industry is giving to locals, etc. This must be taken into consideration by the mining companies <ref name=Jenkins></ref>.

The environment also affects the mining industry, through the availability of energy. Since most of the energy in Ghana is from hydroelectricity, droughts of the Volta river also affect the mining industry by dropping production of many mining companies <ref name=Mining></ref>.

There are 4 traditional minerals (gold, diamonds, bauxite, management) and also cocoa and timber. From 1983 to 1998 gold mining was rapidly increasing, while the biggest industry, agriculture, was slowly decreasing. It is still notable that gold mining in Ghana is not fully developed. There is around 13 000 people employed in mining industry (this is roughly just about 0.1 % of Ghanian population).

According to surveys, 23 % of earnings generated by mines contribute to national economy. Another 10 % is being paid as royalties are recycled for local people through Mineral Development Fund (MDF) which presents two thirds of the total sum devoted financing development projects in proximity of mines. The rest of these development investments comes from voluntary donations made by the companies. Development projects include: infrastructure improvements, health services, supporting local business and agriculture, sustainable livelihood projects, micro-loans etc. Mining company contributes not only by paying taxes but also by building and sustaining communications (such as railways) etc.

Public opinion is that the mining sector is poor, with pressure groups targeting its legitimacy.  The main reasons for the contributions of mining industries to local communities are maintaining a stable working environment and receiving good reputation.

The problem is that the profits are taken out of country with only 14 % of mine inputs from local purchases. Foreign firms also do not want to train local people, they prefer to use foreign experts and managers instead.  

There is an unsolved conflict between small and large-scale miners – concerning legal entitlements, environmental damages and cultural bondage to region. While Ghana is not entirely dependent upon gold mining it has a large impact on its economy, and consequences of price fluctuations or closing down the mines could be very unpleasant, and in the proximity of mines even devastating for local community.  

Locals have the option to create a mining operation without having to buy permits; many Ghanians now work in their own small mines. This provides a decent amount work positions available to the local community, but these small companies often employ the use environmentally unfriendly techniques and tools for mining, whether because they do not have enough financial capital or know-how.  

Stronger cooperation between government and mining companies in making long-term strategies for sustainable development of the region is crucial. Mining companies would also be willing to voluntarily contribute more and in more effective ways if clear plans and agreements on how to do so were established. Also the technological advancement of the smaller local companies is necessary for ecological stability.

If mining in Ghana continues to be dominant it is important to diversify the mining sector, establish stronger ties with the rest of the economy and improve productivity through training and technology transfer.

Companies and the government need improve transparency regarding the use of money from mining.  The key is collecting baseline data, making it publicly available and having it independently verified.

The Chamber of Mines represents the collective interests of companies involved in the mining industry in Ghana. Its actions are funded only by the private member companies. While there are policies the member companies should have (Chamber Code of Conduct, Sustainable Alternative Livelihood Policy) and to which they should adhere, the documents lack specificity and companies’ obligations are not clear.

*Potential positive impacts affecting the poor or other vulnerable groups (mining as a   source of foreign income)

All in all, considering the mining operation in Ghana, it is not as bad as it can be. There is a government legislative and the mining companies have some sort of CSR. These can be built upon to provide a more stable a prosperous financial and social system with regards to mineral mining. Outsourcing, lack of official rigorosity and small local company callousness toward the environment still remain a problem and must be dealt with in order to advance further in the matter.