The mining industry

Introduction – the mining industry as an interest group and its interests

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. The number of small-scale mining companies is significant, as 60% of the known Ghanaian mining labour force is employed at small-scale mines.

Currently, the contribution of mineral mining to Ghana's economy is 5,7% of the GDP, 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.

The main mineral product in Ghana is gold, the others being aluminium, bauxite, manganese, natural gas, petroleum, salt and silver. Also diamonds are an important mining product. 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.

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.

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.

Problems and challenges of the mining industry in Ghana

The potential for mining has been known for a long time, but until the 90. the country has had problems in attracting investors. This is mainly because of the lack of economical, financial, institutional and legal framework. 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. The lack of governmental 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. One must also note, that when actually having a Corporate Social Responsibility programme in different areas, the effectiveness of the programmes have been questioned increasingly. This is a cause of several issues, one being that the actual assessment of the effectiveness CSR programmes has been neglected. 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. 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.

Current facts, data and figures concerning the activities of the mining industry

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 Ghana does not have significantly developed gold mining operations . 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.

Controversial issues and measures taken by the industry

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.

Potential discussion with other interest groups

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.

Sustainable perspective

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 government must take more responsibility for sustainable development strategies by: establishing a sound mineral regulation and licensing system; a land allocation policy for commercial-scale mining; and improving communication between stakeholders.

Small-scale mining provides direct employment for many workers, especially in rural areas. The government needs to be more supportive of this form of mining.

Open questions

The issue is how committed the mining industries are, from a CSR perspective, to sustainable development. 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.

According to the World Bank, there are three important points linking mining and poverty reduction. These are:

• Potential positive impacts affecting the poor or other vulnerable groups
• Potential negative impacts affecting the poor or other vulnerable groups
• What countries can do to maximize the benefits of mining for poverty reduction.

Conclusion

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.

List of references

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Arrye, Benjamin N.A. (2000). Ghana´s mining sector: Its contribution to the national economy.

Bermúdez-Lugo, O.(2011). 2009 Minerals Yearbook. Ghana. Retrieved from http://minerals.usgs.gov/minerals/pubs/country/2009/myb3-2009-gh.pdf

Ghana Chamber of Mines (2011). Retrieved from http://www.ghanachamberofmines.org/site/home/

Gordon, K., Pestre, F., & Oppenheimer, N. (2002). Moving towards healthier governance in host countries: the contribution of extractive industries. OECD Global Forum on International Investment Foreign Direct Investment and the Environment: Lessons from the Mining Sector (s 195). Retrieved from http://www.oecd.org/dataoecd/62/54/2066545.pdf

Hilson, G. (2001). A Contextual Review of the Ghanaian Small-scale Mining Industry. Retrieved from http://pubs.iied.org/pdfs/G00722.pdf.

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

Jenkins, H., & Obara, L. (2006). Land use disputes in Ghana’s mining communities: Developing sustainable strategies. The Centre For Business Relationships, Accountability, Sustainability and Society. WORKING PAPER SERIES No. 36. Retrieved from http://www.brass.cf.ac.uk.

Mining in Ghana
- Overview (2011). Retrieved from http://www.mbendi.com/indy/ming/af/gh/p0005.htm#5

The Precious Mineral Marketing Company. Retrieved from www.pmmcghana.com

World Bank (2010). Mining and Poverty Reduction. Retrieved from http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTOGMC/0,,contentMDK:20246101~menuPK:509413~pagePK:148956~piPK:216618~theSitePK:336930,00.html