Ghana: Gold Mining Resurgence: Difference between revisions

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[[File:Ghana Map.jpg|thumb|Ghana Map]]
[[File:Ghana Map.jpg|thumb|Ghana Map]]
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=Introduction=
The theme of developing countries is important in the globalisation debate – they are often considered to be beneficiaries or victims, depending on one’s perspective, of global economic development fuelled by multinational corporations. Mineral resources are traditional sources of income in these countries that do not require a great deal of know-how to profit from its exploitation and export. In this case study, we will examine how the global imperative to seek rapid economic development measured by growth in Gross Domestic Product (GDP) via the extraction of valuable mineral resources has impacted the economy, the environment and social life in the developing West African state of [[wikipedia:en:Ghana|Ghana]].
 
The theme of developing countries is important in the globalisation debate – they are often considered to be beneficiaries or victims, depending on one’s perspective, of global economic development fuelled by multinational corporations. Mineral resources are traditional sources of income in these countries that do not require a great deal of know-how to profit from its exploitation and export. In this case study, we will examine how the global imperative to seek rapid economic development measured by growth in Gross Domestic Product (GDP) via the extraction of valuable mineral resources has impacted the economy, the environment and social life in the developing West African state of Ghana.
==Globalization==
==Globalization==


This is a complex phenomenon and can be viewed from different (disciplinary) perspectives. Our viewpoint: direct impact at the local level – on the quality of life in diverse parts of the world.
This is a complex phenomenon and can be viewed from different (disciplinary) perspectives. Our viewpoint: direct impact at the local level – on the quality of life in diverse parts of the world.
[[File:Volta view of the dam.jpg|thumb|left|Volta view of the dam]]
[[File:Volta view of the dam.jpg|thumb|left|Volta view of the dam]]
The economy is the driving force of globalisation processes. However, the economy looks different from both a global and local perspective as a result of: on-going trade liberalisation and increasing opportunities for investment across national borders, the global production and distribution network that have become even more interconnected, their increased efficiency, and the lesser importance of boundaries and borders; the globalised economic driver to maximize profit but also deliver cheap goods to underdeveloped regions. However, from a local perspective, globalisation of economic processes might block local initiatives as it neglects local specifics – social, cultural and political conditions, and of course the traditional economy based on those same conditions. In the past, tariffs would have been imposed on imports in developing countries in order to nurture and incubate local industry and hence protect it from foreign competition, just as new industries had once been protected in developed societies, but the demands of the global economy and the World Trade Organization require opening up markets in developing nations to the full force of global competition. Globalisation in a certain sense means universalisation, and its economic imperatives destroy local diversity, which often means neglecting local consumption needs or patterns. Local people are perceived as part of the global “labour force” often working primarily toward the benefit of the wealthy “north” and absorbing their externalities – economic characteristics are important but traditional skills are no longer valued.  
The economy is the driving force of globalisation processes. However, the economy looks different from both a global and local perspective as a result of: on-going trade liberalisation and increasing opportunities for investment across national borders, the global production and distribution network that have become even more interconnected, their increased efficiency, and the lesser importance of boundaries and borders; the globalised economic driver to maximize profit but also deliver cheap goods to underdeveloped regions. However, from a local perspective, globalisation of economic processes might block local initiatives as it neglects local specifics – social, cultural and political conditions, and of course the traditional economy based on those same conditions. In the past, tariffs would have been imposed on imports in developing countries in order to nurture and incubate local industry and hence protect it from foreign competition, just as new industries had once been protected in developed societies, but the demands of the global economy and the World Trade Organization require opening up markets in developing nations to the full force of global competition. Globalisation in a certain sense means universalisation, and its economic imperatives destroy local diversity, which often means neglecting local consumption needs or patterns. Local people are perceived as part of the global “labour force” often working primarily toward the benefit of the wealthy “north” and absorbing their externalities – economic characteristics are important but traditional skills are no longer valued.  
  [[File:Kakum.jpg|thumb|Kakum]]
  [[File:Kakum.jpg|thumb|Kakum]]
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  [[File:Volta lake.jpg|left|thumb|Volta lake]]
  [[File:Volta lake.jpg|left|thumb|Volta lake]]
The Dutch Disease phenomenon has often been applied by economists and researchers to many individual cases on the African continent where 69% of countries rely on the mining industry as their largest sector; the mining exports of 13 of these countries comprise between 25% and 90% of annual export earnings.<ref name="Darimani">Darimani, Akabzaa & Attuquayefio (2013). Effective environmental governance and outcomes for gold mining in Obuasi and Birim North Districts of Ghana. Mineral Economics, 26(1-2), 47-60.</ref> Related to this phenomenon, especially in association with the energy and mining sectors of mineral-rich developing countries, is the “enclave economy” or “enclave export model” thesis. This holds that a particular sector has more external (foreign) linkages than internal (domestic) linkages and where most inputs are imported and most exports are unprocessed. In the mining sector, for example, extracted ores do not contribute to the development of the economy other than to be sent abroad to generate foreign exchange.<ref name="Bloch">Bloch & Owusu (2012). Linkages in Ghana's gold mining industry: Challenging the enclave thesis. Resources Policy.</ref> It is also often used to describe post-colonial dependency relations in the developing world.
The Dutch Disease phenomenon has often been applied by economists and researchers to many individual cases on the African continent where 69% of countries rely on the mining industry as their largest sector; the mining exports of 13 of these countries comprise between 25% and 90% of annual export earnings.<ref name="Darimani">Darimani, Akabzaa & Attuquayefio (2013). Effective environmental governance and outcomes for gold mining in Obuasi and Birim North Districts of Ghana. Mineral Economics, 26(1-2), 47-60.</ref> Related to this phenomenon, especially in association with the energy and mining sectors of mineral-rich developing countries, is the “enclave economy” or “enclave export model” thesis. This holds that a particular sector has more external (foreign) linkages than internal (domestic) linkages and where most inputs are imported and most exports are unprocessed. In the mining sector, for example, extracted ores do not contribute to the development of the economy other than to be sent abroad to generate foreign exchange.<ref name="Bloch">Bloch & Owusu (2012). Linkages in Ghana's gold mining industry: Challenging the enclave thesis. Resources Policy.</ref> It is also often used to describe post-colonial dependency relations in the developing world.
Some factors that contribute to Dutch Disease or an enclave economy are visible under the local circumstances of this case study. Ghana is rich in natural resources but has low technological capacity to develop its mining industry. Large mining companies can bring in the technological innovation needed but their operations should ideally be supported and controlled by national institutions. If these are not fully functional in terms of administrative capability and transparent governance, then there is the risk that the environmental and other consequences of mining activities may be considered “externalities” and therefore will not be adequately addressed by foreign companies. In some cases, the local economy may not have the capacity to absorb large amounts of income from mining activities, which may in turn fuel corruption.<ref> I.e. inadequate strategic planning regarding long-term sustainable economic development via the creation of some sort of ‘National Fund’, such as Norway did when it discovered large oil reserves in the 1970s, can lead directly to a ‘resource curse’ – sudden huge inflows of cash without proper oversight leading to enrichment of corrupt elites.</ref> Moreover, if the legal framework that establishes the administrative and regulatory conditions in which foreign companies operate is weak or poorly enforced, then it creates an environment conducive not only to corruption, but also to penetration by actors involved in the “black” economy. What actually constitutes a black economy is a distinctly grey area in developing countries where survival and subsistence living obviously takes precedence over strict adherence to government-imposed regulations, but “illegal” economic activity can have far-reaching negative impacts on the natural environment when allowed to go unchecked. We will see an example of this in the Ghanaian gold mining sector where illegal and semi-illegal activity by small-scale miners has wrought considerable damage to both the local environment and human health.
Some factors that contribute to Dutch Disease or an enclave economy are visible under the local circumstances of this case study. Ghana is rich in natural resources but has low technological capacity to develop its mining industry. Large mining companies can bring in the technological innovation needed but their operations should ideally be supported and controlled by national institutions. If these are not fully functional in terms of administrative capability and transparent governance, then there is the risk that the environmental and other consequences of mining activities may be considered “externalities” and therefore will not be adequately addressed by foreign companies. In some cases, the local economy may not have the capacity to absorb large amounts of income from mining activities, which may in turn fuel corruption.<ref> I.e. inadequate strategic planning regarding long-term sustainable economic development via the creation of some sort of ‘National Fund’, such as Norway did when it discovered large oil reserves in the 1970s, can lead directly to a ‘resource curse’ – sudden huge inflows of cash without proper oversight leading to enrichment of corrupt elites.</ref> Moreover, if the legal framework that establishes the administrative and regulatory conditions in which foreign companies operate is weak or poorly enforced, then it creates an environment conducive not only to corruption, but also to penetration by actors involved in the “black” economy. What actually constitutes a black economy is a distinctly grey area in developing countries where survival and subsistence living obviously takes precedence over strict adherence to government-imposed regulations, but “illegal” economic activity can have far-reaching negative impacts on the natural environment when allowed to go unchecked. We will see an example of this in the Ghanaian gold mining sector where illegal and semi-illegal activity by small-scale miners has wrought considerable damage to both the local environment and human health.
Ghana has gone through rapid economic development (based on the resurgence of its mining industry since 1989) that was based on liberalisation of the environment for private (foreign) investments. It has in particular been a beneficiary of a huge increase in the world price of gold in the last few decades. While production, for example, increased about 700% from 1980 to 2000, the gold price began surging soon after: it rose from approximately $300/oz. in early 2002 to over $1,900/oz. in September 2012.<ref name="Bloch" /> In 2009, gold accounted for 43% of Ghana’s exports. Mining’s share of GDP, of which gold represents 95%, was 5.8% that same year, which is higher than Ghana’s other chief export commodities, cocoa (3.9%) and forestry (3.2%). Staying in 2009, Ghana was the world’s ninth largest producer of gold (3.8% of global production). By 2012, Ghana had climbed the production rankings to number 8, with an output of 96.8 tonnes, with total revenue from gold at over US$5.3 billion.<ref name="Chamber">Ghana Chamber of Mines (2012). Performance of the Mining Industry in 2012. Retrieved from [http://ghanachamberofmines.org/media/publications/Performance_of_the_Ghana_Mining_Industry_in_2012.pdf]</ref>
Ghana has gone through rapid economic development (based on the resurgence of its mining industry since 1989) that was based on liberalisation of the environment for private (foreign) investments. It has in particular been a beneficiary of a huge increase in the world price of gold in the last few decades. While production, for example, increased about 700% from 1980 to 2000, the gold price began surging soon after: it rose from approximately $300/oz. in early 2002 to over $1,900/oz. in September 2012.<ref name="Bloch" /> In 2009, gold accounted for 43% of Ghana’s exports. Mining’s share of GDP, of which gold represents 95%, was 5.8% that same year, which is higher than Ghana’s other chief export commodities, cocoa (3.9%) and forestry (3.2%). Staying in 2009, Ghana was the world’s ninth largest producer of gold (3.8% of global production). By 2012, Ghana had climbed the production rankings to number 8, with an output of 96.8 tonnes, with total revenue from gold at over US$5.3 billion.<ref name="Chamber">Ghana Chamber of Mines (2012). Performance of the Mining Industry in 2012. Retrieved from [http://ghanachamberofmines.org/media/publications/Performance_of_the_Ghana_Mining_Industry_in_2012.pdf]</ref>


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{{License cc|Andrew George Barton & Jana Dlouhá (course tutors)}}
{{License cc|Andrew George Barton & Jana Dlouhá (course tutors)}}
{{MOSUR}}
{{MOSUR}}
[[Category:Case studies]]