The mining industry

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

In this article we investigate the situation of mining in Ghana from the perspective of the mining industry. The goal is to understand the prospects and challenges of the mining industry in Ghana.

In Ghana, there are about 237 companies prospecting for gold. A total of 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 , p.7.

Currently, the contribution of mineral mining to Ghana's economy is 5.7% of GDP , which can be considered to be quite a small percentage, especially when you consider that Ghana is also the second largest gold producer in Africa. Nevertheless, 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 . Diamonds are also an important mining product

Despite this fact, in the 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 accounts for at least 10 % of GDP and at least 40 % of foreign exchange

There are several important actors in Ghana concerning the mining industry, with the most important ones being the Chamber of Mines and the Precious Minerals Marketing Company. The Chamber of Mines is an 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 Resources. The company is responsible for marketing mainly diamonds and gold. It buys and sells these materials

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

Problems and challenges of the mining industry in Ghana

The potential for mining has been known for a long time, but until the 1990's the country had problems in attracting investors. This was mainly because of the lack of an economic, 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 .

A lack of government control also affects environmental issues. This can also be seen in the actions of the mining companies in Ghana. Historically, the mining companies have not taken responsibility for social legitimacy and the sustainable development of the region, but this is changing over time. Companies have actually accepted Corporate Social Responsibility programmes (a means for companies tp embrace responsibility for their actions in relationship to other stakeholders) in different areas of their activities, although the question of whether CSR programmes are effective is being discussed more and more .

In the mining industry, it must be noted that there is a risk of the local people developing a dependency on a 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 due to actual mining, and the benefits the mining industry is providing 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 on the Volta river also affect the mining industry by reducing the 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 gold mining in Ghana is not fully developed. There are around 13,000 people employed in the mining industry (this is roughly only 0.1 % of the Ghanian population).

According to surveys, 23 % of earnings generated by mines contribute to the national economy. Another 10% paid as royalties are recycled for local people through the Mineral Development Fund (MDF), which represents two thirds of the total sum devoted to financing development projects in the 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 companies contribute 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 maintaining a good reputation.

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

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

Locals have the option of creating a mining operation without having to buy permits; many Ghanians now work in their own small mines. This provides a decent amount of jobs available to the local community, but these small companies often employ environmentally unfriendly techniques and tools for mining, because they do not have either 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 in 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. In addition, technological advancement of 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 to 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 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 (mining as a source of foreign income)
• Potential negative impacts affecting the poor or other vulnerable groups (environmental damage)
• What countries can do to maximize the benefits of mining for poverty reduction (data collection, establish a sound licensing system).

Conclusion

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

List of references

Akabzaa, T., & Darimani, A. (2001). Impact of mining sector investment in Ghana: A study of the Tarkwa mining region. Draft Report prepared for SAPRI. Retrieved from http://www.saprin.org/ghana/research/gha_mining.pdf

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

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.

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

Emmanuel Boon, Frederick Ababio: Corporate Social Responsibility in Ghana: Lessons from the Mining Sector. Retrieved from http://www.iaia.org/iaia09ghana/documents/cs/CS4-1_Boon&Ababio_CSR_in_Ghana.pdf